Unbiased Professional Judgments Are Actually Biased
Professional impartiality in financial reporting and accounting may not, in fact, exist, because there is an innate tendency in people for bias, according to research from the University of Melbourne.
Lead author and professor Colin Ferguson of the Faculty of Business and Economics said that although there is a need for unbiased professional reporting, there has been modest research on factors that affect the objectivity of expert opinions.
“Accounting scandals in financial reporting have been an ongoing issue, through cases such as Enron in the United States and the ongoing Centro lawsuit in Australia. Professional and unbiased judgment requires both independence and objectivity, however our study suggests that people are naturally inclined to an unconscious bias.”
The study, entitled “Professional Independence and Attachment Bias: An Exploratory Study”, lays out how psychological bias and judgment can play out in a professional setting through the use of a court experiment.
Dr. Larelle Chapple from the Australian National University, Peter Crofts, a Barrister at Law in Victoria and Jane Hronsky from the University of Melbourne were co-authors in this research.
In a test mimicking a financial accounting lawsuit, volunteers pretending to be forensic accountants were instructed to act as independent experts in a commercial damages dispute.
As expected, participants awarded higher damages to the defendant, said Ferguson, despite prior instructions on the importance of objective thinking and an unbiased state of mind. Ferguson said this is a form of ‘self-serving bias’ in which people act unconsciously according to their own interests, while still believing they are being objective.
“This has implications for the corporate governance and accounting industries, which rely very much on professional decision-making,” he said. “Ultimately, it might prove that independence of mind cannot be enforced or regulated in people, or in professional settings. Additionally, regulation of independence is usually costly and does not take into account natural and unconscious bias.”
“This also challenges the field of corporate governance and the credibility and professional opinions of independent directors and their audit committees, as well as expert witnesses in the court of law,” said Ferguson.
Source: University of Melbourne
Pedersen, T. (2015). Unbiased Professional Judgments Are Actually Biased. Psych Central. Retrieved on March 17, 2018, from https://psychcentral.com/news/2011/09/24/unbiased-professional-judgments-are-actually-biased/29754.html