critical thinking and judgement skills are not necessary for accountants

Critical Thinking in Professional Accounting Practice: Conceptions of Employers and Practitioners

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• Samantha Sin ,
• Alan Jones &
• Zijian Wang  

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Over the past three decades or so it has become commonplace to lament the failure of universities to equip accounting graduates with the attributes and skills or abilities required for professional accounting practice, particularly as the latter has had to adapt to the demands of a rapidly changing business environment. With the aid of academics, professional accounting bodies have developed lists of competencies, skills, and attributes considered necessary for successful accounting practice. Employers have on the whole endorsed these lists. In this way “critical thinking” has entered the lexicon of both accountants and their employers, and when employers are asked to rank a range of named competencies in order of importance, critical thinking or some roughly synonymous term is frequently ranked highly, often at the top or near the top of their list of desirables (see, for example, Albrecht and Sack 2000). Although practical obstacles, such as content-focused curricula, have emerged to the inclusion of critical thinking as a learning objective in tertiary-level accounting courses, the presence of these obstacles has not altered “the collective conclusion from the accounting profession that critical thinking skills are a prerequisite for a successful accounting career and that accounting educators should assist students in the development of these skills” (Young and Warren 2011, 859). However, a problem that has not yet been widely recognized may lie in the language used to survey accountants and their employers, who may not be comfortable or familiar with the abstract and technicalized pedagogical discourse, for instance, the use of the phrase “developing self-regulating critical reflective capacities for sustainable feedback,” in which much skills talk is couched.

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Sin, S., Jones, A., Wang, Z. (2015). Critical Thinking in Professional Accounting Practice: Conceptions of Employers and Practitioners. In: Davies, M., Barnett, R. (eds) The Palgrave Handbook of Critical Thinking in Higher Education. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137378057_26

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Improving Critical Thinking Skills

November 01, 2021

By: Sonja Pippin , Ph.D., CPA ; Brett Rixom , Ph.D., CPA ; Jeffrey Wong , Ph.D., CPA

Whether working with financial statements, analyzing operational and nonfinancial information, implementing machine learning and AI processes, or carrying out many of their other varied responsibilities, accounting and finance professionals need to apply critical thinking skills to interpret the story behind the numbers.

Critical thinking is needed to evaluate complex situations and arrive at logical, sometimes creative, answers to questions. Informed judgments incorporating the ever-increasing amount of data available are essential for decision making and strategic planning.

Thus, creatively thinking about problems is a core competency for accounting and finance professionals—and one that can be enhanced through effective training. One such approach is through metacognition. Training that employs a combination of both creative problem solving (divergent thinking) and convergence on a single solution (convergent thinking) can lead financial professionals to create and choose the best interpretations for phenomena observed and how to best utilize the information going forward. Employees at any level in the organization, from newly hired staff to those in the executive ranks, can use metacognition to improve their critical assessment of results when analyzing data.

THINKING ABOUT THINKING

Metacognition refers to individuals’ ability to be aware, understand, and purposefully guide how to think about a problem (see “What Is Metacognition?”). It’s also been described as “thinking about thinking” or “knowing about knowing” and can lead to a more careful and focused analysis of information. Metacognition can be thought about broadly as a way to improve critical thinking and problem solving.

In their article “Training Auditors to Perform Analytical Procedures Using Metacognitive Skills,” R. David Plumlee, Brett Rixom, and Andrew Rosman evaluated how different types of thinking can be applied to a variety of problems, such as the results of analytical procedures, and how those types of thinking can help auditors arrive at the correct explanation for unexpected results that were found ( The Accounting Review , January 2015). The training methods they describe in their study, based on the psychological research examining metacognition, focus on applying divergent and convergent thinking.

While they employed settings most commonly encountered by staff in an audit firm, their approach didn’t focus on methods used solely by public accountants. Therefore, the results can be generalized to professionals who work with all types of financial and nonfinancial data. It’s particularly helpful for those conducting data analysis.

