Behavioral Research in Accounting
Published annually by the Accounting, Behavior and Organizations Section of the AAA

1995, Volume 7


This page was last updated on May 18, 2000 .
Please send comments on the ABO Website to ABO Section Webmaster

The Effects of Pay Schemes and Probabilities Management Audits on Subordinate Misrepresentation of Private Information: An Experimental Investigation in a Resource Allocation Context

Chee W. Chow, Mark Hirst, and Michael D. Shields
This experimental study tests the predicted effects of three performance-contingent control mechanisms on a subordinate's misrepresentations of his or her private information to his or her superior: linear profit sharing, linear profit sharing plus a probabilistic management audit, and Groves. The results show that linear profit sharing together with a probabilistic management audit significantly reduces the rate of subordinate misrepresentations compared to a mechanism with only a linear profit sharing scheme. The results also show that linear profit sharing in conjunction with a probabilistic management audit is more effective at deterring subordinate misrepresentations than is the Groves scheme. These results provide support for the conjecture that a sect of controls which individually are imperfect can be as effective as a more complex control mechanism used alone. An implication is that there is need for additional research that examines sets of controls as opposed to studies that focus on a single control. The results also provide a rationale for the frequently observed practice of firms using linear profit sharing pay schemes and probabilistic management audits, as opposed to the more complex control mechanisms developed by analytical research.

Return to BRIA 1995, Volume 7 Contents

Internal Auditors' Memory for Financial-Statement Errors
Bryan K. Church and Arnold Schneider
Recent studies have examined external auditors' cognitive abilities, including their abilities to generate financial-statement errors from long-term memory (LTM). Although internal auditors typically perform some financial auditing, no research study has investigated their abilities to generate financial-statement errors from LTM. The purpose of this study is to investigate (1) the quality of errors generated by internal auditors and (2) the effect of an inherited error on their generation of additional errors. We conducted a laboratory experiment and found that the quality of errors generated by internal auditors is affected by whether they have prior public accounting experience. In addition, we found limited evidence that an inherited error interferes with internal auditors' generation of additional errors from the same transaction cycle as that of the inherited error.

Return to BRIA 1995, Volume 7 Contents

An Exploratory Examination of International Differences in Auditors' Ethical Perceptions

Jeffrey R. Cohen, Laurie W. Pant, and David J. Sharp
This study examines differences in the ethical decision-making of auditors in one multinational public accounting firm. Subjects were drawn from three groups: Latin America, Japan, and the United States, that have been shown by Hofstede (1980, 1991) to differ on important cultural dimensions expected to influence ethical decision-making. subjects were presented with questionnaires (translated into the appropriate languages) containing eight vignettes, each describing a possibly questionable action related to public accounting practice. For each vignette, subjects provided three responses: the likelihood i) that they would perform the action; ii) that their colleagues would perform the action; and iii) the morality of the action. The strongest differences emerged in the Latin-U.S. comparisons, countries that differed most on the individualism and power distance dimensions. The results of the study supported our expectations that culture was related to differences in both subjects' ethical evaluations, and in the likelihood that they or their colleagues would perform the action. We also found evidence of a social desirability bias in all three groups, and that its magnitude varies between countries. Implications of this for future cross-cultural behavioral and accounting ethics research are discussed.

Return to BRIA 1995, Volume 7 Contents

The Relationship Between Budgetary Management Style and Organizational Commitment in a Not-for-Profit Organization

Frank Collins, Suzanne H. Lowensohn, Mary H. McCallum and Richard I. Newmark

Not-for-Profit organizations are concerned about their employees' organizational commitment, especially in difficult economic times. If economic difficulties force the use of more "for profit" budgeting and performance evaluation measures, maintaining commitment may be even more problematic. Consequently, the present study was undertaken in a not-for-profit organization that had recently implemented "for profit" control techniques and was designed to determine: (1) the effects of three budgetary management styles (profit-conscious, budget-constrained, and relatedness) and crisis on organizational commitment, and (2) if feelings of role stress moderate those relationships. Three hundred forty-four non-supervisory employees of a large charitable organization were surveyed, and the results revealed that the relatedness budgetary management style was positively and directly related to organizational commitment, while profit-conscious and budget-constrained styles and organizational crisis were indirectly related to organizational commitment. These results suggest that this organization had not yet successfully implemented their new, "for profit" approach.

Return to BRIA 1995, Volume 7 Contents

A Note on the Application of the Behavioral Life-Cycle Model in Governmental Lending Decisions
Sarah A. Reed, Joyce A. Strawser, and Robert H. Strawser
This study employs the Shefrin and Thaler (1988) Behavioral Life-Cycle Model to examine policy makers' preferences for framing public funding requests. Five cases which relate to the public borrowing activities of a local policy department were developed to test the research hypotheses. Four scenarios required participants to choose between two spending decisions, where durability (current consumption versus capital goods) and concertedness (tangible versus intangible) of the purchased goods or services were systematically varies. A fifth scenario required the participants to choose between two loan repayment schedules (long-term versus short-term), given that the durability of the item financed was varied. Empirical support was obtained for the perceived importance of durability and concreteness when assessing asset benefits to be achieved from a given project, as well as for the perceived attractiveness of matching long-term benefits with related costs.

Return to BRIA 1995, Volume 7 Contents

Factors Affecting Responsibility Assessments After an Audit Failure

Morina Rennie

The cognitive process by which individuals react to an audit failure can be depicted as the mental simulation of counterfactual scenarios. Further the extent to which an alternative outcome can be imagined is proposed to influence responsibility assessments related to an audit failure.

Participants in an experiment assessed responsibility for an audit failure in a courtroom scenario. Three factors predicted to affect counterfactual simulation were manipulated in the experiment: pre-outcome unusualness, existence of a close counterfactual, and alterability of the outcome. Responsibility assessments were observed to be influenced by the interactions of these factors.

Return to BRIA 1995, Volume 7 Contents

Control as an Exchange Process: A Power Control Framework of Organizations

Seleshi Sisaye

This paper develops a power control contingency framework of accounting to identify and describe the types of control exchange systems in complex organizations. The paper makes the basic assumption that resource allocation is critical to planning and control processes. The framework is an integrated approach that incorporates both the structural-functional (SF)-rational and conflict-pluralistic (CP)-political choice models of social organizations in order to study control systems as exchange processes in complex organizations. The power control framework proposes that the type of resource exchange: cooperative, competitive, distributive and unequal, that occurs in organizational decisions is a function of both the basis of power: SF-rational or CP-political, and the perceived availability of resources: relative slack or relative scarcity.

However, the framework recognizes the diversity of organizational control systems and does not claim to address all forms of control systems. It suggests that the classification of control systems as forms of resource exchange depends on the dominant characteristics of a given organization.

Return to BRIA 1995, Volume 7 Contents