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Nelson & Kinney (1997)

3 important questions on Nelson & Kinney (1997)

What is/are the judgment(s) or decision(s) that are studied in this paper?

Decision: whether auditors reference contingent losses in audit reports.
Judgment: the auditor's judgment of the probability that a material loss will occur.

What is/are the (normative) benchmark(s) against which the judgment(s) or decision(s) are compared?

There is not a normative benchmark in this study. There are several standards that state under which conditions a possible contingent loss must be reported, but this depends on terms such as 'probable' and 'remote', which the auditor must assess.

Can you think of a way in which the effect of this behavioral factor might be mitigated? Please describe.

If auditors would always use their most professional judgment rather than this being dependent by the sign and size of the payoffs, the general difference in attitude towards ambiguity between auditors and financial statement users about an appropriate audit report reference would be mitigated as financial statement users rely the most on auditors' professional judgment.