Their approach involved a sequential process of divergent thinking followed by convergent thinking. Divergent thinking refers to creating multiple reasons about what could be causing the surprising or unusual patterns encountered when analyzing data before a definitive rationale is used to inform what actions to take or strategy to use. Here’s an example of divergent thinking:

The customer satisfaction metric employed by RNO Company has increased steadily for the quarter, yet its sales numbers and revenue have declined steadily for the same period. Jill, a senior accountant, conducted ratio and trend analyses and found some of the results to be unusual. To apply divergent thinking, Jill would think of multiple potential reasons for this surprising result before removing any reason from consideration.

Convergent thinking is the process of finding the best explanation for the surprising results so that potential actions can be explored accordingly. The process consists of narrowing down the different reasons by ensuring the only reasons that are kept for consideration are ones that explain all of the surprising patterns seen in the results without explaining more than what is needed. In this way, actions can be taken to address the heart of any problems found instead of just the symptoms. On the other hand, if the surprising result is beneficial to an organization, it can make it easier to take the correct actions to replicate the benefit in other aspects of the business. Here’s an example of convergent thinking:

Washoe, Inc.’s customer satisfaction metric has increased steadily for the quarter, yet sales numbers and revenue have steadily declined for the same period. Roberto found this result to be surprising. After employing divergent thinking to identify 10 potential reasons for this result, such as “the reason that customers seem more satisfied is that the price of goods has been reduced, which also explains the reduction in sales revenue.” To apply convergent thinking, Roberto reviewed each reason that best fit. If the reason doesn’t explain the unusual results satisfactorily, then it will either be modified or discarded. For example, the reduced price of goods doesn’t explain all of the results—specifically, the decrease in units sold—so it needs to either be eliminated as a possible explanation or modified until it does explain all the results.

Exploring strategic or corrective actions based on reasons that completely explain the unusual results increases the chance of correctly addressing the actual issue behind the surprising result. Also, by making sure that the reason doesn’t contain extraneous details, unneeded actions can be avoided.

It’s important to note that a sequential process is required for these types of thinking to be most effective. When encountering a surprising or unexpected result during data analysis, accounting professionals must first focus strictly on divergent thinking—thinking about potential reasons—before using convergent thinking to choose a reason that best explains the surprising result. If convergent thinking is used before divergent thinking is completed, it can lead to reasons being picked simply because they came to mind right away.

LEARNING THE PROCESS

Improving divergent and convergent thinking can benefit employees at any level of an organization. Newer professionals who don’t have as much technical knowledge and experience to draw upon may be more likely to focus on the first explanation that comes to mind (“premature convergent thinking”) without fully considering all of the potential reasons for the surprising results. Experienced individuals such as CFOs and controllers have more technical knowledge and practical experience to rely on, but it’s possible these seasoned employees fall into habits and follow past patterns of thought without fully exploring potential causes for surprising results.

Instructing all accounting professionals on how to think about surprising results can help them have a more complete understanding of the issues at hand that will help guide actions taken in the future. It can lead to a more creative approach when analyzing information and ultimately to better problem solving.

When teaching employees to use divergent and convergent thinking, the goal is to get them to focus on what should be done once they identify information that suggests a surprising result has occurred. The first step is to learn how to properly use divergent thinking to create a set of plausible explanations more likely to contain the actual reason for the surprising results. There’s a three-step method that individuals can follow (see Table 1):

• Ask a broad question that reflects the goal you have: For instance, what is it about the current information that suggests a potential surprising event? Or what led to this event that can help predict future occurrences?
• Answer that question with a complete sentence: Be sure the answer includes a description of the information that suggests a potential surprising event.
• Turn the broad question into a creative challenge: Identify the plausible reasons that could have led to the indications of a surprising event.

Once employees have a good grasp of how to use divergent thinking, the next step is to instruct them in the proper use of convergent thinking, which involves choosing the best possible reason from the ones identified during the divergent thinking process. Potential reasons need to be narrowed down by removing or modifying those that either don’t fully explain the surprising results or that overexplain the results.

Two simple questions can help individuals screen each of the possible explanations generated in the divergent thinking process (see Table 2):

• Can I think of transactions or events that would be considered expected but are accounted for by my ­explanation?
• Can I think of transactions or events that aren’t accounted for by my explanation but are unusual?

