Exercising Judgment Is Just Too Risky

Sir, Steven Kingsley (Letters, March 18) rightly observes the "increasingly regimented approach" of auditors predominantly concerned with rule following, and rightly wishes for "much more judgment". But his approach of increasing their legal risk by making it more "actionable" is guaranteed to achieve the opposite of his desired outcome. It is precisely the threat of financially crippling lawsuits that pushes auditors and accounting firms into rule-following behaviour. Exercising judgment puts them at risk; following the rules provides them protection from rapacious lawyers, so more rules and rigorous rule-following are demanded. Escalating legal threats thus warps the inherently judgmental nature of accounting.

Alex J. Pollock is a resident fellow at AEI.

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