Avoiding bias

Read the pages 1-9 section of Professional Judgment and distinguish the four tendencies toward professional judgment bias:

  1. Availability Tendency
  2. Confirmation Tendency
  3. Overconfidence Tendency
  4. Anchoring Tendency

In a paper 750 to 1,050 words, evaluate how an auditor can avoid these bias traps. For the remainder of the course and subsequent assignments, continue to consider and utilizeyour understanding ofthese biases.



Professional Judgment

Understanding and Developing Professional Judgment in Auditing and Accounting



As you prepare for a professional career, have you ever wondered what characteristics distinguish an exceptional professional from one who is just average? One key distinguishing feature is the ability to consistently make high-quality professional judgments. Professional judgment, which is the bedrock of the accounting and auditing professions, is referenced throughout the professional literature. In some of your accounting or auditing classes, you may have had an instructor respond to a question with the classic answer, “That depends; it is a matter of professional judgment.” This is often true in auditing, but it is not overly satisfying to a student who wonders exactly what good professional judgment looks like, or how he or she can develop the ability to make good professional judgments. The purpose of this module is to provide a very brief overview and introduction to help you understand what a good professional judgment process looks like, make you aware of common threats to exercising good judgment, and give you a head start in developing and improving your own professional judgment abilities.

A common question people have is, “Can you really teach good judgment?” Many believe that it is a gift; either you have it or you do not. Others would say you cannot teach good judgment; rather, it must be developed through the “school of hard knocks” after many years of experience. There is no question that talent and experience are important components of effective professional judgment, but it is possible to enhance your professional judgment skills through learning and applying some key concepts. As with other important skills, the sooner you start learning how to make good professional judgments, the better—which is why KPMG made a very significant investment of time and resources to produce the monograph from which this module is adapted to help the next generation of professionals get a head start on developing professional judgment.

Research in the areas of judgment and decision making over the last few decades indicates that additional knowledge about common threats to good judgment, together with tools and processes for making good judgments, can improve the professional judgment abilities of both new and seasoned professionals. With the movement in financial reporting toward more principles-based standards and more fair value measurements, exercising good professional judgment is increasingly important for auditors. While this module contains a brief overview of some of the most important topics, KPMG’s full monograph contains considerably more in-depth information about professional judgment in auditing, including additional coverage of judgment traps and biases, judgment in groups, and other topics. That monograph is titled Elevating Professional Judgment in Auditing and Accounting: The KPMG Professional Judgment Framework; it is available without charge at http://www.kpmguniversityconnection.com.

1 This Professional Judgment Introduction is adapted from The KPMG Professional Judgment Framework: Elevating Professional Judgment in Auditing and is included with this casebook with permission from KPMG, LLP. © 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.


Let’s start with a common definition of judgment: Judgment is the process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions.2 Judgment occurs in a setting of uncertainty and risk. In the areas of auditing and accounting, judgment is typically exercised in three broad areas:

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