When a bank collapses, depositors, employees and the government all ask the same thing: where were the auditors? The answer the profession gives is that auditors serve more than the client who pays them. They serve the public who rely on audited accounts. Two ideas carry that duty into daily work: acting in the public interest, and applying professional scepticism, a questioning attitude to everything a client says and shows.
This topic explains what the public interest means for accountants, why it separates a profession from a trade, and how professional scepticism is applied, threatened and protected. It links to the ethics topics before it and to the evidence topics that follow.
In 30 seconds
Public interest: a profession must not act only to satisfy the needs of one client or employer. It is usually linked to detecting serious crime, protecting health and safety, preventing the public from being misled, exposing misuse of public funds and revealing conflicts of interest among powerful people. Professional scepticism: a questioning mind, alertness to signs of misstatement and a critical assessment of evidence (International Standard on Auditing (ISA) 200).
Not cynicism: the auditor neither assumes dishonesty nor accepts explanations without evidence.
Key terms in plain English
| Term | What it means |
|---|---|
| Public interest | The wider good of the people who rely on audited accounts |
| Professional scepticism | A questioning mind and critical assessment of evidence |
| Cynicism | Assuming dishonesty without evidence |
| Public interest entity | An entity whose size or nature makes its audit matter to the wider public |
| Contradictory evidence | Evidence that goes against what management says |
| Corroborate | Support with independent evidence |
Syllabus check
This topic is in syllabus area E, professional ethics and public interest (15% of marks). It covers:
- the meaning of public interest in the context of audit and assurance
- the need for professional scepticism in audit and assurance engagements
- the importance of professional ethics
CAMA 2020 and the public interest
The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 403 | Disqualification of persons connected with the company from acting as auditor | The law protects the independence on which the public relies |
| s. 404(1) | The auditors report to the members on the accounts | The public interest is served through an honest report |
| s. 404(2) and (7) | Public companies must have an audit committee that reviews the audit and the auditor's position | Oversight beyond the directors |
| s. 406 | Improper influence on the conduct of audit | The law prohibits pressure that would weaken scepticism |
The rules in more depth
Acting in the public interest
A feature that separates a profession from a trade is that members are expected to act in the public interest. The accountancy profession's responsibility is "not to act exclusively to satisfy the needs of a particular client or employer". When the wishes of a client or employer appear to be against the public interest, the accountant must consider the public interest.
Professional codes do not define it clearly, but it is usually linked with:
- detecting and reporting any serious misdemeanour or crime;
- protecting health and public safety;
- preventing the public from being misled by a statement or action of a person or organisation;
- exposing the misuse of public funds and corruption in government; and
- revealing the existence of any conflict of interest of people who are in a position of power or influence.
Why audit is a public interest activity
An audit report is used by people who never meet the auditor: shareholders, lenders, depositors, suppliers, employees, regulators and tax authorities. They rely on the opinion in deciding whether to invest, lend or trade. If auditors favour the managers who pay them, the whole system of trust in published accounts weakens.
This is why the law sets rules for appointment, removal and disqualification of auditors, why listed and public companies are treated as public interest entities, and why the regulator, the Financial Reporting Council of Nigeria, supervises the auditors of those entities. The law of the company also lets the shareholders and the audit committee, and not the directors, control the auditor's position.
The importance of professional ethics for credibility and the public interest
The May 2026 examination asked why ethics matters in the audit of Royal Bank Plc. A full answer has two parts.
- Credibility. Ethical compliance makes audit opinions credible, objective and trustworthy. In banking, credibility affects depositors' confidence and financial stability, not only the firm's name.
- Public interest. By refusing inducements, and reporting irregularities, the auditor prevents the hiding of risks that could harm depositors, investors, regulators and the wider economy, and acts as a line of defence against corruption and mismanagement in the financial system.
It is useful to add that ethical behaviour protects trust in financial reporting and in the profession itself.
What professional scepticism is
ISA 200 requires the auditor to plan and perform the audit with professional scepticism. It is an attitude that includes a questioning mind, being alert to conditions that may point to possible misstatement due to error or fraud, and a critical assessment of audit evidence.
The auditor accepts that a material misstatement due to fraud could exist whatever his past experience of the honesty and integrity of management and those charged with governance.
Scepticism is not cynicism. The auditor does not assume that management is dishonest. The auditor requires evidence, and keeps asking for it, until it is enough to support a conclusion.
Scepticism in practice
- Questioning explanations: if sales have fallen but profit has risen, the auditor asks why and tests the answer against evidence from outside the company.
- Considering the reliability of evidence: a document from a third party is stronger than one made by the client, and management's oral explanation alone is weak.
- Looking for contradictory evidence, not only evidence that supports the figures.
- Staying alert to unusual transactions, round amounts, entries made after the year end and pressure to finish early.
- Challenging management's estimates and judgements, such as the allowance for bad debts or the useful life of assets.
- Not accepting representations without corroboration.
What weakens scepticism
| Cause | Effect | Response |
|---|---|---|
| Long association with the client | Familiarity: the team trusts management too much | Rotate senior staff, review by another partner |
| Pressure from management | Intimidation: the team accepts weak evidence to avoid conflict | Escalate to the partner and the audit committee |
| Time and fee pressure | Procedures are cut short | Realistic budgets, partner support |
| Over-reliance on management's explanations | Confirmation of what the client says, not testing it | Corroborate with independent evidence |
| Favourable results in earlier years | Assumption that all is well | Treat each year afresh and consider fraud risk |
| Inexperienced staff | Failure to see warning signs | Supervision and review |
How the firm supports scepticism
The firm supports scepticism through its quality management system: training, supervision, review of working papers, consultation on difficult matters, and a culture where junior staff can say that something does not look right. Partners set the tone by asking for evidence in meetings and by supporting a team member who challenges management.
