A new Public Company Accounting Oversight Board (PCAOB) standard requires the reporting of critical audit matters (CAMs) within the audit report. This change has lengthened the audit report but may provide investors with cues about auditor credibility and audit quality. Utilizing an experiment and 140 nonprofessional investors, we find evidence that the disclosure of a CAM improves perceived auditor credibility, but the disclosure also has the unintended consequence of increasing feelings of information overload. More importantly, the disclosure of a CAM has a significant, positive total effect on perceived audit quality. This effect, in turn, lowers investors’ perceptions of investment risk. These findings highlight the potential for CAMs to impact investor perceptions and, possibly, subsequent decision making. Data Availability: Data are available from the authors upon request.
{"title":"Does the Reporting of Critical Audit Matters Affect Nonprofessional Investors’ Perceptions of Auditor Credibility, Information Overload, Audit Quality, and Investment Risk?","authors":"Brian Carver, Leah Muriel, Brad S. Trinkle","doi":"10.2308/bria-19-031","DOIUrl":"https://doi.org/10.2308/bria-19-031","url":null,"abstract":"\u0000 A new Public Company Accounting Oversight Board (PCAOB) standard requires the reporting of critical audit matters (CAMs) within the audit report. This change has lengthened the audit report but may provide investors with cues about auditor credibility and audit quality. Utilizing an experiment and 140 nonprofessional investors, we find evidence that the disclosure of a CAM improves perceived auditor credibility, but the disclosure also has the unintended consequence of increasing feelings of information overload. More importantly, the disclosure of a CAM has a significant, positive total effect on perceived audit quality. This effect, in turn, lowers investors’ perceptions of investment risk. These findings highlight the potential for CAMs to impact investor perceptions and, possibly, subsequent decision making.\u0000 Data Availability: Data are available from the authors upon request.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42104992","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}
Pub Date : 2023-04-01DOI: 10.2308/1050-4753-35.1.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/1050-4753-35.1.i","DOIUrl":"https://doi.org/10.2308/1050-4753-35.1.i","url":null,"abstract":"","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135518458","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}
In this study, we investigate whether the timing and the potential consequences of a transaction influence auditors’ decisions regarding real earnings management (REM). Based on the results of an online experiment with 159 certified public accountant (CPA) participants, we find that the timing of a transaction acts as a signal of management’s intent that auditors use to infer REM. While the timing of the transaction helps auditors identify REM, whether auditors take confrontational actions (i.e., actions taken by auditors to confront a client for the final resolution of an REM issue) also depends on their evaluation of the transaction. We find that auditors are more likely to take confrontational actions when the transaction occurs at the end of the reporting period and is likely to result in more severe negative consequences to the firm’s future operations.
{"title":"Auditors’ Responses to Real Earnings Management: The Effects of Timing and Potential Consequences on Auditor Decision-Making","authors":"Fengchun Tang, Ling Yang","doi":"10.2308/bria-2021-039","DOIUrl":"https://doi.org/10.2308/bria-2021-039","url":null,"abstract":"\u0000 In this study, we investigate whether the timing and the potential consequences of a transaction influence auditors’ decisions regarding real earnings management (REM). Based on the results of an online experiment with 159 certified public accountant (CPA) participants, we find that the timing of a transaction acts as a signal of management’s intent that auditors use to infer REM. While the timing of the transaction helps auditors identify REM, whether auditors take confrontational actions (i.e., actions taken by auditors to confront a client for the final resolution of an REM issue) also depends on their evaluation of the transaction. We find that auditors are more likely to take confrontational actions when the transaction occurs at the end of the reporting period and is likely to result in more severe negative consequences to the firm’s future operations.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47250548","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}
Derek Dalton, Jace B. Garrett, Nancy L. Harp, Gregory P. McPhee
Research suggests that organizational support for alternative work arrangements (AWAs) is essential for the effective implementation of AWAs in public accounting, yet studies consistently suggest that such organizational support is lacking. Despite mass adoption of telecommuting (one type of AWA) during the COVID-19 pandemic, recent evidence suggests that firms vary greatly in the extent to which they plan to support telecommuting in the post-pandemic environment. Using a sample of 133 public accounting professionals, we explore whether several factors under the organization’s control influence perceived organizational support for telecommuting, and whether such support is linked with perceived career penalties from telecommuting usage and turnover intentions. We find that supervisor support for personal/family needs and procedural justice regarding telecommuting requirements are positively associated with perceptions of organizational support for telecommuting. Further, greater perceived organizational support for telecommuting is associated with both lower perceived career penalties from telecommuting usage and lower turnover intentions.
