ABSTRACT: The effectiveness of the whistleblower as a control against misconduct and fraud is dependent on the willingness of the employee to report wrongdoings to the appropriate party. However, there is concern that a perceived threat of retaliation negatively affects one's attitude toward whistleblowing. The objective of this study is to examine whether the employee, even under threat of retaliation, can be persuaded to change his or her attitude toward blowing the whistle. The Elaboration Likelihood Model is used as the theoretical lens to investigate whether attitude change toward whistleblowing can occur and how perceived threat of retaliation impacts the persuasion process. This experimental study provides evidence that persuasive messages can change employee attitude toward whistleblowing but this change is most pronounced when persuasive messages are presented to employees who perceive a high threat of retaliation and are familiar with misconduct within the organization.
{"title":"Blowing the Whistle: Individual Persuasion under Perceived Threat of Retaliation","authors":"R. Young","doi":"10.2308/BRIA-51729","DOIUrl":"https://doi.org/10.2308/BRIA-51729","url":null,"abstract":"ABSTRACT: The effectiveness of the whistleblower as a control against misconduct and fraud is dependent on the willingness of the employee to report wrongdoings to the appropriate party. However, there is concern that a perceived threat of retaliation negatively affects one's attitude toward whistleblowing. The objective of this study is to examine whether the employee, even under threat of retaliation, can be persuaded to change his or her attitude toward blowing the whistle. The Elaboration Likelihood Model is used as the theoretical lens to investigate whether attitude change toward whistleblowing can occur and how perceived threat of retaliation impacts the persuasion process. This experimental study provides evidence that persuasive messages can change employee attitude toward whistleblowing but this change is most pronounced when persuasive messages are presented to employees who perceive a high threat of retaliation and are familiar with misconduct within the organization.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"97-111"},"PeriodicalIF":2.1,"publicationDate":"2017-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46131022","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Brian T Hogan, G. Krishnamoorthy, James J. Maroney
ABSTRACT: Reacting to the criticism that companies routinely mislead investors by emphasizing non-GAAP or pro forma numbers, the SEC promulgated Regulation G in 2003, which requires firms to provide a reconciliation of the pro forma and GAAP numbers. In this study, we conduct an experiment to examine how investors' GAAP and non-GAAP earnings performance assessments affect their financial evaluations and investment decisions based on the presentation format of the reconciliation (presenting a full non-GAAP income statement, referred to as the full NGIS format, versus presenting only the items that caused the difference between GAAP and non-GAAP measures, referred to as the summary NGIS format). We find that even though a summary NGIS format for the reconciliation of pro forma earnings does not increase the perceived non-GAAP earnings performance, it does increase the weight given to non-GAAP earnings performance when making investment-related judgments and decisions, relative to a full NGIS format. These f...
{"title":"Pro Forma Earnings Presentation Effects and Investment Decisions","authors":"Brian T Hogan, G. Krishnamoorthy, James J. Maroney","doi":"10.2308/BRIA-51775","DOIUrl":"https://doi.org/10.2308/BRIA-51775","url":null,"abstract":"ABSTRACT: Reacting to the criticism that companies routinely mislead investors by emphasizing non-GAAP or pro forma numbers, the SEC promulgated Regulation G in 2003, which requires firms to provide a reconciliation of the pro forma and GAAP numbers. In this study, we conduct an experiment to examine how investors' GAAP and non-GAAP earnings performance assessments affect their financial evaluations and investment decisions based on the presentation format of the reconciliation (presenting a full non-GAAP income statement, referred to as the full NGIS format, versus presenting only the items that caused the difference between GAAP and non-GAAP measures, referred to as the summary NGIS format). We find that even though a summary NGIS format for the reconciliation of pro forma earnings does not increase the perceived non-GAAP earnings performance, it does increase the weight given to non-GAAP earnings performance when making investment-related judgments and decisions, relative to a full NGIS format. These f...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"11-24"},"PeriodicalIF":2.1,"publicationDate":"2017-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43820409","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Stephen J. Perreault, J. Wainberg, Benjamin L. Luippold
ABSTRACT: An important aspect of an organization's tone at the top is its practices for correcting the behavior of employees who deviate from set corporate policies and procedures (COSO 2013). Coll...
