Professional skepticism and professional judgement Flashcards
(2 cards)
An audit partner has audited a company for several years and has always found the company’s internal controls to be exceptionally strong. In the current engagement, a subordinate pointed out that inquiries with client personnel indicated design flaws in several newly implemented key controls. The partner nonetheless instructed the subordinate to set control risk as low, as in previous audits. The partner’s judgment has most likely been affected by which of the following?
A. Availability bias.
B. Survivorship bias.
C. Confirmation bias.
D. Automation bias.
C. Confirmation bias.
When planning or performing an audit, an auditor may be subject to various conscious and unconscious biases that threaten the ability to maintain professional skepticism and professional judgment. Auditors should be aware of these biases so they can make a diligent effort to mitigate them.
Common cognitive biases that can adversely affect an auditor’s judgment include:
Availability bias: a tendency to put more weight on facts that are more readily available (Choice A)
Confirmation bias: a tendency to favor information that confirms one’s existing beliefs (eg, this client always has strong controls) while disregarding evidence that challenges them (eg, inquiries suggest a design flaw)
Overconfidence bias: a tendency to overestimate one’s abilities or knowledge
Anchoring bias: a tendency to rely too heavily on one piece of information (eg, the first offer in a negotiation), evaluating subsequent information against it
Automation bias: a tendency to rely too much on output generated from an automated process (Choice D)
(Choice B) Survivorship bias is a tendency to focus on things that make it past a selection process, overlooking those that did not.
Things to remember:
Confirmation bias is a tendency to put too much weight on evidence that confirms one’s beliefs (eg, this client always has strong controls) while disregarding evidence that challenges them (eg, inquiries suggest a design flaw).
Each of the following is an attribute of audit evidence that affects its reliability except:
A. Susceptibility to auditor bias.
B. Susceptibility to management bias.
C. Authenticity.
D. Accuracy.
A. Susceptibility to auditor bias.
Correct! Accuracy, completeness, authenticity, and susceptibility to management bias are attributes of audit evidence that affect its reliability. Auditor biases may affect auditors’ professional skepticism or professional judgment in their performance of audit procedures or evaluation of audit evidence.
