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

1996, Volume 8

Some Comments About Research and the FASB

Robert J. Swieringa
This paper discusses how accounting research information helps the FASB in setting standards, discusses how the FASB has relied on that information in the past and describes five areas for future behavioral research in financial accounting.

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Ethical Development, Professional Commitment, and Rule Observance Attitudes: A Study of CPAs and Corporate Accountants

Cynthia Jeffrey and Nancy Weatherholt
The current research integrates and extends prior research on ethical reasoning and professional commitment by examining the relation between professional commitment, ethical development, and attitude towards following rules. An important component of professional status is the existence of an ethical base that defines professional conduct, yet previous research results indicate that accountants may not be achieving their potential for ethical development (e.g., Ponemon 1992).

Results indicate no difference in ethical development for accountants working in private industry or public practice. Ethical development does not vary across rank in public accounting firms. However, there are differences in ethical development for public accountants across public accounting firms and across different offices of a single public accounting firm. professional commitment does vary by rank; professional commitment of partners is significantly stronger than professional commitment of seniors. Rule observance attitudes do not vary across rank within public accounting or by employment in public or private accounting. There is a significant positive relationship between rule observance attitudes and professional commitment. A significant relationship also exists between ethical development and the level of professional commitment; high commitment is associated with moderate levels of ethical development, while low commitment is associated with higher levels of ethical development. The results of this study indicate that differences in ethical development may in part be a result of a selection-socialization process that varies across work environments.

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Auditors' Comprehension and Evaluation of Client-Suggested Causes in Analytical Procedures

Lisa Koonce and Fred Phillips
This study investigated whether the ease of comprehending informatioin pertaining to a client-suggested cause affects auditors' judgments about the plausibility of that cause. Experimental results indicated that when information pertaining to the client's suggested non-error cause was easy to comprehend, auditors judged that cause to be more plausible than when the same information was difficult to comprehend. The results also indicated that auditors considered certain alternative error causes to be less (more) plausible when information pertaining to the client's non-error cause was easy (difficult) to comprehend. These judgment differences persisted even after auditors developed a written explanation for the client-suggested cause. Implications for audit practice and the design of case materials in behavioral research are considered, and directions for future research are suggested.

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The Effect of Cognitive Styles on External Auditors' Reliance Decisions on Internal Audit Functions

Tina Y. Mills
This study examines the effects of cognitive style on external auditors' reliance decisions on internal audit functions (IAFs). Fifty-one auditors from two Big 6 accounting firms participated in a case-based experiment in which they assigned audit hours to a hypothetical client's IAF, indicating their degree of reliance. The auditors were given audit programs of accounts payable or deposit activities depending on whether their expertise was in the manufacturing or finance industries.

Two pen-and-paper psychological tests were used to measure the auditors' cognitive styles. Two dimensions of cognitive style, field dependence/field independence (FD/FI) and mobility-fixity, were hypothesized to affect auditors' reliance decisions. FD/FI did not significantly affect auditors' decisions, which is consistent with prior research of FD/FI in an accounting context and one study of FD/FI in an auditing context but inconsistent with another auditing study. Mobility-fixity, which has not been researched previously in an auditing or accounting context, had a significant effect on auditors' reliance decisions and on the degree of consensus among auditors.

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The Effect of Organizational Commitment on the Relation Between Budgetary Participation and Budgetary Slack

Hossein Nouri and Robert J. Parker
The relation between budgetary participation and budgetary slack has been examined in several accounting studies with conflicting results. The conflicting evidence may reflect the influence of a contingency variable, organizational commitment. According to the theory presented in the study, for individuals with strong organizational commitment, budget participation and slack are inversely related. For individuals with weak roganizational commitment, budget participation and slack are positively related. Survey results from a large multi-national company support these assertions. The findings imply that agency problems encountered in budgeting may be reduced if both the organizational commitment and budget participation of employees are increased.

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The Determinants and Outcomes Associated with Job Insecurity in a Professional Accounting Environment

William R. Pasewark and Jerry R. Strawser
Staff turnover faced by the public accounting profession is well-documented in both the professional (Gaertner et al. 1987; Doll 1983) and academic (Snead and Harrell 1991) literatures. In general, these studies suggest organizational commitment and job satisfaction serve as antecedents to accountants' intentions to seek alternative employment (Bline et al. 1991; Snead and Harrell 1991; Harrell 1990; Rasch and Harrell 1990). However, these studies focused primarily on personality, psychological, or demographic factors, rather than organizational factors. Ashford et al. (1989) identified and tested a comprehensive turnover model comprised of organizational factors, including job insecurity, which may have particular relevance in a public accounting setting. This study extends previous accounting research on turnover by examining the Ashford et al. (1989) model (and the effect of job insecurity) in a public accounting setting.

Consistent with the results of previous research, this study found that turnover intentions are negatively related to organizational commitment and job satisfaction. In addition, this study identified three factors (job insecurity, organizational trust, and role conflict) that influence organizational commiment and/or job satisfaction; the first two were previously unexamined in an accounting setting. The results of this study suggest firms take actions to reduce the levels of role conflict and job insecurity maintained by their personnel. Also, firms may wish to take actions to increase the level of organizational trust held by their staff and reduce the negative consequences associated with organizational changes.

