Auditors employ numerous methods to alleviate the potential biases that may result from the use of judgment heuristics. These include

- Improving expertise

- Debiasing techniques

- Framing and perspective

- Group decision making and review

- Justification

- Decision aids Examine each of the following incidences of biased audit judgment. Discuss how one or more of these methods may be employed to improve audit judgment.

a. An auditor believes that a sample size of 10 items from a population of several hundred thousand items is enough to judge the quality of compliance with controls over the accounts receivable posting process.

b. Having completed audits for several years on a certain client without incident, an auditor's substantive tests are designed with the perspective that the possibility of misstatement is remote.

c. The auditor who discovered a small fraud related to the prepaid assets account writes a qualified audit report.

d. The auditor who performs preliminary analytical procedures on the reasonability of various sales expenses fails to notice that the client recently instituted a compensation scheme more heavily weighted toward commissions and away from fixed salaries (each of which are recorded in different expense accounts).

e. An auditor argues for a lower risk of material misstatement for a process based solely on the results of her experience with such clients and her walkthrough of the area.

f. Not fully understanding the ramifications of the newly issued financial accounting standard on stock-based compensation, an auditor trusts management's estimates without further testing.

g. An audit manager notices that her new and eager-to-please staff is prone to overestimating the probabilities of certain events that are, in fact, very unusual.

h. An audit senior notices that his staff's interviews with clients during the evaluation of controls are rarely adequate to get a good understanding of the process.