Several professional organizations have developed informational pieces discussing the need for professional judgment and professional judgment frameworks.
Public Companies Accounting Oversight Board (PCAOB)
On December 4, 2012, the PCAOB issued Staff Audit Practice Alert (Practice Alert) No. 10, Maintaining and Applying Professional Skepticism in Audits, which reminds auditors of the requirement under professional standards to apply professional skepticism throughout the audit. The Practice Alert covers the appropriate application of professional skepticism in conducting audits and related considerations for audit firms’ quality control systems. The Practice Alert notes that PCAOB inspections continue to identify circumstance s that suggest auditors did not appropriately apply professional skepticism in conducting the audit.
The Center for Audit Quality has a members-only alert available with further discussion.
Institute of Chartered Accountants of Scotland (ICAS)
ICAS has prepared a report entitled A Professional Judgment Framework for Financial Reporting which discusses the importance of professional judgment in a principles-based accounting standards model, provides guidance for preparers, auditors and regulators, and provides recommendations for standard setters.
Committee of Sponsoring Organizations of the Treadway Commission (COSO)
COSO has prepared a document entitled Enhancing Board Oversight: Avoiding Judgment Traps and Biases, which details a five-step judgment process that board members and others can use to overcome common pitfalls and mitigate the effects of judgment bias.
Securities and Exchange Commission (SEC)
The report, " Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission", release August 1, 2008, contains a significant discussion of professional judgment.