{"title":"An Analysis of Organizational Support for Telecommuting in Public Accounting Firms","authors":"Derek Dalton, Jace B. Garrett, Nancy L. Harp, Gregory P. McPhee","doi":"10.2308/bria-2021-053","DOIUrl":"https://doi.org/10.2308/bria-2021-053","url":null,"abstract":"\u0000 Research suggests that organizational support for alternative work arrangements (AWAs) is essential for the effective implementation of AWAs in public accounting, yet studies consistently suggest that such organizational support is lacking. Despite mass adoption of telecommuting (one type of AWA) during the COVID-19 pandemic, recent evidence suggests that firms vary greatly in the extent to which they plan to support telecommuting in the post-pandemic environment. Using a sample of 133 public accounting professionals, we explore whether several factors under the organization’s control influence perceived organizational support for telecommuting, and whether such support is linked with perceived career penalties from telecommuting usage and turnover intentions. We find that supervisor support for personal/family needs and procedural justice regarding telecommuting requirements are positively associated with perceptions of organizational support for telecommuting. Further, greater perceived organizational support for telecommuting is associated with both lower perceived career penalties from telecommuting usage and lower turnover intentions.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43308709","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 examine the relationship between grandiose (GN) and vulnerable (VN) narcissism and their relative effects on external forecasting behavior. We also investigate how narcissists respond to a stronger/weaker forecast made by an industry competitor. Our participants are practicing professionals with accounting or corporate finance experience. We find evidence of a nonlinear relationship between GN and VN. At lower levels of GN, the relationship between the two is not statistically significant, but as GN increases they show a strong, positive correlation. High-GN narcissists exhibit relatively aggressive forecasting behavior, even when they are also high-VN, and are not particularly responsive to a strong competitor forecast. In contrast, low-GN/high-VN narcissists are more strategic, issuing more (less) aggressive forecasts when the competitor forecast is stronger (weaker). Our research contributes to the limited accounting research on VN and highlights the importance of considering both GN and VN on manager behavior.
{"title":"The Relative Effects of Grandiose and Vulnerable Narcissism on External Forecasting Behavior","authors":"M. Hayes, Philip M. J. Reckers","doi":"10.2308/bria-2022-011","DOIUrl":"https://doi.org/10.2308/bria-2022-011","url":null,"abstract":"We examine the relationship between grandiose (GN) and vulnerable (VN) narcissism and their relative effects on external forecasting behavior. We also investigate how narcissists respond to a stronger/weaker forecast made by an industry competitor. Our participants are practicing professionals with accounting or corporate finance experience. We find evidence of a nonlinear relationship between GN and VN. At lower levels of GN, the relationship between the two is not statistically significant, but as GN increases they show a strong, positive correlation. High-GN narcissists exhibit relatively aggressive forecasting behavior, even when they are also high-VN, and are not particularly responsive to a strong competitor forecast. In contrast, low-GN/high-VN narcissists are more strategic, issuing more (less) aggressive forecasts when the competitor forecast is stronger (weaker). Our research contributes to the limited accounting research on VN and highlights the importance of considering both GN and VN on manager behavior.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2022-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41316133","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}
Considerable evidence from cultural psychology indicates that East Asians tend to reason holistically whereas Westerners tend to think analytically. We propose that this important difference in cognition can explain divergences in the perceived effectiveness of, and preference for controls between the two cultures. We experimentally test our predictions by studying American and Chinese employees’ perceptions of the Code of Conduct used by companies in both the U.S. and China. Overall, the results are consistent with our predictions and provide evidence of the role of cognition in influencing perceived control effectiveness. We contribute to efforts at a systematic understanding of cross-cultural differences in preferences for controls and add to research that is important for furthering theory building.
