J. Boritz, Natalia V. Kochetova, Linda A. Robinson, Christopher Wong
With the greater spotlight on the quality of auditing in the context of increasing complexity of accounting, auditors are more frequently seeking the assistance of specialists from such fields as tax, information technology, valuation, and forensic accounting. This interview-based study of 40 practitioners from Big 4 2 firms - 18 auditors (partners, managers, seniors) and 22 specialists (tax, IT, valuation, and forensic) - examines auditors’ and specialists’ views about the current state of specialist use, sources of conflict, auditors’ overconfidence in their ability to perform specialist work, firm policies, and future expectations about utilization of specialist services.
{"title":"Auditors' and Specialists' Views About the Use of Specialists During an Audit","authors":"J. Boritz, Natalia V. Kochetova, Linda A. Robinson, Christopher Wong","doi":"10.2308/bria-19-064","DOIUrl":"https://doi.org/10.2308/bria-19-064","url":null,"abstract":"With the greater spotlight on the quality of auditing in the context of increasing complexity of accounting, auditors are more frequently seeking the assistance of specialists from such fields as tax, information technology, valuation, and forensic accounting. This interview-based study of 40 practitioners from Big 4 2 firms - 18 auditors (partners, managers, seniors) and 22 specialists (tax, IT, valuation, and forensic) - examines auditors’ and specialists’ views about the current state of specialist use, sources of conflict, auditors’ overconfidence in their ability to perform specialist work, firm policies, and future expectations about utilization of specialist services.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42284751","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}
Analytical procedures are critical to the financial statement auditing process and involve the auditor generating and considering multiple explanations for account fluctuations. We examine whether generating more or fewer explanations during analytical procedures improves audit quality. Research from fields outside of accounting suggests that generating many explanations can exacerbate judgment biases. We conduct an experiment with 92 senior auditors from two Big 4 firms to investigate whether the generation of more plausible explanations about potential misstatements hinders professional skepticism by increasing auditors' tendencies to anchor on client-provided explanations. We find that the generation of more plausible explanations increases the perceived difficulty of the task, which leads to anchoring on client explanations. Increased anchoring results in reduced assessments of fraud risk, an important component of the risk assessment process. These findings suggest that generating more explanations during analytics procedures can be counterproductive.
{"title":"Analytical Procedures: Are More Good Ideas Always Better for Audit Quality?","authors":"A. Rose, Jacob M. Rose, Ikseon Suh, J. Thibodeau","doi":"10.2308/BRIA-52512","DOIUrl":"https://doi.org/10.2308/BRIA-52512","url":null,"abstract":"\u0000 Analytical procedures are critical to the financial statement auditing process and involve the auditor generating and considering multiple explanations for account fluctuations. We examine whether generating more or fewer explanations during analytical procedures improves audit quality. Research from fields outside of accounting suggests that generating many explanations can exacerbate judgment biases. We conduct an experiment with 92 senior auditors from two Big 4 firms to investigate whether the generation of more plausible explanations about potential misstatements hinders professional skepticism by increasing auditors' tendencies to anchor on client-provided explanations. We find that the generation of more plausible explanations increases the perceived difficulty of the task, which leads to anchoring on client explanations. Increased anchoring results in reduced assessments of fraud risk, an important component of the risk assessment process. These findings suggest that generating more explanations during analytics procedures can be counterproductive.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44253354","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 experimentally examine the effects of boilerplate disclosure and text markup on the judgments of novice and experienced users of financial information. We manipulate the presence of boilerplate (higher versus lower) and text markup (markup versus no markup) in sequential corporate disclosures, and examine participants' sensitivity to diagnostic information about the firm's financial performance. Using theory on the dilution effect, we predict that boilerplate will have a greater impact in the absence of markup, and markup's positive effect on sensitivity to diagnostic information will be stronger in disclosures with higher boilerplate. Our findings are consistent with this prediction. We also find that experienced users have greater sensitivity overall to diagnostic information and that markup increases novices' (but not experienced users') sensitivity to diagnostic information. Our findings extend theory on potential remedies to the dilution effect and are potentially useful to regulators as they consider improving the usefulness of corporate disclosure.
