Roadblocks in Exercising Professional Skepticism

GUEST BLOGGER

Sarah Hofmann, CFE
ACFE Public Information Officer

As an anti-fraud professional, you may consider yourself a natural-born skeptic. Your job requires questioning all that is presented to you. While others may prefer to take things at face value, you are trained to dig deeper and ferret out important information. But if that doubting nature should be common sense in the course of an investigation, why is professional skepticism included as a requirement in auditing standards?

Stacy L. Williams, Counsel for Reed Smith LLP in Houston, posed this question to members of the Austin Chapter of the ACFE at a meeting this past week. Why would auditing standards need to include something so obvious? Unfortunately, for the egos of professionals everywhere, we may not be as naturally skeptical as we think.

As humans, we can have a blind spot when it comes to our friends, family and coworkers. “We believe people we work with because we like to believe we only associate with honest people,” said Williams.

Parents often instill the idea that “you are who you surround yourself with” in their children. With that mindset, you may be less likely to question the actions or motives of someone you regularly interact with because if you think they are unscrupulous or unintelligent, that might mean you are the same way. If you are performing an audit and a coworker you are friendly with provides one of the documents to be included, you may take less time examining it because you feel confident in your trust of the coworker.

Another roadblock in fully exercising professional skepticism can be a form of confirmation bias. If you haven’t experienced something, you’re more likely to believe it doesn’t actually happen. For instance, when the massive Enron fraud was being perpetrated, routine audits were still taking place. Without commenting on the effectiveness of the auditors, if they had started to document red flags, would they have been able to predict the scale of the fraud? The scope of the fraud was so massive it would be difficult for anyone who hadn’t experienced a case of that size before to even fathom what was going on, let alone know what to look for.

These barriers to true professional skepticism don’t mean that all is lost. One way auditors and fraud examiners can strengthen their skepticism is to use the mindset that you must justify, or prove, every step and action of an investigation. If someone you trust provides information on a case and you accept that as a fact, that wouldn’t stand on its own in a court case. You would need supporting evidence that the information they provided was verified separately.

Even though you may think its redundant to be told to be skeptical in the course of an investigation, a simple reminder of it, like in the auditing standards, can help keep your work watertight and fair.