Management Bias and Professional Skepticism

Recognizing Potential Bias

Management may unintentionally or intentionally introduce bias into accounting estimates. Auditors apply professional skepticism when evaluating assumptions that appear overly optimistic, inconsistent, or unsupported.

• Compare current estimates with prior estimates.
• Evaluate whether assumptions are consistent with external evidence.
• Investigate significant changes in estimation methods.
• Challenge unsupported management assumptions.

Professional skepticism means questioning evidence—not assuming management is always correct.