Confidence Accounting can be defined as:

Definition of Confidence Accounting

Confidence Accountingchallenges traditional accountingby introducingprobability distributions and rangesrather than fixed numbers for financial reporting.

This approach improvestransparency and risk awarenessby acknowledginguncertainty in financial figures.

Why Answer B is Correct

Encourages usingranges (confidence intervals)instead of discrete values to better reflect uncertainty.

Used inrisk-sensitive industrieswherefinancial estimates varydue to external factors (e.g., credit risk, market fluctuations).

Why Other Answers Are Incorrect

Option

Explanation

A. An approach that encourages companies and audit firms to have diverse boards.

Incorrect– Board diversity is unrelated to Confidence Accounting.

C. An approach that encourages companies and audit firms to use regular statements in their AI software.

Incorrect– AI may use probability models, but Confidence Accounting is anaccounting methodology, not an AI approach.

D. An approach that encourages companies and audit firms to stop using figures and maths.

Incorrect– Confidence Accounting stillrelies on mathematical models; itdoes not eliminate numerical analysis.

PRMIA Financial Risk Reporting Standards

IFRS (International Financial Reporting Standards) Guidelines on Probability-Based Accounting

PRMIA References for Verification