(ObjeCtive 6-5) The following independent scenarios describe auditor decisions made during an audit engagement.

1. Cai Di worked on the audit of China Healthcare Associations (CHA), which operates hospitals and outpatient centers in Shanghai and Beijing. Cai was assigned responsi- bility to audit the allowance for patient receivables. For the past several years, CHAs accounting policy required that the recorded allowance for patient receivables be set to equal the total amount of receivables over 180 days past due. Prior audit testing of the allowance in previous years has found that the subsequent write-offs of patient receivables have closely approximated the amount included in the allowance. During the current year audit, Cai examined the amount recorded in the general ledger allow- ance account and reconciled that amount to the amount shown in CHAs consolidat- ed aged trial balance in the 180 days past due amount. Given that the dollar amounts agreed, Cai concluded that the allowance was in accordance with CHA accounting policy and fairly stated. While media reports and other industry publications sug- gested that recent regulatory changes in healthcare insurance were affecting patients ability to pay, Cai concluded that CHAs allowance was fairly stated given the amounts complied with CHAs policy.
2. John Peter was assigned responsibility for evaluating the goodwill impairment testing process at ABC, Inc. Because ABC growth strategy was based mostly on acquisitions, the company had experience in performing annual impairment tests of goodwill. The client provided John extensive information along with detailed schedules that documented managements testing approaches, and it provided her support for keyassumptions made by management. John reviewed the schedules in detail and tested the key calculations. While Johns firm has a number of valuation specialists as part of its staff, John decided not to request their assistance in making an independent assessment of goodwill impairment given that the clients documentation was exten- sive and it would take too much time to have the firms valuation specialists complete an independent assessment.
3. Jason Peter was responsible for auditing the occurrence of sales transactions in the audit of ABC Manufacturing. As part of his testing, he reviewed the contracts signed between ABC Manufacturing and its customers to determine that the transaction terms justified the recording of sales for the year under audit. In addition, he exam- ined documentation related to the sales transactions, including the customers pur- chase orders, shipping documents, and invoices generated by ABC. That evidence examined supported the correct recording of sales in the current year. However, Jason also noticed in the customer files copies of email exchanges between ABC Manufacturing sales agents and the customers suggesting that some of the terms of the sales agreements could be waived at the customers discretion. Jason decided to rely on the contracts and sales transactions documentation to conclude that the sales were properly stated, given that the other information was only included in emails.
4. John Peter works on a number of audits of technology equipment manufacturers and has developed extensive knowledge and experience in the industry. On the recent au- dit engagement of financial statements for ABC Technologies, John was responsible for auditing the valuation of inventories, including the reserve for obsolescence. Giv- en his familiarity with the industry, John decided to conduct a quick analytical proce- dure regarding the days in inventory and determined that the reserve was fairly stated, given it was in line with reserves established by some of his other clients. He deter- mined that additional evidence was not necessary to obtain because of his experience with other clients.

For each of the scenarios listed above, describe the most likely judgment trap that ulti- mately biased the auditors decision making in the audit.