Use the KPMG Professional Judgment Framework to critically evaluate the judgments made by Grace as the senior auditor in charge of the engagement.

After reading Case 4-1: KBC Solutions, post your responds to the student following the anwser questions.

  1. Use the KPMG Professional Judgment Framework to critically evaluate the judgments made by Grace as the senior auditor in charge of the engagement.

    The KPMG Professional Judgment Framework explains that there are four common judgment tendencies that are applicable to audit professionals: the availability tendency, the confirmation tendency, the overconfidence tendency, and the anchoring tendency.

    The availability tendency is when an auditor, like Grace, uses accessible information to make a judgement. Grace did this repeatedly, relying on the past information from accrued expenses and last year’s work papers to determine the proper allowance for uncollectibles over a year later. While it is helpful to relate to older information gained, auditors cannot take the easy way out and not verify original information.

    The confirmation tendency is to put weight on beliefs that are consistent with their own. Grace will accept client’s explanations if it aligns with her own desires to not do further work. She will confirm everything that aligns with her needs.

    The overconfidence tendency is when they overestimate their own abilities. Grace pursued her own self-interest and failed to look at contradictory evidence. She realized issues existed, and still does, but she is continuing to deny them.

    Lastly, the anchoring tendency is when an auditor anchors to a piece of information. Grace did exactly this. She gathered last year’s audit and chose to just accept all of its information.

  2. Did Grace violate any rules of conduct in the AICPA Code? Explain.

    Grace violated several rules of conduct in the AICPA Code.

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