The first question is designed for an individual to think about whether there are other events outside of the current issue that fit the explanation: “Does the explanation also address phenomena that aren’t related to or outside the scope of the surprising result that’s being studied?” If the answer is “yes,” then this is a case of overexplanation. Consider, for example, a scenario involving an increase in bad debts. Relaxing credit requirements may explain the increase, but they would also explain a growth in sales and falling employee morale due to working massive amounts of overtime to make products for sale.

The second question is designed to think about whether an explanation only accounts for part of the phenomenon being observed: “Does the explanation address only part of what’s being observed while leaving other important details unexplained?” If the answer is “yes,” then it’s an under-explanation. For example, consider a decline in sales. An economic downturn at the same time as the decline may be a possible explanation, but it might only be part of the problem. A drop in product quality or a drop in demand due to obsolescence could also be causing sales to decline.

If the answer to either screening question is “yes,” then the explanation needs to be discarded from consideration or modified to better address the concern. In the case of over-explanation, the reason is too general and may lead to action areas where none is needed while still not addressing the actual issue. For underexplanation, the reason is incomplete because it accounts for only a portion of the phenomenon observed, thus action may only address a symptom and not the actual root problem.

If the answer to both questions is “no,” then the explanation is viable. The chosen reason neither overexplains nor underexplains the issue at hand, making it more likely that the recommended solution or plan of action based on that reason will be more successful at addressing the actual cause of the issue.

Divergent and convergent thinking are two distinct processes that work in conjunction with each other to arrive at potential reasons for the results they observe. Yet, as previously noted, the two ways of thinking must be conducted separately and sequentially in order to obtain optimal results. Divergent thinking must be applied first in order to achieve a diverse set of potential reasons. This will maximize the probability of generating a feasible reason that explains the results correctly. After the set of potential reasons has been generated using the divergent thinking approach, convergent thinking should be used to methodically remove or modify the reasons that don’t fit with the surprising results.

If both divergent thinking and convergent thinking are done simultaneously, premature convergence can lead to a less-than-optimal reason being chosen, which may lead to taking the wrong course of action. Thus, it’s important with training to instruct employees in the use of both divergent thinking and convergent thinking and to use the types of thinking sequentially.

ORGANIZATIONAL TRAINING

Learning to apply divergent and convergent thinking can require a substantial time commitment. The process we’ve described here is designed to enhance critical thinking and problem-solving skills. It outlines a general approach that doesn’t provide specific guidance on the best methods to analyze data or complete a task but rather focuses on successful methods to think of a diverse set of reasons for any surprising results and then how to choose the best explanation for that result in order to be able to recommend the most appropriate actions or solutions.

Individuals can practice the approach we’ve described on their own, but each organization will likely have its own preferred way to approach the analyses. Plumlee, et al., used training modules in their study that could be employed in a concerted effort by a company, with supervisors training their employees. We estimate that a basic training session would take about two hours. Complete training with practice and feedback would require about four hours—which could grow longer with even more for intensive training.

One area where this training could be very effective in helping employees is data analytics. In the past decade, an increasing amount of accounting and financial work involves or relies on data analysis. Data availability has increased exponentially, and companies use or have developed software that generates sophisticated analytical results.

Typical data analysis procedures accounting professionals might be called on to perform include things such as ratio and trend analyses, which compare financial and nonfinancial data over time and against industry information to examine whether results achieved are in line with expectations for strategic actions. Additionally, analyses are forward-looking when performance measures examined are leading indicators.

In order to perform data analytics effectively, accounting professionals must exercise sufficient judgment to critically assess the implications of any surprising results that are found. The quality of judgments and understanding the best ways to conduct and interpret the information uncovered by data analytics have typically been a function of time spent on the job along with training. At the same time, however, it’s commonplace that many of these analyses are performed by newer professionals.

Training in metacognition will help these employees more effectively and creatively reach conclusions about what they’ve observed in their analysis. Since the method discussed provides general instruction, each organization can customize the approach to best fit its own operations, strategies, and goals. Implementing a training program can be worth the investment given the importance of critical thinking throughout the process of evaluating operating results. Avoiding potential failures with interpreting results that could be prevented would seem to warrant the consideration of metacognitive training.

