CAQ Provides New Tool to Help Auditors Avoid Judgment Tendencies, Traps, and Biases
The Center for Audit Quality (CAQ) is a public policy organization which is formed to increase the confidence of shareholders and investors in capital markets. The entity interacts with different stakeholders to identify and discuss critical matters requiring actions and interventions. It is associated with American Institute of CPAs. Center for Audit Quality (CAQ), distributed an article describing the matter of professional judgment while carrying out an audit. This article named as Professional Judgment Resource, it illustrates an example to assist the auditors regarding the use of auditing and accounting judgments in a skeptical and professional way.
The article is designed to help auditors when they are stuck in a situation having multiple areas requiring judgments resulting from enhanced complexity of transactions, growing use of estimates and the other particular subjective issues.
This article formulates a procedure which assists auditors in reaching a decision which requires professional judgment:
- Categorize and describe the case
- Collect the details and gather relevant evidence
- Scrutinize the case and recognize the substitutes
- Draw a conclusion carefully
- Perform a review of all documents and pertaining reasons behind the conclusion.
Furthermore the article classifies many of the situations having tendency to mislead auditors, resultantly deteriorating their attitude towards professional skepticism. According to Fornelli, now days, it is very important for the local and capital markets to rely on the assurance given by a registered auditor, possibly due to the increased complexity of the transactions leading to more complicated situations to judge. If we assume that there is no such tool which can eradicate all the deceiving situations, increased knowing of these set-ups could improve an auditor’s decision making procedure.