Are you biased toward your clients?

In a recent speech by the PCAOB, the organization noted that they are willing to consider auditor term limits to overcome the inherent bias in auditing. James R. Doty, Chairman of the PCAOB asked questions that all audit firms need to consider: "Do auditors read the literature? Do young auditors learn to hold onto skepticism and look for fraud regardless of long association with management?" If the answer is more frequently "no," then perhaps there is a loss of professional skepticism in the culture of the audit profession.

When I started as an auditor with one of the Big Four, some of my first clients were among the largest financial institutions in the country. This was in the early 2000's, before our current financial crisis. Many of my audit team members considered the length of our firm's association with certain members of management to be adequate audit evidence that the accounting decisions they made were valid. New audit team members were often intimidated by the confidence management exuded about their areas of accounting expertise, backed by decades of experience in the industry. However, as we now know what these financial institutions were hiding, we can appreciate the importance of pushing back when sufficient audit evidence is not provided, or if management's explanations to your inquiries as an auditor raise concerns.

Does anyone have an experience in which they or a colleague allowed their professional skepticism to wane in the face of a long-standing relationship with client management?