ICAS launches new professional judgement framework

piece of the jigsaw

2 September 2016

Michelle Crickett, ICAS Director of Research, and Alice Telfer, ICAS Assistant Director, Business Policy & Public Sector, report on the new ICAS guidance on making a professional judgement.

We are increasingly applying principles-based standards. A group of senior CAs, including finance directors, audit partners, audit committee chairs, regulators and standard setters, have shared their experience to distill the key principles they use for making a sound judgement. The result is a new, up-to-date ICAS publication A professional judgement framework for financial reporting decision making. It offers practical guidance for decision makers involved in narrative and financial reporting. 

What is the professional judgement framework?

Irrespective of whether you are an auditor, a preparer, an audit committee member or a regulator this practical guide provides a structure which aims to help you come to a sound judgement when you have a complex financial or narrative reporting decision to make. It can be used by accountants and non-accountants, whether in the private or not-for-profit sectors, irrespective of size and type of organisation and where based in the world.

It also provides a useful training guide for students or those new to decision making who wish to share the experience of those who have been there and done it.

The framework identifies core principles and provides a structured process to guide decision makers through how to make, assess and document significant judgements. It targets significant judgements across narrative and financial reporting including accounting treatment, materiality and disclosures. It is designed to fit within the context provided by applicable accounting standards.

Confidence in financial reporting and in principles-based standards requires us to demonstrate collectively that, as professionals, we are capable of making sound judgements. I believe that this professional judgement framework is vital for the future of the profession

Sir David Tweedie, former Chair of the IASB and former ICAS President

Making a judgement in a complex world, with principles-based accounting standards is not an easy task, but the success of narrative and financial reporting relies on our ability to be able to make sound judgements and to demonstrate our reasoning for making these judgements. We believe that our framework can help individuals with this process and thus help to improve the quality of reporting. The framework is also intended to assist regulators’ judgement process by ensuring that there is appropriate documentation by preparers, audit committee members and auditors to justify key judgments.

The framework also has an important role to play in the training process for those who are new to making professional judgements and crucially, to enable individuals to recognise situations where they need to seek assistance from others.

The key changes

The guide replaces the 2012 edition of this framework. The 2016 edition is shorter and more interactive for online readers. Importantly, it also includes a new framework for audit committee members and further material on ethical decision making. It has also been broadened to make it more widely applicable internationally, as well as across different sectors.

ICAS firmly believes that a principles-based approach to standard setting is a key driver of quality reporting. Our guide therefore also includes recommendations for standard setters to ensure that standards provide the scope for professional judgement.

Using the framework

To contribute to improvement of narrative and financial reporting worldwide, ICAS encourages use of this guidance within organisations and we allow the guidance to be reproduced, stored and transmitted in any form, with appropriate acknowledgement and notification to ICAS. Please do consider how this guidance can be used in your own organisation and built into your current procedures for decision making.

Any queries or feedback regarding this publication can be sent to accountingandauditing@icas.com

Read more: The professional judgement framework


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