{"title":"The Impact of Client Error-Management Climate and the Nature of the Auditor-Client Relationship on External Auditor Reporting Decisions","authors":"Stephen J. Perreault, J. Wainberg, Benjamin L. Luippold","doi":"10.2308/BRIA-51770","DOIUrl":"https://doi.org/10.2308/BRIA-51770","url":null,"abstract":"ABSTRACT: An important aspect of an organization's tone at the top is its practices for correcting the behavior of employees who deviate from set corporate policies and procedures (COSO 2013). Coll...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"37-50"},"PeriodicalIF":2.1,"publicationDate":"2017-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47582352","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT This study examines whether charismatic client leadership constrains the objectivity of auditor judgment. Previous accounting research has found that auditors who identify with their clients suffer from objectivity impairment because they agree with their clients more than do other auditors. Related to this, leadership research claims that followers' identification with a collective makes them susceptible to charismatic leader influence. Based on leadership theory, we anticipate that auditor objectivity may be constrained when leadership is perceived as charismatic, even disregarding the fact that the auditor is not a member of the client's organization. A cross-sectional design was used and responses from Swedish auditors were analyzed statistically. The findings indicate that perceived charismatic leadership is associated with constrained auditor objectivity.
{"title":"Does Charismatic Client Leadership Constrain Auditor Objectivity","authors":"Jan Svanberg, Peter Öhman","doi":"10.2308/BRIA-51496","DOIUrl":"https://doi.org/10.2308/BRIA-51496","url":null,"abstract":"ABSTRACT This study examines whether charismatic client leadership constrains the objectivity of auditor judgment. Previous accounting research has found that auditors who identify with their clients suffer from objectivity impairment because they agree with their clients more than do other auditors. Related to this, leadership research claims that followers' identification with a collective makes them susceptible to charismatic leader influence. Based on leadership theory, we anticipate that auditor objectivity may be constrained when leadership is perceived as charismatic, even disregarding the fact that the auditor is not a member of the client's organization. A cross-sectional design was used and responses from Swedish auditors were analyzed statistically. The findings indicate that perceived charismatic leadership is associated with constrained auditor objectivity.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"103-118"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2308/BRIA-51496","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44802046","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Staci A. Kenno, Susan A. McCracken, Steven E. Salterio
ABSTRACT: To better focus financial reporting research on key issues as seen by participants in the financial reporting process and to give added depth to the interpretation of archival and experimental results, there have been increased calls for financial reporting researchers to “enter the field.” As field research methods, especially interview-based, are rarely covered in accounting doctoral programs that focus on archival or experimental research, the goal of this article is to provide a basic primer on how to conduct positivist field-based research using qualitative interview methods. We assemble a set of resources that facilitate the transfer of knowledge about the interview method, both by reviewing the explicit knowledge that needs to be acquired, as well as by illustrating how we carried out a study on the earnings press release creation process. Such a “how to do” approach is well suited for the passing on of the tacit knowledge required by researchers beginning a qualitative research program. ...
{"title":"Financial Reporting Interview-Based Research: A Field Research Primer with an Illustrative Example","authors":"Staci A. Kenno, Susan A. McCracken, Steven E. Salterio","doi":"10.2308/BRIA-51648","DOIUrl":"https://doi.org/10.2308/BRIA-51648","url":null,"abstract":"ABSTRACT: To better focus financial reporting research on key issues as seen by participants in the financial reporting process and to give added depth to the interpretation of archival and experimental results, there have been increased calls for financial reporting researchers to “enter the field.” As field research methods, especially interview-based, are rarely covered in accounting doctoral programs that focus on archival or experimental research, the goal of this article is to provide a basic primer on how to conduct positivist field-based research using qualitative interview methods. We assemble a set of resources that facilitate the transfer of knowledge about the interview method, both by reviewing the explicit knowledge that needs to be acquired, as well as by illustrating how we carried out a study on the earnings press release creation process. Such a “how to do” approach is well suited for the passing on of the tacit knowledge required by researchers beginning a qualitative research program. ...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"77-102"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44201933","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT: Shareholder litigation is an important part of the regulation of securities markets that can influence corporate managers' reporting behavior. Prior research shows that conventional economic factors affect investors' litigation decisions. We use experimental markets to examine whether investors engage in costly litigation even without a direct financial incentive to do so and whether this affects managers' reporting decisions and managers' and investors' welfare. We find that investors frequently litigate when they can impose a financial penalty on managers for misreporting even though they cannot recover their legal fees or receive restitution for their losses. Moreover, this deters managers' shirking and misreporting and improves managers' and investors' welfare almost as effectively as when investors can recover their legal fees and receive restitution for their losses. Overall, our results indicate that, in addition to financial incentives, investors' desire to punish misreporting plays an i...
