Cognitive Biases in Accounting

Cognitive biases in accounting are systematic errors in thinking that affect judgment and decision-making. They can lead accountants or managers to interpret financial data inaccurately, favor certain outcomes, or overlook important details. Examples include overconfidence bias, which causes an overestimation of abilities or data accuracy, and confirmation bias, where individuals focus on information that supports their preconceived notions. Recognizing these biases is crucial for maintaining objectivity, ensuring accurate financial reporting, and making sound business decisions. Being aware of cognitive biases helps prevent errors caused by unconscious mental shortcuts.