The largest risk for an auditor is an audit failure, i.e. where the audit report issued was inappropriate. This can only occur when there is a lack of evidence to support the audit opinion issued. In most cases, a material balance or disclosure, or the completeness of balances and disclosures are not appropriately addressed. Management of the auditee, who spend a whole year working on the business generating the financial results, rely on the auditors to be knowledgeable enough to point out deficiencies to them.

In order to address the full spectrum of an auditee’s business, that business needs to be understood. Although ISA 315 addresses risk assessment, it is actually an exercise to obtain, among others, an understanding of the client’s business, all the types of controls, the business model, and IT installations and issues. However, the net of knowledge has to be extended wider for auditors to understand what should be in the records; not only what is already in the records.

Therefore, evidence should be obtained that is relevant, and appropriate for the risk of material misstatement assessed for the relevant balance or disclosure and assertion. The IRBA Code of Professional Conduct and the International Standards on Auditing (ISAs) explicitly require auditors to maintain a questioning mind and critically assess evidence. However, practical application often falls short, due to:

• Time and budget pressures, leading to a box-ticking approach, rather than substantive testing
• Over-reliance on management representations, without sufficient independent corroboration
• Lack of challenge to complex or unusual transactions, especially in industries with a high risk of fraud or misstatement.

Trainees’ misunderstanding of the purpose of auditing

The issue starts at trainee level. Many new entrants into the profession view auditing as a procedural exercise – a mere checklist to comply with standards – without grasping its core objective: to provide reasonable assurance that financial statements are free from material misstatement. This disconnect leads to:

• A mechanical approach to audit procedures, without understanding their significance
• Failure to link audit evidence to risk assessment, resulting in ineffective procedures
• Lack of confidence to challenge clients, which is essential for scepticism.

Strengthening scepticism in the profession

To address these challenges, firms must invest in:

1. Better training and mentoring – Trainees need to be taught why they perform audit procedures, not just how to do it.
2. Encouraging critical thinking – Firms should embed scepticism in their culture, rewarding auditors who challenge assumptions, rather than just completing work papers.
3. Firms should respectfully elevate trainees’ self-image as professionals and equal contributors to the success of an audit.
4. Making audit teams aware of what can go wrong, with regard to fraud, and the various ways that management, or the employees of the auditee, can commit the different types of fraud.

Without a shift towards stronger professional scepticism, the audit profession will remain vulnerable to failures that damage public trust. Trainees, as the future of the profession, must be taught from the outset that auditing is not about compliance – it is about assurance, integrity and protecting stakeholders from financial misrepresentation.