The public relies on auditors to make critical professional judgments in an objective, professionally skeptical manner. Show
Participants in capital markets who are making investment decisions place trust and confidence in the judgments made by auditors during audits of public company financial statements. A new Professional Judgment Resource released Wednesday by the Center for Audit Quality (CAQ) describes judgment challenges auditors face—and the critical elements of an effective judgment process for auditors. The CAQ is affiliated with the AICPA. Judgment challenges, according to the resource, are posed by:
Five basic actions can help auditors arrive at sound professional judgments, according to the CAQ resource. These are:
“It is critical for the public and capital markets to have trust and confidence in the reasonableness of judgments made by public company auditors,” CAQ Executive Director Cindy Fornelli said in a news release. “While there is no ‘silver bullet’ that will eliminate all psychological traps, increased awareness of them can improve an auditor’s decision-making process.” — Ken Tysiac ( ) is a JofA editorial director. Chapter 4 NotesPage 217 - Audit Deficiency Rate (30-40%) -KNOW THIS FOR EXAM 1We will meet at the Accelerator. You can bring foam earplugs.-------------------------------------------------------------------------------------------------------------------------------The allegiance of independent auditors to the interests of the public is known as thepublicwatchdogfunction.What is at the center of the KPMG Professional Judgment Framework? Applying ethical reasoning to identify shareholder interests and the effect of actions onshareholders is inconsistent with which cognitive judgment trap? Which of the following guide accountants when making a professional judgment? IFAC Policy Position Paper #4 links the common benefits of serving the public interest throughsound financial reporting to: The independent auditor's public responsibility underlies its:-certification of public reports-allegiance to creditors and shareholders-fidelity to the public trust When evaluating the risk of material misstatements in financial statements, professionaljudgmentis imperative for accountants.Which of the following are components of the KPMG Professional Judgment Framework? Which of the following are common cognitive traps that our judgment can incur? Ethical values as well as one's knowledge of the accounting issues in question influence theprofessionaljudgmentof accountants.Which of the following lead to loss of public trust in the accounting profession? The process of reaching a decision or drawing a conclusion where there are a number ofpossible alternative solutions is referred to as: Since the PCAOB was formed, a mandatory quality inspection program was implemented. Whatis the average audit deficiency rate range since the program started? Which of the following has led to PCAOB concerns relating to the Big Four accounting firms? The conceptual frameworks in the AICPA Revised Code: Which of the following are components of the KPMG Professional Judgment Framework?The KPMG framework identifies five components of professional judgment that revolve around one's mindset. The components are: (1) clarify issues and objectives; (2) consider alternatives; (3) gather and evaluate information; (4) reach conclusion; and (5) articulate and document rationale.
What role does auditor independence play in a CPA's responsibility to protect the public interest?The Supreme Court, in United States v. Arthur Young, described the auditor's role as a "public watchdog function" that demands "total independence from the client at all times and requires complete fidelity to the public trust." This means that auditors must work on behalf of investors and the public interest.
Why does a company choose to have an independent auditor report on its financial statements?An independent auditor is typically used to avoid conflicts of interest and to ensure the integrity of performing an audit. Independent auditors are often used—or even mandated—to protect shareholders and potential investors from the occasional fraudulent or unrepresentative financial claims made by public companies.
Which of the following will most likely call into question the expertise of an audit committee financial expert?Which of the following will most likely call into question the expertise of an audit committee's financial expert? Lack of experience with internal accounting controls.
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