{"title":"Does Investors' Desire to Punish Misreporting Affect Their Litigation Decisions and Managers' and Investors' Welfare?","authors":"Jason L. Brown, Donald V. Moser","doi":"10.2308/BRIA-51559","DOIUrl":"https://doi.org/10.2308/BRIA-51559","url":null,"abstract":"ABSTRACT: Shareholder litigation is an important part of the regulation of securities markets that can influence corporate managers' reporting behavior. Prior research shows that conventional economic factors affect investors' litigation decisions. We use experimental markets to examine whether investors engage in costly litigation even without a direct financial incentive to do so and whether this affects managers' reporting decisions and managers' and investors' welfare. We find that investors frequently litigate when they can impose a financial penalty on managers for misreporting even though they cannot recover their legal fees or receive restitution for their losses. Moreover, this deters managers' shirking and misreporting and improves managers' and investors' welfare almost as effectively as when investors can recover their legal fees and receive restitution for their losses. Overall, our results indicate that, in addition to financial incentives, investors' desire to punish misreporting plays an i...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"57-75"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47419985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Donna D. Bobek, Derek Dalton, Brian E. Daugherty, Amy M. Hageman, Robin R. Radtke
ABSTRACT: The purpose of this paper is to investigate certified public accountants' (CPAs) perceptions of their ethical environments. More specifically, we compare the perceptions of CPAs in (1) public accounting firms to those in industry, and (2) perceptions of CPAs at Big 4 public accounting firms to those at non-Big 4 firms. The ethical environment is one component of overall organizational culture and is important for encouraging ethical decision making. Based on responses from 904 CPAs, we find CPAs working at public accounting firms perceive their ethical environments as significantly stronger than CPAs in industry (and other nonpublic accounting work settings). Additionally, within public accounting, CPAs at Big 4 firms perceive their ethical environments as significantly stronger than those working at non-Big 4 accounting firms. Implications for research and practice are discussed. Data Availability: Please contact the authors.
{"title":"An Investigation of Ethical Environments of CPAs: Public Accounting versus Industry","authors":"Donna D. Bobek, Derek Dalton, Brian E. Daugherty, Amy M. Hageman, Robin R. Radtke","doi":"10.2308/BRIA-51561","DOIUrl":"https://doi.org/10.2308/BRIA-51561","url":null,"abstract":"ABSTRACT: The purpose of this paper is to investigate certified public accountants' (CPAs) perceptions of their ethical environments. More specifically, we compare the perceptions of CPAs in (1) public accounting firms to those in industry, and (2) perceptions of CPAs at Big 4 public accounting firms to those at non-Big 4 firms. The ethical environment is one component of overall organizational culture and is important for encouraging ethical decision making. Based on responses from 904 CPAs, we find CPAs working at public accounting firms perceive their ethical environments as significantly stronger than CPAs in industry (and other nonpublic accounting work settings). Additionally, within public accounting, CPAs at Big 4 firms perceive their ethical environments as significantly stronger than those working at non-Big 4 accounting firms. Implications for research and practice are discussed. Data Availability: Please contact the authors.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"43-56"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49233165","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT: Understanding the inferences that nonprofessional investors draw from material weakness disclosures is important because of their effect on investment decisions and for assessing whether current standards serve their needs. Prior research shows that users assess higher financial reporting risk for an entity-level material weakness compared to an account-specific material weakness because they perceive the former as presenting a higher risk of potential misstatement. We extend the literature by proposing two variables (remediation and operational risks) that mediate and incrementally explain the observed relationship between the type of material weakness and financial reporting risk assessments. In an experiment involving 181 nonprofessional investors, we find, as predicted, that the entity-level material weakness signals not just a higher potential for undetected misstatements but also higher remediation and operational risks. Further, we find that the two variables fully mediate and incremental...
