chap 6 professional judgement Flashcards
the process of documenting helps the auditor to be more what?
objective and complete in assessing the reasoning used in reaching a judgment decision
the starting point to an effective professinal judgment begins with ____ and defining the issue by carefully analyzing the situation and its potential effect on the audit
identifying
once the issue is defined, the auditor seeks to understand what?
the relevant facts and available info concerning the issue
the starting point to an effective professinal ____ begins with identifying and defining the issue by carefully analyzing the situation and its potential effect on the audit
judgment
what are the 4 most likely judgement tendencies, traps, or biases that may affect the decision making process of auditors?
- confirmation - more weight on info consistent with inital beliefs or preferences 2. overconfidence- overestimate ones own abilities to perform tasks or make accurate assessments of risks or other judgments and decisions 3. anchoring- the tendency to make assessments by starting from an initial value and then adjusting insufficiently away from that initial value 4. availability- tendency to consider info that is more easily retrievable or whats easily assessible as being more liekly or more relevant
what is an example of trying to understand relevant facts and availb info concerning an issue?
obtaining facts and infor about key inputs and assumptions to a transaction, event, or situation through discussions with client personnel who are knowledgeable about the situation
the starting point to an effective professinal judgment begins with ?
identifying and defining the issue by carefully analyzing the situation and its potential effect on the audit
when identifying and defining the issue, the auditor will consider what 4 aspects of the issue?
- the impact of the issue on the FSs 2. the level of complexity and uncertainty surrounding the issue 3. whether there are any related issues that should be considered 4. the impact of the issue on planned audit procedures
the starting point to an effective professinal judgment begins with identifying and defining the issue by carefully analyzing the situation and its potential effect on the ____
audit
the starting point to an effective professinal judgment begins with identifying and ____ the issue by carefully analyzing the situation and its potential effect on the audit
defining
the starting point to an effective professinal judgment begins with identifying and defining the ____ by carefully analyzing the situation and its potential effect on the audit
issue
as more is learned about the facts and circumstances surrounding the issue, the auditor may determine that who is needed to make the judgement?
subject matter experts
What 4 factors might an auditor consider while doing the analysis and identify potential alternatives phase of professional judgement?
- whether she understands the form and substance of the transaction or event 2. whether the relevant authoritative literature has been applied consistently by the client to similar situations 3. whether the auditor has been able to corroborate the facts and assumptions that are important to the analysis 4. whether the auditor has identified any discrepancies or inconsistencies in the facts and info obtained.
what is the strategy to avoid or mitigate the tendency for overconfidence bias? (2)
- challenge opinion and experts 2. challenge underlying assumptions
What are the 5 key elements of a professional judgment process?
- Identify and Define the Issue 2. gather the facts and info and identify relevant literature 3. perform the analysis and identify potential alternatives 4. Make the decision 5. Review and complete the documentation and rationale for the conclusion
what is the strategy to avoid or mitigate the tendency for anchoring bias? (2)
- solicit input from others 2. consider management bias, inluding potential for fraud and material misstatements
to evaluate the effect of the issue on the audit of the FSs, the auditor should consider what standards and rules relevant to the issue?
accounting and auditing standards and rules
T/F Professional judgment isn’t part of professional skepticism
F
what is the strategy to avoid or mitigate the tendency for confirmation bias? ()2)
- make the opposing case and consider alternative explanations. 2. consider potentially disconfirming or conflicting info
the starting point to an effective professinal judgment begins with identifying and defining the issue by carefully analyzing the _____ and its potential effect on the audit
situation
what is the strategy to avoid or mitigate the tendency for availability bias? (3)
- consider why something comes to mind 2. obtain and consider objective data 3. consult with others and make the opposing case
AFter making the decision, the auditor should step back and do what?
evaulate the judgment process to determine that all of the key activities in the judgment process have been appropriately performed
as the auditor articulates in written form the rationale of his or her judgment, the auditor may find that the reasoning appears faulty or incomplete and therefore is not persuasive. this should direct the auditor to do what?
evaluate whcih aspects of the analysis and judgment process may warrant further consideration .
when gathering facts and info, the auditor should be alert for what?
other info either confirms or contradicts facts and info as well as evaluating the sources of that info
