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The process behind auditor judgement

Auditors are required to use considerable judgment in their job, assessing information from a number of sources to create financial reports, critique accounting estimates, and assess a company’s internal controls over financial reporting. But an auditor’s decision-making process is not well understood. In their paper, Kathryn Kadous, professor of accounting, and coauthors Emily E. Griffith (U Wisconsin) and Donald Young 13PhD (Goizueta, Indiana U) provide a framework for researchers to better evaluate the judgment of auditors and, in turn, improve audit quality. Prior research in this area presumes that “decision makers typically engage deliberate, analytical processes to solve problems (i.e., pursue goals) that they have specifically chosen, that they limit their decision inputs to items they view as relevant, and that they have access to the details of their own cognitive processing.” The trio notes that “nonconscious goals” and “intuitive processes” are also influential in the decision-making process and in the factors driving these processes. Kadous, Griffith, and Young conclude that their framework indicates researchers approach their investigation by taking into account “conscious and nonconscious goals” and “decision makers with conflicting incentives, as well as differing capabilities.” Source:

Are you one of the Canadians most likely to get a tax audit this year?

Every year, Canadian taxpayers fear the worst - a notice from the Canada Revenue Agency (CRA) informing you that you’re going to be audited. You should always prepare and file your income tax return under the assumption that your return will be looked at and scrutinized. The reality is, there very few are actually checked by the CRA - but that does not do you any good if you are the one. Apart from a random selection process there are many reasons why your return might be pulled for review or audit. If this is the case, the best advice we offer is to get your accountant involved immediately. Far too often our clients will start the process alone, answering a few questions that they think are simple and straightforward only to find they have simply provided the auditor with reasons to further pursue his or her review of your taxes. This is not to suggest that the questions are misleading. We are simply pointing out that you might not be aware of the implications of your answers and you can do yourself a disservice by providing an answer that simply leads to more questions. If you have prepared your return yourself go over it with a professional as soon as you receive your letter from CRA and let that individual deal with the CRA representative going forward. If you used a professional to prepare your return - get them involved immediately. Michael Burch is a managing partner at Welch LLP in Ottawa and is an expert in the fields of business, corporate/personal taxation and finance. He is an excellent speaker and is available to talk with media regarding this important topic. Simply click on Michael’s icon to arrange an interview. Source: