(PDF) Heuristics and biases: The science of decision-making
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Added on 2021-06-16
(PDF) Heuristics and biases: The science of decision-making
Added on 2021-06-16
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Running head: HEURISTICS AND BIAS 1Heuristics and BiasName Institution
HEURISTICS AND BIAS 2A heuristic is a mental shortcut that helps us make decisions and judgments quicklywithout spending a lot of time researching and analyzing the information. On the other hand, abias is also known as cognitive bias are the errors that come as a result of the judgments anddecisions made. (Tversky & Kahneman, 1974)The following are the types of heuristics and bias;Anchoring and Adjustment HeuristicThis is when people make decisions based on the first piece of information that theyreceive (anchor). Therefore in every decision, they make they will adjust it in such a way that itfits the information they have received. For example, if one has a certain number of marbles inhis hand and they ask a person to guess the number. The person then asks to be given a roughestimate and the one with the marbles says 5. The answer that they give will be close to fivebecause this is their anchor. (Toplak et al., 2017)How it affects an auditIt affects an audit during the planning phase. During this process, the auditor is requiredto acquire documents from previous audits. This way while going through the previous audits heor she will make them his/her anchor. Thus whatever decisions or judgments they make on willbe based on this first information that they have received.Factors that affect this heuristic1. Reviewing all information. If a person considers all the facts and informationpresented then this heuristic is affected.2. Considering both the negative and the positive. The anchor information may benegative therefore if a person needs to considers the positive also.
HEURISTICS AND BIAS 3The following case is an example of anchoring and adjustment heuristic. Two groupswere both given a description of a woman and told to write an essay. The first group was toldnegative attributes of the woman while the second was given positive attributes. The essayswritten by the first group all said negative things about the woman while those written by thesecond group all said pleasant things. The basis of both essays was from the first informationthey received.Representative HeuristicThis is a mental shortcut that helps us in making decisions based on our mentalprototypes. In other words, we make decisions based on categories or stereotypes. For example,if we want to determine if a person is a criminal we will make this decision based on categoriesor stereotypes. We believe that most men are criminals rather than women. Hence if the person ismale we are most likely to make an assumption that they are a criminal. This is because this fitsour mental prototype.How it affects an auditThis can affect the audit when giving a preliminary review. In this stage, an auditorevaluates the way a company operates and the internal processes. The auditor may already havean assumption of how the company operates and this is a mental prototype. Factors that affect this heuristic1. Eliminating stereotypes. 2. Making decisions based on facts and not assumptions. The following is an example of representative heuristic. A student is told to do a researchon the doctors in the medical industry. The student conducted interviews and most of the
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