{"title":"Cross-Cultural Differences in Perceived Control Effectiveness: The Role of Cognition","authors":"Mengjiao Du, Bernard Wong-On-Wing, Dan Yang","doi":"10.2308/bria-2020-057","DOIUrl":"https://doi.org/10.2308/bria-2020-057","url":null,"abstract":"Considerable evidence from cultural psychology indicates that East Asians tend to reason holistically whereas Westerners tend to think analytically. We propose that this important difference in cognition can explain divergences in the perceived effectiveness of, and preference for controls between the two cultures. We experimentally test our predictions by studying American and Chinese employees’ perceptions of the Code of Conduct used by companies in both the U.S. and China. Overall, the results are consistent with our predictions and provide evidence of the role of cognition in influencing perceived control effectiveness. We contribute to efforts at a systematic understanding of cross-cultural differences in preferences for controls and add to research that is important for furthering theory building.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2022-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42900435","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}
Travis Christensen, A. Rose, Jacob M. Rose, Kerri-Ann Sanderson
We investigate effects of audit evidence in the form of big data visualizations on jurors’ decisions. Using an experiment with mock juror participants (n = 582), the study examines how visualization design features and audit evidence reliability affect jurors’ negligence assessments. We find evidence for interactive effects of visualization design and evidence reliability where mock jurors make higher negligence likelihood judgments when audit evidence reliability is higher and visualizations are more vivid. Mediation results indicate that the combination of more vivid visualizations and more reliable audit evidence produces stronger emotional responses related to the auditor defendant; these negative emotional responses increase the likelihood of finding the auditor to be negligent. Overall, we find that data visualization techniques that can improve audit quality may expose auditors to increased litigation risk. Our study informs academics, auditors and regulators about the potential effects of audit evidence visualization choices on lay evaluators’ judgments.
{"title":"Effects of Data Visualizations on Jurors’ Judgments","authors":"Travis Christensen, A. Rose, Jacob M. Rose, Kerri-Ann Sanderson","doi":"10.2308/bria-2021-005","DOIUrl":"https://doi.org/10.2308/bria-2021-005","url":null,"abstract":"We investigate effects of audit evidence in the form of big data visualizations on jurors’ decisions. Using an experiment with mock juror participants (n = 582), the study examines how visualization design features and audit evidence reliability affect jurors’ negligence assessments. We find evidence for interactive effects of visualization design and evidence reliability where mock jurors make higher negligence likelihood judgments when audit evidence reliability is higher and visualizations are more vivid. Mediation results indicate that the combination of more vivid visualizations and more reliable audit evidence produces stronger emotional responses related to the auditor defendant; these negative emotional responses increase the likelihood of finding the auditor to be negligent. Overall, we find that data visualization techniques that can improve audit quality may expose auditors to increased litigation risk. Our study informs academics, auditors and regulators about the potential effects of audit evidence visualization choices on lay evaluators’ judgments.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2022-01-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45595185","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}
A. Rose, Jacob M. Rose, K. Rotaru, Kerri-Ann Sanderson, J. Thibodeau
Two experiments examine the effects of visualizing uncertainty on attention, cognitive arousal, and incorporation of uncertainty information into judgments. The first experiment employs psychophysiological measurements to understand how different presentations of uncertainty information influence decision-making processes. Results indicate that participants attend more to uncertainty information when uncertainty is incorporated directly into a visualization. Pupillometry and eye tracking analyses indicate that participants exhibit greater attention to uncertainty information, fixate more on the bounds of uncertainty, and spend more time examining uncertainty information when uncertainty is visualized, compared to when uncertainty is depicted textually (i.e., not visually). In addition, the decisions of participants who view visualizations directly depicting uncertainty better integrate the level of uncertainty in the underlying data. The second experiment reveals that experienced auditors are more likely to appropriately use uncertainty information when it is visualized.