{"title":"Inferring Remediation and Operational Risk from Material Weakness Disclosures","authors":"S. Asare, A. Wright","doi":"10.2308/BRIA-51560","DOIUrl":"https://doi.org/10.2308/BRIA-51560","url":null,"abstract":"ABSTRACT: Understanding the inferences that nonprofessional investors draw from material weakness disclosures is important because of their effect on investment decisions and for assessing whether current standards serve their needs. Prior research shows that users assess higher financial reporting risk for an entity-level material weakness compared to an account-specific material weakness because they perceive the former as presenting a higher risk of potential misstatement. We extend the literature by proposing two variables (remediation and operational risks) that mediate and incrementally explain the observed relationship between the type of material weakness and financial reporting risk assessments. In an experiment involving 181 nonprofessional investors, we find, as predicted, that the entity-level material weakness signals not just a higher potential for undetected misstatements but also higher remediation and operational risks. Further, we find that the two variables fully mediate and incremental...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"1-17"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42430172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Ewald Aschauer, M. Fink, Andrea Moro, Katharina van Bakel-Auer, Bent Warming‐Rasmussen
ABSTRACT: This study empirically investigates the relationship between auditors' identification-based trust in client firms' managers (CEOs/CFOs) and their perceptions of auditors' professional skepticism. We employ a multimethod approach broken down into two studies. First, in Study 1, we approached auditors and clients using narrative interviews in order to identify the working definitions of interpersonal trust and professional skepticism and also to develop an empirical and testable hypothesis against the backdrop of the current literature. Second, in Study 2, an ordinary least squares regression based on data collected from 233 real auditor-client dyads in Germany reveals that auditors' identification-based trust is positively associated with their clients' perception of the auditors' professional skepticism. The identified coexistence of trust and professional skepticism in auditor-client dyads implies that regulatory measures that impede the evolution of trust between auditors and their clients wil...
{"title":"Trust and Professional Skepticism in the Relationship between Auditors and Clients: Overcoming the Dichotomy Myth","authors":"Ewald Aschauer, M. Fink, Andrea Moro, Katharina van Bakel-Auer, Bent Warming‐Rasmussen","doi":"10.2308/BRIA-51654","DOIUrl":"https://doi.org/10.2308/BRIA-51654","url":null,"abstract":"ABSTRACT: This study empirically investigates the relationship between auditors' identification-based trust in client firms' managers (CEOs/CFOs) and their perceptions of auditors' professional skepticism. We employ a multimethod approach broken down into two studies. First, in Study 1, we approached auditors and clients using narrative interviews in order to identify the working definitions of interpersonal trust and professional skepticism and also to develop an empirical and testable hypothesis against the backdrop of the current literature. Second, in Study 2, an ordinary least squares regression based on data collected from 233 real auditor-client dyads in Germany reveals that auditors' identification-based trust is positively associated with their clients' perception of the auditors' professional skepticism. The identified coexistence of trust and professional skepticism in auditor-client dyads implies that regulatory measures that impede the evolution of trust between auditors and their clients wil...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"29 1","pages":"19-42"},"PeriodicalIF":2.1,"publicationDate":"2017-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48280592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We use an experiment to examine escalation bias in subjective performance evaluations. Participants assume the role of manager and evaluate the performance of an employee based on a balanced-scorecard-type performance report. We manipulate whether managers recommended positively or negatively about the evaluated employee's promotion to his current position. Consistent with the presence of escalation bias, we find that managers give higher performance ratings to employees about whom they advised positively than to employees about whom they advised negatively. Using eye-tracking data, we investigate whether escalation bias arises because managers with different prior commitments toward the evaluated employee pay attention to different items in the scorecard. We find that evaluators' prior recommendation does not affect what proportion of their visual attention is given to favorable (versus unfavorable) performance measures, and that the relative attention paid to favorable measures is not associated with the performance rating.
{"title":"Selective Attention as a Determinant of Escalation Bias in Subjective Performance Evaluation Judgments","authors":"S. Kramer, V. S. Maas","doi":"10.2139/ssrn.2457941","DOIUrl":"https://doi.org/10.2139/ssrn.2457941","url":null,"abstract":"\u0000 We use an experiment to examine escalation bias in subjective performance evaluations. Participants assume the role of manager and evaluate the performance of an employee based on a balanced-scorecard-type performance report. We manipulate whether managers recommended positively or negatively about the evaluated employee's promotion to his current position. Consistent with the presence of escalation bias, we find that managers give higher performance ratings to employees about whom they advised positively than to employees about whom they advised negatively. Using eye-tracking data, we investigate whether escalation bias arises because managers with different prior commitments toward the evaluated employee pay attention to different items in the scorecard. We find that evaluators' prior recommendation does not affect what proportion of their visual attention is given to favorable (versus unfavorable) performance measures, and that the relative attention paid to favorable measures is not associated with the performance rating.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":"1 1","pages":""},"PeriodicalIF":2.1,"publicationDate":"2016-10-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2139/ssrn.2457941","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46970985","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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