Question

The concept of professional judgement-making informed decisions about course of action that are appropriate in the circumstances-underpins the accounting profession. Discuss how heuristics/biases and culture can influence accountants. decision making with reference to specific judgements that are typically made by accountants.

Answer 1

Answer :

Heuristic is a way refers to problem solving, learning and discovery. Heuristics used by most managers because they speed up the process to find a solution when situation is extremely complicated. We can say that heuristics are shortcuts that simplify the complex methods of assessing the probabilities and values ordinarily required to make judgments, and eliminate the need for extensive calculation. This may result from pressure of completing a certain task or may be done for convenience without assurance on the result that it may give.

Heuristics can make the decision-making much easier. There are many situations that accountants would like using heuristic to solve problems. In such situation, an accountant may have reached a decision however the result is increase in uncertainty that may be affected by pressure such as on time constraint and by lack of sufficient knowledge on accounting matters.

Heuristic sometimes can be a powerful tool to find the solution. However, when it was used in the wrong situation, it may cause accountants to make systematic metal mistakes.

In case of Biases, there is the tendency that accountants prefer to interpret the information in the way that confirms their preconceptions and try to avoid the interpretation that contradict their beliefs. As a result, the accountant recalls the information selectively from their memory and use information to interpret evidences in a biased way. Biases affect decision making extensively. In accounting, accountants would like to look for the information that confirm their original idea and avoid the opposite information. However, this one-side information can only let accountants see a small part of the whole situation in the company, and lead to a wrong decision making.