What is the role of professional skepticism in fraud risk response?

• A. It strengthens detection by requiring auditors to question evidence and management representations
• B. It replaces the need for controls in fraud risk management
• C. It is irrelevant to fraud risk
• D. It guarantees detection of all fraud

Answer: (C)

Professional skepticism in fraud risk response means maintaining a questioning mindset about evidence and management representations, not taking explanations at face value. It involves challenging information, looking for inconsistencies, corroborating evidence from multiple sources, and considering the possibility of fraud even when things seem to align with expectations. This approach strengthens detection because it drives auditors to gather sufficient, appropriate evidence, test whether evidence supports management’s claims, and evaluate whether the overall risk assessment aligns with what the evidence shows.

Skepticism works with controls rather than replacing them; controls are still needed to prevent and detect fraud, while skepticism guides how evidence is gathered and evaluated to assess whether those controls are effective. It does not guarantee that every fraud will be found—the reality is that some schemes can be highly concealed, but a skeptical mindset increases the chances of identifying misstatements and gaps in evidence.