In this episode of THE SAMPLE, Leita Hart-Fanta, CPA explains what a bias threat is and how to recognize it.
Welcome to The Sample, a quick discussion of auditing concepts and terms that will help you do your work. Conducting an audit in accordance with auditing standards is no small feat and I want to support you. We’ll be referring to the GAO, IIA and AICPA literature to bolster our conversations. Let’s get started.
In this episode, we discuss how to recognize a bias threat.
What is a Bias Threat?
Biases are like belly buttons. We’ve all got ’em! We were raised in different families and different cultures. We have different life experiences. And so, naturally, we form biases.
But the problem is that biases can impact our objectivity and our independence as an auditor. ‘Cause we do not want anyone doubting our work. We don’t want our readers and our users of our audit report to recognize a bias and thereby not believe what we’re saying.
You know how conservatives really don’t like what the New York Times says, and liberals don’t like what Fox News says. And so they reject, depending on your bias, your political bias, one of those two sources of news is rejected.
We can’t do that as auditors. We don’t have that luxury of leaning one way or the other, right? This is the definition of a bias threat. Why don’t we have that luxury? Because our work becomes worthless if someone doesn’t believe us. It’s of no use to anyone, right?
So a bias could be political, ideological, social or other multitude of biases. And when you do recognize a threat to your independence, the GAO asks that you apply safeguards to protect your independence. And there’s four ideas that they list in the Yellow Book. The last one, I believe, is the only true one that we can use in this case. It’s the nuclear option I call it, which is ‘withdraw from the engagement.’ You get reassigned and, if you’re a one person shop, you don’t do the audit because there’s no one else to assign it to, right?
Bias is Difficult to Overcome
Because biases are really hard to get over. You have to have a lot of empathy. You might have to do some healing. Talking it out with someone. Really understanding what’s going on. That’s going to take some time. And biases impact the entire audit engagement. Where you end up going. What subject specific aspect of the subject you evaluate. What you’re looking at. How deeply you dig. What you test. What’s your report. Who you report to. It affects the entire engagement.
An Example of a Bias Threat
I’ll give you an example of a bias here that recently came up in one of my webinars.
I was talking to an auditor who was evaluating a police department. And the police department was allowing prisoners to die in their custody because they were not receiving medical care within 48 hours of being incarcerated. So prisoners were dying. This, as it turns out, is a pretty common problem across the United States, unfortunately. And I was also talking to them about how to frame your objective so that it’s more interesting and compelling to the reader. And I said it or the user of your report.
And I said, If you use Maslow’s hierarchy and you address your objectives to the bottom of this hierarchy, the basic things that we all agree, all humans have a right to, like air and food and shelter, that your objectives are automatically going be more compelling to a broader audience. And this comment came up in the chat panel showing an obvious bias against inmates:
“Do you think the pyramid applies to all human situations/
some prisoners have committed serious crimes?”
That person should not be on this audit. Plain and simple. Because they are biased against the inmates, right?
Ask Yourself Questions to Determine Bias
Here’s how you know if you’ve got bias.
Do you have disdain or negative thoughts toward the subject or the people involved? So you ask yourself these questions.
Got any negative thoughts there?
Does anything make you uncomfortable or agitated about the subject or the people involved?
Are you able to discuss different views on the subject without getting agitated?
Do you feel like those involved should be severely punished?
Would you feel comfortable expressing your opinions in writing or in public? I think in public is really the better test because we all have a lot of chutzpah when we are making comments online. But would you do this face to face? Would you say these things in public? In front of your pastor, your leaders of your community, your neighbors? Would you say these things? Would you feel comfortable doing that?
Is there anybody else in your office that might be more objective about this?
Really think hard about that. Because when it comes to bias threats, you should really be honest with yourself, your team and your report users.
Biases are not something that are easily overcome and you just shouldn’t be on that engagement.
Want to know more?
Want to learn more about this subject and earn some hours at the same time? Then please join us for a live webinar: Yellow Book Ethics. We offer these a couple of times a year, and, in it, we identify when your auditor credibility is threatened and how to work through any threat to your independence that you encounter. Hope to see you there!
And that wraps it up for another episode of The Sample. True to the nature of a sample, we didn’t talk about everything, so you’ve probably got questions. Write to me at email@example.com and I’ll do my best to fill in the blanks. Thanks for playing.