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Critical Thinking in Professional Accounting Practice: Conceptions of Employers and Practitioners

2015, Martin Davies and Ron Barnett (Eds), 2015. The Palgrave Handbook of Critical Thinking in Higher Education. London: Palgrave Macmillan.

In settings of semi-structured interviews accountants and employers, using the informal language of the lifeworld, verbalized how they conceptualize critical thinking in professional accounting practice. From their voices, critical thinking is conceptualized not so much as a cognitive ability but as a kind of purposeful doing and is imbued with desirable traits such as open-mindedness and a persistently questioning mind. Critical thinking is also seen to be associated with high-level interpersonal and writing skills. Related skills, like interpretation, evaluation, and reflective judgment, can be honed if persistently practiced in the classroom.

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Top soft skills for accounting professionals

Soft skills are key to career advancement. one cpa at the forefront of recruitment and professional development shares tips for boosting these critical skills..

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Communication

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As professionals advance in an accounting or finance career, soft skills become increasingly important. In a world that is becoming more digital, computerized, and automated, soft skills can be the differentiator between two employees competing for the same promotion or position.

In fact, in a recent survey reported by the Society for Human Resource Management, 97% of employers stated soft skills were either as important or more important than hard skills. Whether a professional is looking for a new job or seeking a promotion, focusing on and developing soft skills can help employees be more well-rounded and employable professionals.

What I am seeing, for my own team and firmwide working with hiring companies, is the importance placed on various soft skills for accounting and finance professionals, which can help take the company's work to the next level.

For professionals looking to improve their work and their employability, the four soft skills listed below are most prominent.

Time management

Time management is an essential skill for any accounting professional because of not only how deadline-focused the profession is, but also because of the time management discipline required by the large-scale shift to remote work. It can be challenging to avoid procrastination, and it is easier to get off track when working virtually.

Because of accounting's cyclical nature, employees have ample opportunities to hone time management skills. Most significant projects and deliverables will happen at the same time of year, depending on the organization. Here are a few tips I have found to help develop time management skills and stay organized.

Start with leveraging calendars and tasks. Using the organization's digital tools can help move projects along and keep them organized. For example, if working within a team setting, use a shared spreadsheet with colleagues to track each person's responsibilities for month-end close or whatever project the team has prioritized. For sole practitioners, diligently using a calendar can help with keeping on task and meeting deadlines.

Another way to develop time management skills is by talking to managers and colleagues. Ask how they keep their tasks aligned. They might be planning their days in a way that can work with other projects and tasks. CPAs who demonstrate good time management have a leg up both for new employment opportunities and for promotions within their organization.

Critical thinking

Various hiring managers we work with often request that candidates have "strong critical-thinking skills," but what does that mean for the accounting and finance profession? Critical thinking — analyzing problems and finding the causes and solutions to those problems — is a major facet of the accounting profession.

Organizations are constantly facing new financial challenges. Most recently, COVID-19 created a range of challenges for accounting and finance teams to solve. Reallocating funds and cash management, managing payroll changes, reacting to new legal changes to internal reporting practices, and other changes required employees to think critically and creatively to meet organizational needs.

While COVID-19 was unexpected, there are other challenges accounting teams can plan for. What we are seeing most employers ask for is accounting and finance professionals who not only look at the problems of the past and find solutions, but who also can predict problems before they occur. From first glance to final analysis, accounting professionals should look at all the information they have and be able to communicate why something happened and what can be done in the future to plan or account for it.

When working to develop critical thinking skills, I've found it extremely important to first question how and why processes are done the way they are and ask how they can be done better. This "professional skepticism" and general curiosity can help ensure accuracy across all tasks. Professional skepticism will make it easier to ask the right questions and find the "why" instead of just trusting information at face value.

Leveraging other successful accounting professionals' advice can hone critical thinking skills and make any accounting professional a stronger asset to their organization. Webinars, conferences, and networking with other accounting professionals can give insight into what other organizations are doing and offer vendor recommendations, process improvements, and more.

Our recruiters regularly see communication as a top skill for accounting and finance talent. Nearly every function of an organization interacts with the accounting and finance teams. Therefore, professionals need to have exceptional communication skills, both written and verbal. Important projects need to be communicated in an easy-to-understand way to executives and colleagues (especially if they are unfamiliar with accounting or finance terminology) to ensure proper completion.

