As noted in the previous post “A
Process for Professional Judgment,” the US Center
for Audit Quality (CAQ) has also recently published a Professional Judgment Resource. This Professional Judgment Resource is
designed to provide auditors with an example of a decision-making process to
facilitate important auditing and accounting judgments in a professionally
skeptical manner. This CAQ Resource is aimed at both auditors and audit firms
to enhance their system of quality control. According to the Overview (on page
2): “...the exercise of professional judgment should be: (1) Based on the
relevant facts and circumstances known and available at the time the judgment
is made; (2) Made after the consideration of reasonable alternatives; (3) Sensitive
to the degree of uncertainty that may be inherent in the judgment; and (4) In
compliance with the applicable professional standards.
Effective auditor decision making also requires the
application of professional
skepticism. Indeed, the appropriate exercise of professional skepticism
throughout the judgment process is at the heart of effective auditor decision making.
Accordingly, the CAQ Resource outlines a decision-making process grounded in five
essential actions that include identifying and defining the issue, reviewing
and completing the documentation, and explaining the rationale for the
conclusion. In addition, the Resource identifies several of the more common
judgment tendencies and traps that can potentially lead to bias and weaken professional
skepticism. It also provides illustrative examples of these tendencies and
strategies that can be used to avoid them.
