Issues in audit world: professional skepticism, judgement
Making good judgements: not intuitive o Our brains programmed to make snap judgements based on little evidence, which isnt helpful in audit Longer firms: sophisticated strategies for overcoming unconscious biases and promote sound processes for making judgements Micro-entity: audit team is often one person o Can be a challenge to overcome threats of interest bias in making judgements Factors that auditors may not be conscious o Power of first impressions o Taking easy route o Believing what we are told o Believing what we want to o Influence of the initial position Large firms safeguards include o Using formal decision making frameworks o Engaging external experts where necessary o Becoming aware of uncovering bias in auditor judgement at every level Micro-entity auditors o Management often not knowledgeable about accounting, which makes initial identification of issues more difficult o Second guessing ones own judgement is hard o Implementing formal/rigid judgment processes not conducive to effective micro-entity engagement where flexibility is essential Process to reduce unconscious bias 1. Clearly state the issue 2. Document which stakeholders will be affected by judgment 3. Determine possible outcomes and whether they differ for various stakeholder 4. Evaluate process management has gone through to develop issue, wheat evidence provided, what youre done to verify it 5. Obtain evidence from other sources, evaluate its qualify 6. Whether consultation with someone else its quality 7. Document your conclusion and impact on your audit