{"title":"Effects of Uncertainty Visualization on Attention, Arousal and Judgment","authors":"A. Rose, Jacob M. Rose, K. Rotaru, Kerri-Ann Sanderson, J. Thibodeau","doi":"10.2308/bria-2021-011","DOIUrl":"https://doi.org/10.2308/bria-2021-011","url":null,"abstract":"Two experiments examine the effects of visualizing uncertainty on attention, cognitive arousal, and incorporation of uncertainty information into judgments. The first experiment employs psychophysiological measurements to understand how different presentations of uncertainty information influence decision-making processes. Results indicate that participants attend more to uncertainty information when uncertainty is incorporated directly into a visualization. Pupillometry and eye tracking analyses indicate that participants exhibit greater attention to uncertainty information, fixate more on the bounds of uncertainty, and spend more time examining uncertainty information when uncertainty is visualized, compared to when uncertainty is depicted textually (i.e., not visually). In addition, the decisions of participants who view visualizations directly depicting uncertainty better integrate the level of uncertainty in the underlying data. The second experiment reveals that experienced auditors are more likely to appropriately use uncertainty information when it is visualized.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2022-01-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47644556","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}
Prior research has found evidence that country factors and management styles influence earnings management decisions in various geographic locations. Extending this research, we utilize an experimental setting to isolate the effect of geographic distance on the willingness to manage earnings in a near/distant location. In an initial experiment, we find less acceptable earnings management methods generate greater concerns about the method (ethicality and riskiness) leading to less willingness to manage earnings. Yet, greater geographic distance between the decisionmaker and reporting location attenuates these concerns, resulting in increased willingness to use a less acceptable method. In contrast, individuals are willing to use a more acceptable method to manage earnings regardless of geographic distance. These findings are consistent with construal level theory (CLT) and are corroborated in a second experiment where we find that greater geographic distance reduces managers’ focus on the means of earnings management, thereby reducing concerns about the method.
{"title":"The Effect of Geographic Distance on Earnings Management Decisions","authors":"M. Hayes, Michael J. Mowchan","doi":"10.2308/bria-2021-003","DOIUrl":"https://doi.org/10.2308/bria-2021-003","url":null,"abstract":"Prior research has found evidence that country factors and management styles influence earnings management decisions in various geographic locations. Extending this research, we utilize an experimental setting to isolate the effect of geographic distance on the willingness to manage earnings in a near/distant location. In an initial experiment, we find less acceptable earnings management methods generate greater concerns about the method (ethicality and riskiness) leading to less willingness to manage earnings. Yet, greater geographic distance between the decisionmaker and reporting location attenuates these concerns, resulting in increased willingness to use a less acceptable method. In contrast, individuals are willing to use a more acceptable method to manage earnings regardless of geographic distance. These findings are consistent with construal level theory (CLT) and are corroborated in a second experiment where we find that greater geographic distance reduces managers’ focus on the means of earnings management, thereby reducing concerns about the method.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2022-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48292063","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}
This study examines the effects of using the internal audit function as a management training ground (MTG) and fraud magnitude on internal fraud reporting decisions. Two experiments examine (1) internal auditors’ reporting behaviors, and (2) other employees’ willingness to report directly to internal audit. In the first experiment, experienced internal auditors indicate that the use of internal audit as a MTG may negatively impact fraud reporting likelihood by internal auditors to the Chief Audit Executive (CAE). Further, using the internal audit function as a MTG inhibits the sense of urgency internal auditors feel to report large fraudulent acts. The second experiment compares management accountants’ preferences for reporting to an anonymous third-party hotline versus reporting directly to internal audit. The results indicate a preference for the hotline that increases with a MTG. This preference is fully mediated by the perceived trustworthiness of internal audit, which is negatively impacted by a MTG.
{"title":"Fraud Reporting within an Organization and the Use of the Internal Audit Function as a Training Ground for Management","authors":"Alisa G. Brink, C. Eller, Karen Y. Green","doi":"10.2308/bria-2020-015","DOIUrl":"https://doi.org/10.2308/bria-2020-015","url":null,"abstract":"This study examines the effects of using the internal audit function as a management training ground (MTG) and fraud magnitude on internal fraud reporting decisions. Two experiments examine (1) internal auditors’ reporting behaviors, and (2) other employees’ willingness to report directly to internal audit. In the first experiment, experienced internal auditors indicate that the use of internal audit as a MTG may negatively impact fraud reporting likelihood by internal auditors to the Chief Audit Executive (CAE). Further, using the internal audit function as a MTG inhibits the sense of urgency internal auditors feel to report large fraudulent acts. The second experiment compares management accountants’ preferences for reporting to an anonymous third-party hotline versus reporting directly to internal audit. The results indicate a preference for the hotline that increases with a MTG. This preference is fully mediated by the perceived trustworthiness of internal audit, which is negatively impacted by a MTG.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2021-11-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46617729","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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