Case Study of “Rigorous or Not?: a Case of Auditor Judgment for Deferred Tax Issues”

The author puts Jack into some situations to show examples of how auditors may encounter difficult situations with clients and personnel that will require much consideration. The first example of a difficult situation for Jack is when he works underneath Stan Wright on the Ardmore audit. Stan had a reputation for demanding a lot from his subordinates and being unreasonable regarding working conditions. Stan was working Jack and several other auditors very hard to the brink of exhaustion. Barney, Jack’s coworker, was having a nervous breakdown from exhaustion and from his wife threatening to leave him because of work. Jack understands the situation and tells Barney only to work forty hours per week despite Stan’s orders. In the end, the partner in charge sides with Jack decision, he then gives Jack a favorable review, and fires Stan for his abusive managing style.

Summary: The objective of this article is to clarify the significance of professional skepticism as an essential part of the auditor’s mindset, and to consider the reasons why approaching an audit with an attitude of professional skepticism is becoming increasingly important. The following are three case studies that will concentrate your consideration on what it takes to be a skeptical auditor when performing journal entry testing.

Present findings in a clear, concise and meaningful manner to inform decision-making within an organisation.

1. Ethical Obligations and Decision in Accounting Shawn M. Mintz and Roselyn E. Morris page 248

The audit team documented its observations and quantified the resulting misstatements. Their audit paperwork classified Waste Management, Inc. as a “high risk client” partially due to the misstatements on its books, but also because of Buntrock and his team making “geographic” adjustments in the last quarter of the year to force the financial statements to meet previously stated profit expectations. Each year the auditing team presented Waste Management with “Proposed Adjusting Journal Entries” to bring the statements into compliance with GAAP. Waste Management refused to make the adjustments, yet Arthur Andersen still issued the statements with an unqualified opinion.

Therefore, framing is integral to this topic of because choosing to emphasize words such as “saving” and “will die” will influence how the respondents process this moral decision that will block them from seeing they have the same outcome. This studies framing connects information to our heuristic knowledge and highlights what we regard as important

(1) The framing effect is how the way a statement is formatted influences how a person views a situation (Goldstein, 2015, p.384). People tend to take risks when the other option guarantees a loss, while they avoid risks when they are guaranteed a gain (Francis & Neath, 2007). You could use the framing effect to convince their parents that you need a new car by framing the purchase of the new car in a more positive light compared to keeping the current car, or not having one at all. The new car will ultimately save your parents money, as though there is the initial cost of the car, there will be fewer maintenance fees. Ultimately, this increased safety and decreased added cost will save them money. However, there is a high probability that

First we should begin by defining what framing really is. Framing is when information is presented

The author used a qualitative and quantitative analysis in the research. The researcher analyzed issues of earnings management and financial statement manipulations. The findings demonstrated that qualitative misstatements affect the auditor readiness to provide a judgment. The auditor realizes the outcomes, such as disciplinary actions and litigation consequences. Auditors do not require companies to correct immaterial errors if they based on estimates and earning forecast (pp. 437-438). However, the American Institute of Certified Public Accountants (AICPA) made changes in professional auditing standards that require auditors to discuss errors to audit committee (p.

Framing is “[t]he way an issue is defined [and] every issue has many possible frames, each with a slightly different tilt in describing the problem and highlighting solutions” (Morone and Kersh 244). We have all has that one friend or family member that tells stories multiple of times and every time they slightly change it and that is basically what Media does. Different media outlets will explain a story in different ways. Basically, “… framing defines the nature of the problem, organizes potential solutions, and wipes out alternative policies” (Morone and Kersh 245). We as people are oblivious to framing in the media due to the fact that it imitates social conventions. For example, “[t]he issue of equality was once framed as a problem concerning white men: Could they achieve the American dream in an industrial system devoted to profits? Later, mass social movements rose up and reframed the issue as one that spoke directly to race, ethnicity, and gender” (Morone and Kersh 244-245).

The textbook Persuasion in Society defines framing as “a number of possible ways of seeing something, while it defines reframing as a way of seeing something differently; in effect changing its meaning”. (Simons & Jones p.179) Essentially these definitions boil down to perspective. How things are framed are simply what perspective they are shown in or which they are intended to be shown in. Reframing simply means that the perspective changes and adjustments are made on the fly.

The effectiveness of an audit procedure and its application is enhanced by the application of professional skepticism and reduces the possibility that the auditor might select an inappropriate audit procedure, misapply an appropriate audit procedure, or misinterpret the audit results (IAASB staff question and answers, 2012).

Value judgments and the decision process. According to Nutt (1999), judgement is the ability to make decisions within reason. Research has shown that executive and other senior leaders leverage their experiences to make a judgement decision to solve problems (Agor, 1983; Nutt, 1999; Vaughan, 1979). Based on Nutt’s (1999) research, more than twenty-six percent of problem solving using judgement to solve business problems. Agor (1983) and Vaughan’s (1979) research differs from Nutt through the way they define judgement. Agor and Vaughan conclude that decisions are made through intuition, rather than judgement.

These three human decision-making patterns combine to generate what Tversky and Kahneman called the framing effect: the phenomenon whereby human decision-making is impacted based on whether

Decision making could be defined as the process of choosing the best alternative out of several ones in order to fulfill the objective of the organization and to increase the shareholders ' wealth. The process of choosing the best alternative from a given set of projects involves various quantitative and qualitative analysis of the available set of alternatives, to decide on the viability of the project or projects that are going to be chosen by the management.