What attitude should auditors maintain when assessing the risks of fraud?

Maintaining professional skepticism is essential for auditors when assessing the risks of fraud. This mindset encourages them to critically evaluate the evidence presented and remain alert to inconsistencies or indications of potential fraudulent behavior. Professional skepticism entails questioning whether the information provided by management and other stakeholders is fully reliable and believing that fraud can occur, regardless of the company's reputation or prior performance.

Adopting a skeptical attitude enables auditors to delve deeper into the financial statements and the internal controls of the organization, thereby enhancing their ability to detect fraud. This approach is not about being suspicious or cynical, but rather about being diligent and cautious in evaluating the authenticity of information and the integrity of the processes reviewed during the audit.

By fostering this attitude, auditors can more effectively identify red flags, validate the appropriateness of management assertions, and ensure that they are not swayed solely by a positive outlook or complacency that may obscure potential fraud. In contrast, other options, such as optimism about outcomes or indifference towards fraud indicators, would undermine the thoroughness and effectiveness of the audit process. Therefore, professional skepticism is recognized as a fundamental aspect of an auditor's approach to fraud risk assessment.