Documenting how scepticism was applied, for example by recording the contradictory evidence considered and how it was resolved, shows that the work was done properly.
Worked examples
Example 1: public interest. A listed company asks its auditors not to mention a pollution fine that could trigger an investor sell-off.
- Investors would be misled if the fine were hidden, which is a public interest matter.
- The auditor must not act only to satisfy the client and must deal with the matter through the report and the proper channels.
Example 2: scepticism in action. Revenue rises 40% in December and the finance director explains that a customer "ordered early".
- A sceptical auditor does not accept the explanation without evidence.
- The auditor tests the orders, delivery notes and January returns, and checks the cut-off.
Example 3: scepticism lost. After eight clean years, the team copies last year's working papers and accepts the client's schedules.
- Familiarity has weakened scepticism.
- The partner should insist on fresh testing, rotate staff and consider fraud risk afresh.
Example 4: scepticism or cynicism? An auditor assumes the finance director is lying and refuses to consider any explanation.
- That is cynicism: it assumes dishonesty without evidence.
- Scepticism asks for evidence and weighs it, whatever the person's character.
How to score full marks
- Define public interest with two or three of the five associations.
- Tie credibility and the public interest to the facts, for example depositors in a bank.
- Define scepticism with the three parts: questioning mind, alertness, critical assessment of evidence.
- Distinguish scepticism from cynicism and name what weakens it.
Common mistakes in the exam
- Saying the auditor's duty is only to the client or the directors.
- Confusing scepticism with distrust of everyone.
- Forgetting that scepticism applies even when past experience with management is good.
- Listing public interest examples without applying them.
Quick revision
- A profession does not act only for one client.
- Five public interest associations.
- ISA 200: questioning mind, alertness, critical assessment.
- Scepticism is not cynicism.
- Familiarity, pressure and time weaken scepticism.
Practice questions
Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.
Question 1. A feature that separates a profession from a trade is that members:
- Charge higher fees
- Act in the public interest
- Work alone
- Avoid regulation
Show the answer
B. Members must act in the public interest.
Question 2. Which is usually linked with the public interest?
- Preventing the public from being misled
- Raising fees
- Avoiding all risk
- Protecting a client's image
Show the answer
A. It is one of the five associations.
Question 3. Professional scepticism includes:
- A questioning mind
- Assuming fraud
- Accepting representations
- Avoiding evidence
Show the answer
A. A questioning mind is one part.
Question 4. Scepticism is required by:
- ISA 200
- The tax laws
- The stock exchange only
- The client
Show the answer
A. ISA 200.
Question 5. Scepticism differs from cynicism because the sceptic:
- Assumes dishonesty
- Requires evidence without assuming dishonesty
- Ignores management
- Refuses to talk
Show the answer
B. He tests, he does not presume.
Question 6. Which weakens scepticism?
- Long association with the client
- Rotation of staff
- Partner review
- Training
Show the answer
A. Familiarity.
Question 7. The auditor should accept that a material misstatement due to fraud could exist:
- Only for new clients
- Whatever past experience with management
- Only in banks
- Never
Show the answer
B. Regardless of past experience.
Question 8. Which evidence is usually more reliable?
- An oral explanation by management
- A document from a third party
- A draft schedule
- An unsigned note
Show the answer
B. External evidence is stronger.
Question 9. Audit reports are relied on by:
- Directors only
- Many people who never meet the auditor
- The auditor only
- Tax staff only
Show the answer
B. Shareholders, lenders, depositors and others.
Question 10. A way a firm supports scepticism is:
- Training and review of working papers
- Reducing fees
- Skipping meetings
- Hiding errors
Show the answer
A. Quality management.
Question 11 (10 marks). Explain what is meant by the public interest in the context of the accountancy profession and why audit is a public interest activity. (7 marks)
Question 12 (10 marks). Define professional scepticism and give four ways in which an auditor applies it. (6 marks)
Question 13 (10 marks). Explain four factors that can weaken an auditor's professional scepticism and how each can be dealt with. (7 marks)
Model answers
Show the model answer to Question 11
Public interest: the profession does not act only to satisfy one client or employer; usually linked with reporting serious crime, protecting health and safety, preventing the public being misled, exposing misuse of public funds, revealing conflicts of interest of powerful people. (4) Audit is relied on by shareholders, lenders, depositors and regulators who never meet the auditor, so credibility affects trust in financial reporting. (3)
Show the model answer to Question 12
Scepticism: a questioning mind, alertness to signs of misstatement due to error or fraud, and critical assessment of evidence. (2) Applications: question explanations; weigh reliability of evidence; seek contradictory evidence; challenge estimates; do not accept representations without corroboration; watch unusual transactions. (any four, 1 each)
Show the model answer to Question 13
Long association (rotate, review); pressure from management (escalate); time and fee pressure (realistic budgets); over-reliance on explanations (corroborate); inexperience (supervise). (any four, 1.75 each)
Pathfinder on Public interest and professional scepticism in audit and assurance
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Source: ICAN Pathfinder, Audit, Assurance and Forensics. Diets covered: May 2026 and November 2025.
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