If accounting and finance professionals have poor communication skills, making clear points, sharing their reports and creating action items from the findings can be difficult. 

When working to develop strong communication skills, reach out to a manager for feedback. Have them review emails, reports, and other communication before sending out or sharing.

Ask them if the communication gets the point across and if they believe the end user will understand the report or the solution being communicated. It's important to recognize who your audience is and the best way to present the information.

Avoid using too much jargon and ensure that anyone can understand the information, not just accounting professionals. Along with asking a manager for help, do a self-review of any communication. For written work, read it out loud to catch errors. Hearing versus reading something has a different impact. For oral communication, practice in advance so that the meeting's goal or call is adequately communicated.

Collaboration

Collaboration with teammates and other employees is paramount for accounting professionals. Since accounting and finance teams touch every area of the business, they are expected to work cross-functionally and collaborate well with other employees. Projects that involve other employees — like budgets, cash flow projections, or strategic planning — can be complicated and require a high degree of collaboration.

While entry-level accountants might not lead these projects with other company leaders, they will eventually be expected to meet with teams across the organization, so developing this skill now is crucial for continued growth. Even for sole practitioners who work relatively independently, collaboration is absolutely key while working with clients and any other stakeholders in various projects.

One way I've found helpful in practicing to become a stronger collaborator is spending time before a meeting writing down questions and thoughts to bring to the conversation. Make speaking up in meetings and calls a regular habit, and eventually, it'll become muscle memory. Preparing questions and engaging with the topic will encourage other team members to do the same and create more dialogue and collaboration in the discussions.

— Ryan Chabus , CPA, MBA, is the controller at LaSalle Network, a staffing, recruiting, and culture firm based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, a JofA senior editor, at [email protected] .

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4 Critical Digital Skills

There are four critical leadership and digital skills that CPAs and accountants need to succeed and thrive in the 21st century, Mansfield explains. These skills include:

1. Leadership

Leadership is one key area that accountants need to incorporate into their training programs, according to Mansfield. The guiding principle of “leading from wherever you are,” means that any individual — from an early career professional to one seasoned with 35-plus years of experience — has the opportunity to practice leadership. Like any skill, leadership requires that you learn, practice, and hone it. Accountants are the second most trusted profession, behind doctors, and that trust automatically puts them in a leadership role with responsibilities.

As Daniel Goleman points out in his bestseller Emotional Intelligence (EI): “Exceptional leaders distinguish themselves because of superior self-leadership.” Indeed, EI has two distinct parts: i ) self-awareness; and ii ) social or relational awareness — and progress on the first must be made before embarking on the second. Becoming aware of one’s own emotions, formulating accurate self-assessment, controlling one’s outward emotional responses, taking initiative, and being optimistic are the primary areas of self-awareness that need to be practiced and honed.

2. Critical thinking

Mansfield has heard from many members of the accounting profession over the past few years that critical thinking skills are lacking in their team members. Yet, many surveys have shown that critical thinking is one of the most coveted skills in new hires. Technology is a powerful tool, but it should not replace our need to think critically. Indeed, there appears to be greater trust in the output of the technology over their own assessment at times or a hesitation to go against what the software output is saying. And this is not just an issue for the accounting profession. Multiple new standards are not as black and white in their guidance, and therefore more judgement and discernment is needed.

Employing good critical thinking skills, according to Mansfield, includes the ability to ask: i ) Does this look right for this type of business or the situation the client is in? ii ) What do I need to do to be able to look into the situation further? iii ) Can I get more diversified input so any biases don’t impair the conclusions or recommendations?

