According to an article in the CPA Journal of Accountancy: “Confirmation
bias—one of the five commonly occurring judgment biases—has the potential to
trip up auditors, particularly during the early stages of an audit. At that
time, financial information is often highly aggregated and may be too ambiguous
to allow the auditor to definitively identify the reason for a change in
financial information. As a result, an auditor’s initial hypothesis may not
actually represent the true cause of the data fluctuation.”
The deeper the auditors get into investigating a particular
hypothesis, the more difficult it becomes to consider other potential
hypotheses. This is because once a potential explanation has been identified,
it is common to seek evidence that supports it and ignore evidence
that does not support the explanation. This is the behavior psychologists refer to
as confirmation bias. As such, if
auditors generate an early hypothesis, they risk overlooking important
contradictory evidence that may result in a flawed evaluation of the data.
What can be done? Auditors can take several simple and
pragmatic steps to overcome this bias when performing analytical procedures. Learn
more by reading the online article 5
ways to overcome confirmation bias by Benjamin L. Luippold, Ph.D., Stephen
Perreault, CPA, Ph.D. and James Wainberg, Ph.D. dated February 1, 2015.
