Teaching Professional Judgment and Decision Making

A course on Professional Judgment and Decision Making is offered by the Harvard Kennedy School. It states that:“Professionals who work in government, business, the legal system, medicine, and many other settings make critically important decisions every day. Whom should our organization hire? How much financial risk can we tolerate? How should we structure accountability systems? Taking this course will help you to make such decisions in a less biased and more systematic way. It will also help you understand the underlying psychology of the mind. More specifically, it will help you understand when and why humans depart from standards of accuracy and rationality in judgment and decision making.”

The course topics include (a) basic mental processes in perception, memory and context dependence; (b) how questions affect answers; (c) models of decision making; (d) heuristics and biases; (e) social and group influences; (f) common traps; and (g) debiasing techniques. It also discusses emotion. The lectures and discussions are coordinated to complement weekly readings, which draw from primarily from psychology, as well as behavioral economics and neuroscience.

Throughout the course, the overarching goals are to: (1) Learn about the academic field of judgment and decision making, its major theories, results and debates. (2) Become a critical consumer of research findings, learning: (a) how to identify behavioral science studies on a given topic and (b) the methodological standards for evaluating the soundness of such studies. (3) Develop the ability to effectively write and speak about behavioral science theories, results and debates. (4) Acquire practical skills for improving your own judgments and decisions. (5) Acquire knowledge of which biases individuals can fix with training/knowledge and which biases individuals cannot fix unless managers engage in institutional design. (6) Develop a capstone project in which you apply the material in a way that will improve professional decision-making processes. Possible selections include legal process, government institutions, medical settings and other areas where high stakes decisions are made regarding policy.

To learn more, refer to previous posts on Teaching Professional Judgment and Decision Making.

Practice-Based Education – Perspectives and Strategies

There are many challenges facing researchers, educators, practitioners and students in today’s practice worlds. Published in 2012, the 37-page Australian book Practice-Based Education- Perspectives and Strategies is part of a series that examines research, theory and practice in the context of university education, professional practice, work and society. The series examines places where two or more of these areas come together.

Themes explored in the series include university education of professions, society expectations of professional practice, professional practice workplaces and strategies for investigating each of these areas. The authors bring a wealth of practice wisdom and experience to examine these issues, share their practice knowledge, report research into strategies that address these challenges, share approaches to working and learning and raise yet more questions. The conversations in the series contribute to expanding the discourse around the way people encounter and experience practice, education, work and society.

This book explores the principles, context, practices and strategies of practice-based education from multiple perspectives. It examines the place and nature of practice-based university education, that is, education that prepares graduates for practice. This seems initially to be a straightforward goal. However, practice-based education is, in reality, a complex of ideas, pedagogies, opportunities and possible experiences. In this complexity of realisation and simplicity of concept lies its strength and potential for rich and productive higher education.

The book is written by leading academics in higher education and is aimed at a broad audience including university educators, as well as researchers and those in the professions. The book examines goals, trends, perspectives and strategies of practice-based education in international, professional education programs. There are three sections: 1. Contesting and Contextualising Practice-Based Education; 2. Practice-Based Education Pedagogy and Strategies; and 3. The Future of Practice-Based Education.

Professional Judgment in Auditing

The Canadian Institute of Chartered Accountants (CICA) published the research report Professional Judgment and the Auditor in 1995. The 100-page report was prepared by staff of the CICA Research Studies Department (J. Paul-Emile Roy, CA) under the direction of an 8-member study group. It establishes the importance of professional judgment to auditing standards through an examination of the prevalence of references to professional judgment in the CICA Handbook. On page 5, the report proposes a definition of professional judgment in auditing that is a more concise and condensed version of the definition proposed in the 1988 CICA research study Professional Judgment in Financial Reporting.

According to the report: “Professional judgment in auditing is the application of relevant knowledge and experience, within the context provided by auditing and accounting standards and Rules of Professional Conduct, in reaching decisions where a choice must be made between alternative possible courses of actions.” This definition is helpful in that it clarifies the situations where professional judgment is called for and emphasizes the role of professional standards in the process.

The report identifies many sources of information regarding the issues surrounding professional judgment. It develops a framework for professional judgment and identifies key factors that influence the judgment process. As well, it provides valuable guidance to practitioners regarding their professional obligations when exercising professional judgment.

Professional Judgment in Financial Reporting

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.

"Judgment in Jeopardy" by Ross Skinner

Ross Skinner, FCA, had a significant impact on Canadian accounting standards. He was inducted to the Accounting Hall of Fame (see “A Rare Induction to Fame” in CAmagazine online) in 2000.

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."