3. Communication

Another major skill area Mansfield sees as essential for CPAs and accountants is communication. More specifically, understanding the client’s perspective and presenting ideas from the client’s perspective are critical sub-skills within this broader category:

• Taking perspective — By stepping into the client’s shoes to analyze the decision or recommendation you are making can increase communication effectiveness almost immediately. It’s the responsibility of the accountant to help the client reach their goals, Mansfield says, adding that one critique she’s heard many times is that some professionals can be too direct or lack positioning that is relevant to the client.
• Thinking of the situation businesses are in now — During this time of the COVID-19 pandemic, your clients may need a great deal of empathy and truth. To connect with clients, you have to relate — or you will not elicit all the information you need from a client to advise them accurately. By walking in the shoes of the client; by thinking about the problem they’re encountering; by understanding the potential implications of the decision for their business (especially when the stakes are this high); by empathizing with them about how the stress and anxiety of the decision might be impacting them — these are best practices to be successful in perspective-taking.
• Presenting ideas by starting with the end-goal in mind — Whether you are presenting a recommendation to a board, management team, or individual, it’s a good idea to start with the end in mind, and connecting it to the client’s stated goals. Start with the recommendation first; focus on your rationale for it; and then walk the client through your thought process, so they are learning, and you are building trust. The more trust, the more the client shares, and the better your service. All of this is accomplished through effective communication with clients and with colleagues as well.

4. Digital mindset

The digital mindset, as Mansfield describes it, is the ability to adapt to change and apply that change to evolving their business model, practice area, or service. During this process, it’s also important to understand that technology is a tool to stand on. Indeed, another aspect of the digital mindset is learning how to evaluate technology, understanding how it impacts the workflow for the services you provide, and ultimately, determining whether or not the technology actually fits your needs.

For example, understanding how innovative technology like artificial intelligence currently figures into your workflow and how your interaction with AI could create bias in the output is an absolute must to be able to leverage the output successfully, Mansfield says.

Soft skills are critical now

These soft skills are of growing importance to the accounting profession because technology is continuing to automate the transactional side of accounting work, Mansfield explains. An accountants’ ability to connect, relate, and communicate will become ever more important in their role as advisor to clients, she adds.

Accounting professionals need to lean into their leadership, critical thinking, and communication skills and develop a digital mindset to capitalize on the unique value that they have to offer, she notes, adding that the opportunities are abundant, it just requires honing additional skills to deliver that knowledge and value to clients.

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Critical Thinking for Accountants

by John Taylor

Critical thinking is becoming increasingly important for accountants, as businesses look to you to provide insight, analysis and proposals to improve your, or your clients� business. This course explores critical thinking techniques and provides practical advice on how to use them to benefit the organisations you work with.

Look inside, how it works, this course will enable you to.

• Understand critical thinking and use it to benefit the organisations you work with.
• Overcome the logical fallacies, flawed arguments and unfounded assumptions that lead to bad decisions.
• Improve your decision making by being honest with yourself and reflecting critically.
• Apply critical thinking to present engaging and informative reports.

About the course

Critical thinking is becoming increasingly important for accountants. Your clients are looking to you for more analytical engagement. For accountants in business, critical thinking is an important skill to enable you to help your business achieve its potential.

This course explores critical thinking techniques and provides practical advice and tips on how to use them to benefit the organisations you work with.

• What is critical thinking?
• An important skill
• Why do accountants need critical thinking skills?
• Necessary skills
• Professional scepticism
• Enhancing our work
• Emotional responses
• Cognitive biases
• Logical thinking
• A practical skill
• Practical reasoning
• Judgement statements
• Deductive reasoning
• Inductive reasoning
• Testing a hypothesis
• Flawed arguments
• Professional judgement
• Learning to reflect
• Critical reflection
• Dealing with doubt
• For the avoidance of doubt
• Decision-making
• Improving critical thinking skills
• Developing creative solutions
• Objectives and planning
• Setting pen to paper
• Gathering information
• Analysis, analysis, analysis
• A report worth reading
• Drawing conclusions

John Taylor

John is a Chartered Accountant who has spent many years advising small and medium-sized businesses across the North of England. John is the author of two industry standard textbooks: Millichamp - Auditing and Forensic Accounting . He has also written several auditing textbooks for AAT courses.

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Critical Thinking and Judgment Skills Are Not Necessary for Accountants

Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine.

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Q2: A creditor is any person who has

Q3: Accounting is the information system that measures

Q4: Accounting is referred to as the language

Q5: A creditor is a person who owes

Q6: Which of the following users would rely

Q8: Managerial accounting focuses on information needed by

Q9: Any person or business to whom a

Q10: Investors primarily use managerial accounting information for

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