CONFIRMATION BIAS: A TRAP THAT ALL AUDITORS AND FRAUD EXAMINERS SHOULD AVOID!!

INTRODUCTION

When Auditors or Fraud Examiners go about their day to day work on audit assignments or fraud examinations, their brains go to work in many ways that they do not consciously recognize. Although as Auditors or Fraud Examiners we try to remain objective, we are undoubtedly affected by factors such as our previous experiences, our cultures, morals, our perceptions of someone and even whether we like them. During an audit or fraud examination, confirmation bias is arguably the most dangerous pitfall for Auditors or Fraud Examiners from conducting an effective audit or fraud examination and making reasonable conclusions. Confirmation bias can lead Auditors or Fraud Examiners to search for and interpret evidence in a way that confirms their existing beliefs and opinions, even when facts/evidence may suggest otherwise.

WHAT THEN IS CONFIRMATION BIAS?

Nelson and McKenzie (2009) define Confirmation bias as, “the tendency for people to search for or interpret information in a manner that favors their current beliefs.” It can also be defined as the tendency to search for, interpret, favor, and recall information in a way that confirms or supports one's prior beliefs or values. People display this bias when they select information that supports their views, ignoring contrary information, or when they interpret ambiguous evidence as supporting their existing views. Confirmation bias is likely to negatively affect the quality of conclusions made from an audit or fraud examination if the audit or fraud examination is not rid of it. In its most basic definition confirmation bias is simply seeing what one wants to see.

In a research in America, a group of people was shown a picture depicting a man holding a knife almost stabbing another man. After a few hours the group was called in one by one and asked what they had seen on the picture. The majority said they had seen a BLACK MAN holding a knife and almost stabbing the white man when in fact the picture clearly showed it was the WHITE MAN who was holding the knife and the black man was the one who was almost getting stabbed. On further probing it was noted that statistics in America that show that most people that commit crime in America are BLACK people affected the way the respondents perceived the picture and the conclusions they made. The respondents saw what they wanted to see (or at least what they were expecting to see).

Same thing in these offices. We have seen a situation where a supervisor who is less academically qualified as compared to their subordinate will respond, “so you think because you have a degree now you know everything?” to a subordinate that makes what could be an innocent suggestion. We have also seen situations where a subordinate whose idea is not embraced by his/her supervisor walking away saying to themselves, “he doesn’t embrace my ideas. He is against me because he/she doesn’t have a degree.” Both the subordinate and the supervisor have a preconceived mind and whatever action is done by the other simply confirms what they already believe. Whatever action is done by the other is interpreted to suit their already held view. A pure case of seeing what you want to see. Confirmation bias can be dangerous in work places as it affects decision making. We see the world through our lenses and we interpret what we see based on our lenses. I call this seeing and interpreting things from one’s world view.

For Auditors and Fraud Examiners confirmation bias can affect how one designs audit and fraud examination procedures and interprets the evidence. An Auditor or Fraud Examiner that is affected by confirmation bias will design audit or fraud examination procedures that support a preconceived outcome. Their interpretation of audit or fraud examination evidence will be to suit a tailored outcome. An Auditor or Fraud Examiner who has heard rumors of fraud occurring at a certain section may unconsciously suffer from confirmation bias hence design their audit or fraud examination procedures and interpret results thereof to suit their conclusion that fraud is occurring.?Another Auditor or Fraud Examiner given the same evidence may come to a totally different conclusion.

Confirmation bias should however be differentiated from professional scepticism which is, an attitude that includes a questioning mind, being alert to conditions which may indicate misstatements or fraud and a critical assessment of audit evidence (ZICA). Professional scepticism is expected and encouraged of Auditors and Fraud Examiners but confirmation bias is strongly discouraged as it goes against the principle and professional ethics of OBJECTICITY which states that members should NOT allow BIAS, conflict of interest or undue influence of others to override professional or business judgements. ??

HOW THEN DOES ONE AVOID CONFIRMATION BIAS?

Conducting an audit or fraud examination that is devoid of confirmation bias is never easy because in most cases confirmation bias happens unconsciously but the following steps may help to reduce or eliminate confirmation bias.

1.???Avoid jumping to conclusion

Thoroughly look through the evidence and facts available, ensuring that you have reviewed all necessary evidence before coming to a conclusion (make sure you have not overlooked any relevant evidence). Ask yourself; have I reviewed all the evidence for me to come up to this conclusion?

2.???Rule out all other possibilities

Before making a conclusion on audit or fraud examination evidence, rule out all other possibilities. As an example, an auditor or fraud examiner that is faced with a situation of fraud must ensure that they rule out any other causes that could cause the situation at hand besides fraud. In short they must be certain it is fraud and nothing else. Try and prove yourself wrong before making a conclusion.

3.???Ask why a lot

It is the best way to get to the bottom of most audit or fraud examination puzzles. It helps to avoid jumping to conclusion.

4.???Review the conclusions you have made

Once you have completed your audit or fraud examination and made your conclusions, allow some time (take a break) and then review your conclusions once your mind is fresh. Chances are that you could have missed or misinterpreted some evidence. It’s called individual quality assurance.

CONCLUSION

The best quality audits are those conducted with a mind of professional scepticism but devoid of confirmation bias. Auditors and Fraud examiners must see what the evidence suggests and not what they want to see. The Auditor or Fraud Examiner must ensure that they reduce the risk of confirmation bias by applying the steps listed above. It is only in this way that the Auditor or Fraud Examiner will make reasonable conclusion and perform a quality and effective audit or fraud examination.

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FOR THE PASSION OF AUDIT AND FRAUD EXAMINATIONS…….

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FRANCIS MILAMBO SPEAKS!!!