The study covers how cognitive biases are involved in financial choosing and considers their possible effect on auditing and risk management in large organisations. When organisations face highly dynamic and important situations, anchoring, overconfidence, confirmation bias, herd behaviour, framing effects and the availability heuristic make it difficult for decisions to be made wisely. Bias in companies can change the way they handle financial matters such as budgeting, making forecasts and investing, creating problems that auditors and risk managers must handle. Prospect theory, behavioural finance, agency theory and internal control frameworks are used in this review to blend and expand ideas that explain how biases appear in finance, audit and risk management. They show that negative thinking patterns are shared throughout an organisation and can cause conflicts between departments. For example, being too confident about financial estimates can make audit scepticism less effective if people have confirmation bias. On the other hand, well-organised approaches such as clear decision-making, learning new ways of behaving and using AI systems can help solve bias at various places. The review further points out that boards and audit committees help detect and prevent biassed choices and create a culture that encourages people to challenge them. Apart from suggesting actions for businesses, the review points out there are few studies and little publicly available data on how cognitive biases play out in organisations and on testing strategies to overcome them. Working on these deficiencies would be important for further academic work. All in all, the study supports the idea that tackling cognitive biases benefits decision-making, the organisation’s abilities to withstand stress and stakeholder trust in major companies.
Abetoh Nyiawung Fobellah (Sun,) studied this question.