In a 1995 CAmagazine article “Judgment in Jeopardy:Why Detailed Rules Will Never Replace a CharteredAccountant’s Professional Judgment in Financial Reporting,” Ross argued that judgment in financial accounting cannot be eliminated by detailed rule making, and that sound judgment requires a thorough understanding of the objectives and theory of accounting (which theory must be complete and specific enough to provide a proper grounding for judgment). These were fundamental beliefs of his accounting philosophy.
In 2005, the “Judgment in Jeopardy” article was re-published (with permission) in Canadian Accounting Perspectives (CAP), a journal of the Canadian Academic Accounting Association. The special edition of CAP includes eight commentaries, available online. Two commentaries focus on the meaning of professional judgment and how it has evolved or will evolve. Another looks to the future of accounting practice, exploring Ross’s suggestion that the establishment of an interpretation panel could improve the application of accounting standards and professional judgment. It provides evidence to support this proposal, arguing that an interpretation panel would enhance the information environment that underlies the market’s allocation of capital.
Several commentaries focus primarily on the role of professional judgment in present-day accounting and auditing. For example, one notes that the very nature of professional judgment is changing. It argues that measurements or estimates made by people other than professional accountants, such as managers, open financial statements to potential earnings management and may undermine accountants’ professional judgment. Another discusses several critical issues raised by Ross’s article, including the difficulty of fully resolving judgment problems. It argues that ideological choices, competition and fundamental measurement problems support the conclusion that solutions will remain “forever elusive."