{"title":"Joint Effects of Boilerplate and Text Markup on the Judgments of Novice and Experienced Users of Financial Information","authors":"E. Henry, Marietta Peytcheva","doi":"10.2308/bria-52582","DOIUrl":"https://doi.org/10.2308/bria-52582","url":null,"abstract":"\u0000 We experimentally examine the effects of boilerplate disclosure and text markup on the judgments of novice and experienced users of financial information. We manipulate the presence of boilerplate (higher versus lower) and text markup (markup versus no markup) in sequential corporate disclosures, and examine participants' sensitivity to diagnostic information about the firm's financial performance. Using theory on the dilution effect, we predict that boilerplate will have a greater impact in the absence of markup, and markup's positive effect on sensitivity to diagnostic information will be stronger in disclosures with higher boilerplate. Our findings are consistent with this prediction. We also find that experienced users have greater sensitivity overall to diagnostic information and that markup increases novices' (but not experienced users') sensitivity to diagnostic information. Our findings extend theory on potential remedies to the dilution effect and are potentially useful to regulators as they consider improving the usefulness of corporate disclosure.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.2308/bria-52582","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47939619","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 Prior research suggests individuals have difficulty comprehending large magnitude numbers commonly associated with government spending (e.g., millions and billions). We conduct an experime...
{"title":"Too Big to Comprehend? A Research Note on How Large Number Disclosure Format Affects Voter Support for Government Spending Bills","authors":"Aaron Saiewitz, M. D. Piercey","doi":"10.2308/bria-18-017","DOIUrl":"https://doi.org/10.2308/bria-18-017","url":null,"abstract":"ABSTRACT Prior research suggests individuals have difficulty comprehending large magnitude numbers commonly associated with government spending (e.g., millions and billions). We conduct an experime...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46917609","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}
The purpose of this study is to investigate the commitment of public accountants toward their profession and organization, and to provide evidence for various commitment profiles. Specifically, we analyze the relationships between commitment profiles and differences seen in the work context, professional and commercial values, role conflict and ambiguity, and client commitment. The study is based on a survey of 435 German public accountants. It employs a person-centered approach to identify commitment profiles based on latent profile analysis. Using multidimensional scales of professional and organizational commitment, we identify differences in the manifestation of affective, normative, and continuance commitment. By introducing a person-centered approach in the study of accounting professionals, we found six latent profiles, including a fully committed profile that almost exclusively relates to partners in small- and medium-sized accounting firms. Our results show that studies of accountants' commitment benefit from using a person-centered, multidimensional approach. JEL Classifications: M100; M420.
{"title":"Commitment Profiles of Accountants: A Person-Centered Study of the Commitment towards Profession and Organization","authors":"G. Loscher, S. Ruhle, S. Kaiser","doi":"10.2308/BRIA-52476","DOIUrl":"https://doi.org/10.2308/BRIA-52476","url":null,"abstract":"\u0000 The purpose of this study is to investigate the commitment of public accountants toward their profession and organization, and to provide evidence for various commitment profiles. Specifically, we analyze the relationships between commitment profiles and differences seen in the work context, professional and commercial values, role conflict and ambiguity, and client commitment. The study is based on a survey of 435 German public accountants. It employs a person-centered approach to identify commitment profiles based on latent profile analysis. Using multidimensional scales of professional and organizational commitment, we identify differences in the manifestation of affective, normative, and continuance commitment. By introducing a person-centered approach in the study of accounting professionals, we found six latent profiles, including a fully committed profile that almost exclusively relates to partners in small- and medium-sized accounting firms. Our results show that studies of accountants' commitment benefit from using a person-centered, multidimensional approach.\u0000 JEL Classifications: M100; M420.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48709995","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 extends recent research on the interaction of formal and informal controls that may create divergence between economic self-interest and social norms consistent with organizational belongingness. We use a sequence of two experiments to explore the interactive effects of performance incentives and a contemporary value statement promoting organizational belongingness. Experiment 1 focuses on the moderating effect of a general value statement, showing that a value statement increases (decreases) productivity associated with fixed pay (piece-rate) incentives. Experiment 2 further extends the work on value statements by reinforcing the value statement to increase the statement's saliency with employees. The results of the second experiment confirm that enhancing the saliency of the value statement through active delivery increases its moderating effect on productivity. On an overall basis, the results support our theorized disordinal interaction between formal and informal controls. Most notably, a value statement enhances productivity when incentivizing employees using fixed pay.
