Accountants’ Perception of Risk: Understanding the Psychological Factors that Influence Risk Assessment and Risk-taking Behavior in Accounting Scenarios

• Post by: airjournals
• September 21, 2023
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Chukwuani, Victoria Nnenna PhD

Department of Accounting, Enugu State University of Science and Technology, Nigeria

Abstract The realm of accounting, traditionally viewed as an objective discipline, is intrinsically influenced by human psychology. This study delves into the profound interplay between psychological biases and risk assessment in accounting, highlighting the nuanced ways in which human cognition can shape financial decisions. Through a combination of case studies, personal experiences, and empirical evidence, we explore the potential consequences of these biases, not only for individual accountants and firms but also for the larger economic milieu. The research underscores several pivotal psychological factors at play, ranging from overconfidence and confirmation bias to groupthink and automation complacency. Personal anecdotes reveal that these biases, albeit subtle, can significantly steer financial narratives, sometimes with far-reaching ramifications. Moreover, a retrospective analysis of significant financial events in history, such as the downfall of Lehman Brothers, offers insights into the role of human psychology in these occurrences. However, this intricate dance of numbers and cognition is not solely a cautionary tale. The study also charts a proactive path forward, suggesting potential solutions to counteract these biases. Emphasis is laid on the integration of behavioral finance into accounting education and the establishment of robust decision-making frameworks within firms. Counterarguments, asserting the inherent objectivity of accounting or the efficacy of modern tools in negating biases, are addressed and juxtaposed with the main thesis. In conclusion, this study advocates for a holistic approach to accounting, one that melds technical proficiency with cognitive awareness. In recognizing and navigating the psychological intricacies inherent in risk assessment, the accounting profession can foster a future marked by informed, resilient financial decision-making. Keywords Behavioral Finance; Cognitive Biases; Risk Assessment; Accounting Decision-making; Psychological Influences; Accountants’ Perception of Risk Citation Chukwuani, V. N. (2023) Accountants’ Perception of Risk: Understanding the Psychological Factors that Influence Risk Assessment and Risk-taking Behavior in Accounting Scenarios. Contemporary Journal of Psychology and Behavioral Science, 4(1), 25-35, https://doi.org/10.5281/zenodo.8367137 –