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Excessive distrust on the auditee may create rather than relying on intuition or excessive
a hostile environment, making it difficult to
establish open communication and gather reliable
audit evidence.
How Auditors Can Maintain Objectivity
Without Creating Suspicion:
To strike the right balance, auditors must approach
their work with a mindset of neutral skepticism,
ensuring they remain objective without assuming
any wrongdoing by the entity being audited. This
can be achieved by:
1. Applying a Risk Based Approach:
Rather than treating all transactions with equal
suspicion, auditors should focus on the high risk
areas based on their understanding of the business,
industry and internal controls. This helps them
prioritize efforts where skepticism is most needed
without overwhelming the management with
unnecessary scrutiny.
2. Establishing a Collaborative yet Independent
Approach:
Auditors should build a professional yet
independent relationship with the management
and those charged with governance. While
maintaining an arm’s length approach, auditors
should communicate effectively, explaining the
rationale behind their queries and procedures.
3. Using Data Analytics and Evidence Based
Judgements:
Leveraging technology and data analytics allows
the auditors to identify anomalies objectively
INTERNAL AUDIT TODAY
skepticism. By using evidence based judgements,
the auditors can maintain professionalism while
reducing unnecessary friction.
4. Recognizing the Difference between Healthy
Skepticism and Bias:
Auditors must be mindful of their own biases. A
preconceived notion that a company is engaging
in fraud can cloud their judgement. Instead of
assuming guilt, auditors should focus on gathering
sufficient and appropriate audit evidence before
drawing conclusions.
5. Maintaining Open Communication and
Transparency:
Encouraging transparent communication with
management and those charged with governance
helps auditors gain insights into business operations
and internal controls. Instead of interrogating
management, auditors should frame their inquiries
as part of the assurance process.
6. Staying Updated w.r.t Regulatory and Ethical
Standards:
Auditors should continually enhance their
knowledge of professional standards, ethics and
fraud detection techniques. Regular training and
adherence to the stipulated guidelines ensure
that skepticism is applied appropriately without
crossing into distrust.
Impact of Distrust - Actions for the
Auditors:
When internal auditors experience distrust within
an organization, they should express their concerns
in a professional and objective manner. Some of
the actions that may be taken in such situations are
enumerated as follows:
• More detailed testing and increased scrutiny of
financial records.
• Recommendations for stronger governance
and internal control measures
• Red flags being raised to senior management or
the audit committee.
• Trigger whistleblower reports or escalations to
regulatory authorities.
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