{"title":"Wording and Saliency Matter: The Impact of Incentive System and Organizational Value Statement on Employees' Performance","authors":"Kazeem O. Akinyele, V. Arnold, S. Sutton","doi":"10.2308/bria-18-035","DOIUrl":"https://doi.org/10.2308/bria-18-035","url":null,"abstract":"\u0000 This study extends recent research on the interaction of formal and informal controls that may create divergence between economic self-interest and social norms consistent with organizational belongingness. We use a sequence of two experiments to explore the interactive effects of performance incentives and a contemporary value statement promoting organizational belongingness. Experiment 1 focuses on the moderating effect of a general value statement, showing that a value statement increases (decreases) productivity associated with fixed pay (piece-rate) incentives. Experiment 2 further extends the work on value statements by reinforcing the value statement to increase the statement's saliency with employees. The results of the second experiment confirm that enhancing the saliency of the value statement through active delivery increases its moderating effect on productivity. On an overall basis, the results support our theorized disordinal interaction between formal and informal controls. Most notably, a value statement enhances productivity when incentivizing employees using fixed pay.","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44143399","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}
The purpose of this study is to identify situations in which auditors' professional values are most likely to constrain the biasing effects of self-interest. Specifically, I examine whether auditor...
{"title":"When do Auditors' Professional Values Constrain the Biasing Effects of Self Interest? An Experimental Investigation","authors":"Michele L. Frank","doi":"10.2308/bria-19-068","DOIUrl":"https://doi.org/10.2308/bria-19-068","url":null,"abstract":"The purpose of this study is to identify situations in which auditors' professional values are most likely to constrain the biasing effects of self-interest. Specifically, I examine whether auditor...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46880401","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}
Standards with imprecise guidelines require interpretation by users. In this study we investigate how investors' perceptions of earnings management vary with their interpretations of imprecise stan...
{"title":"Investors' Interpretations of Imprecise Standards and Their Perceptions of Earnings Management by Reputable Companies","authors":"H. Tan, Diane M. Mayorga","doi":"10.2308/bria-19-009","DOIUrl":"https://doi.org/10.2308/bria-19-009","url":null,"abstract":"Standards with imprecise guidelines require interpretation by users. In this study we investigate how investors' perceptions of earnings management vary with their interpretations of imprecise stan...","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2020-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48069143","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}
{"title":"In Celebration of 30 Years of Behavioral Research in Accounting","authors":"Steven E. Salterio","doi":"10.2308/BRIA-10681","DOIUrl":"https://doi.org/10.2308/BRIA-10681","url":null,"abstract":"","PeriodicalId":46356,"journal":{"name":"Behavioral Research in Accounting","volume":null,"pages":null},"PeriodicalIF":2.1,"publicationDate":"2019-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44204899","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}
Mandy M. Cheng, Tami Dinh, Wolfgang Schultze, Maria Assel
We examine the impact of deferred bonus payments and employment horizon on managers' investment decisions. Bonus deferral is an important element of compensation schemes designed to mitigate managers' tendency to avoid long-term investments that can reduce their bonuses, i.e., the problem of managerial myopia. Consistent with construal-level theory in the psychology literature, we find that bonus deferral increases managers' willingness to make an investment that has detrimental effects on their current bonus but that provides long-term benefits to the firm. This is driven by managers placing greater importance on their responsibilities for advancing their firm's long-term interests and on improving their reputations within their firms. These mediation effects are moderated by participants' employment horizon. Our study contributes to the debate on effective managerial compensation by showing that a simple deferral of bonus payments can reduce the negative consequences related to managerial myopia. JEL Classifications: M40; M41. Data Availability: Data are available from the authors upon request.
{"title":"The Effect of Bonus Deferral on Managers' Investment Decisions","authors":"Mandy M. Cheng, Tami Dinh, Wolfgang Schultze, Maria Assel","doi":"10.2308/BRIA-52463","DOIUrl":"https://doi.org/10.2308/BRIA-52463","url":null,"abstract":"\u0000 We examine the impact of deferred bonus payments and employment horizon on managers' investment decisions. Bonus deferral is an important element of compensation schemes designed to mitigate managers' tendency to avoid long-term investments that can reduce their bonuses, i.e., the problem of managerial myopia. Consistent with construal-level theory in the psychology literature, we find that bonus deferral increases managers' willingness to make an investment that has detrimental effects on their current bonus but that provides long-term benefits to the firm. This is driven by managers placing greater importance on their responsibilities for advancing their firm's long-term interests and on improving their reputations within their firms. These mediation effects are moderated by participants' employment horizon. Our study contributes to the debate on effective managerial compensation by showing that a simple deferral of bonus payments can reduce the negative consequences related to managerial myopia.\u0000 JEL Classifications: M40; M41.\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":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49531255","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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