According to the regulators, in the past auditors could have improved their assessment of the questioning and accounting of senior executives.
The paper follows the launch of an investigation into the role of Ernst&Young and its audit of failed bank Lehman Brothers before it went bust.
Paul Sharma, FSA director of prudential policy, said: "Our experience has indicated that, at times, auditors have focused too much on gathering and accepting evidence to support firms' assertions rather than exercising sufficient professional scepticism in their approach - this falls far short of what the FSA - and society at large - expects from auditors.â
He added that now is the time for the auditing sector to show how they have learned from the global crash and to ensure that mistakes will not happen again.
The discussion paper asked how the relationship between the FSA, FRC and auditors could be enhanced to increase the effectiveness of auditing within the financial services industry.
Responses can be submitted up until September 29th 2010.
By Jim Ottewill