This chapter lays out a framework for high-quality decision-making that has been applied across a number of different professions, including the medical profession. The framework has been adapted in this textbook to fit audit terminology.

Required

a. What is meant by the term high quality decision-making? How is that term operationalized in an audit situation?

b. How are both (i) the risk of making an incorrect decision and (ii) the risk that errors exist in the accounting records implemented in the decision-making model?

c. What does the decision-making model infer about the sufficiency and persuasiveness of information needed to make high-quality decisions? What is meant by the term sensitivity analysis?

d. What is the major decision auditors have to make regarding audits of a company's financial statements? For example, assume that the statements are only "a little bit wrong." What are the consequences for the auditor? What if the statements are significantly in error? What are the consequences for the auditor?