The Canadian Institute of Chartered Accountants (CICA) published the research study Professional Judgment in Financial Reporting in 1988. On pages 132-133 of the 225-page study, the co-authors (Michael Gibbins, PhD, FCA and Alister K. Mason, PhD, FCA) supported by a six-member advisory group, address matters regarding the exercise of professional judgment in financial reporting.
According to the authors, when professional judgment in the financial reporting context is referred to by standard-setters, securities commissions, educators, individual professionals and others, it should be defined as follows: “The process of reaching a decision on a financial reporting issue can be described as professional judgment when it is analytical, based on experience and knowledge (including knowledge of one's own limitations and of relevant standards), objective, prudent and carried out with integrity and recognition of responsibility to those affected by its consequences. Such professional judgment is likely to be most valuable in complex, ill-defined, or dynamic situations, especially where standards are incomplete, and should normally involve consultation with other knowledgeable people, identification of potential consequences and documentation of the analytical processes leading to the decision.”
In Chapters 12-14 of the study, the authors make 32 recommendations ─ about the nature of professional judgment, about standards and for those exercising professional judgment.