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Incentive Plans and Opportunities for Information Sharing

Sue Ravenscroft and Susan Haka
Changes in organizational environments have increased the importance of teamwork and cooperation among workers. If incentives can be designed to motivate employee teams to share task-related information, productivity can be enhanced. However, little is known about the interactive effects of incentive plans and environmental variables (e.g., task or opportunity to share information) on productivity or group processes such as information sharing. This study examines the interactive effect of incentives and the opportunity to share information on task-related information sharing, productivity, and variability of productivity.

Two hundred ninety-seven subjects, assigned to three-person work groups, completed an independent task under one of two types of incentive plans--cooperative and competitive--and under one of two types of environmental settings--where an opportunity to share information existed and where no sharing of information was allowed. Reported information sharing, variance of intragroup output, and productivity were measured. Results suggest that information is shared more frequently, productivity is higher, and intragroup variance in productivity is lower when cooperative incentives are combined with the opportunity to share information. Competitive incentives combined with information sharing opportunities do not result in productivity gains, variance reduction or information sharing.

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An Exploration of the Use of Financial and Nonfinancial Measures of Performance by Executives in a Service Organization

Andrew D. Schiff and L. Richard Hoffman
The need for more nonfinancial measures of performance in management accounting has been widely expressed. But there is also a need for a better understanding of how financial and nonfinancial measures are actually used. This study explores the ways in which a group of executives incorporated both financial and nonfinancial measures in their performance judgment policies.

The experimental stimuli consisted of 51 cases. Each case contained eigh cues which described the performance of a hypothetical department. Four cues were financial measures, and four were nonfinancial measures. After each case, each subject rated the performance of the department and the performance of its manager.

Most subjects utilized both types of cues in their department and manager ratings. Of particular interest, the variance in the manager ratings explained by the nonfinancial cues significantly exceeded the variance explained by the financial cues, and the judgment policies for the department ratings differed significantly from the policies for the manager ratings.

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Trust and Suspicion: The Effects of Situational and Dispositional Factors on Auditors' Trust of Clients

Michael K. Shaub
The level of subjective trust demonstrated by auditors toward their clients, which is an implicit prediction of auditee behavior, is a function of situational and dispositional factors. The purpose of this study is to determine the relative importance of each of these types of factors to the auditor's determination of subjective trust of a client.

The results of this study indicate that historic experience with the client and situational factors are more important than dispositional factors in determining the extent to which auditors trust clients. Specifically, length of service, historic client accuracy, a situation-specific incentive for misstatement, quality of communication, and the gender of the person being trusted influenced client trust in specific situations. Global measures of trustworthiness, independence, and client trust generally were not significantly related to subjective trust. The findings suggest that providing auditors with adequate opportunities for broad experience and training is important in aiding their ability to calibrate the appropriate amount of trust to demonstrate. An individual auditor's tendency to view people as being trustworthy and reliable does not accurately predict the tendency to trust clients; the audit circumstances do.

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Recency Effects: Task Complexity, Decision Mode, and Task-Specific Experience

Ken T. Trotman and Arnold Wright
The findings of several research studies indicate that accountants exhibit a significant recency effect in belief revisions that may impair their effectiveness or efficiency. This study examines the generalizability of prior results by manipulating response mode (setp by step (SbS) or end of sequence (EoS) and task complexity and by examining three levels of experience, factors that Hogarth and Einhorn (1992) suggest may affect the presence of a recency effect. Participants completed two audit tasks of varying complexity (going concern and internal control evaluations). The results indicated that students exhibited significant order effects for both tasks and in either response mode. Seniors displayed recency effects in both response modes for the going concern task. A marginal recency effect was present in the SbS mode but not in the EoS mode for the control evaluation task. In contrast, the more experienced managers did not display significant order effects, regardless of the task or the response mode. This suggests the potential importance of task-specific experience in considering the prevalence of heuristics.

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The Effects of Experience and Confidence on Decision Aid Reliance: A Causal Model

Stacy M. Whitecotton
This study examines three characteristics that may explain individual decision makers' differential reliance on decision aids. Decision aid reliance, not merely availability, is critical for an aid's success. A causal model was developed which links decision aid reliance to three factors: experience, confidence and agreement with the decision aid. An experiment was then conducted to examine whether these factors explain decision aid reliance in a financial forecasting setting.

Confidence proved to be the factor most strongly affecting decision aid reliance. Individuals with more confidence placed less reliance on the decision aid. General task experience did not explain decision aid reliance, but prior experience with decision aids was a significant factor explaining decision aid reliance. Neither experience measure was related to confidence. Both were negatively correlated with subjects' agreement with the aid, but this factor did not explain decision aid reliance.

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The Handbook of Experimental Economics: A Review Essay

Arijit Mukherji
The publication of The Handbook of Experimental Economics (hereafter, Handbook ) calls for a re-examination of the way economics research is done. Is economics a science that can be experimentally tested in the laboratory? Are such experiments mere alchemy? Research over the last two decades has already answered such questions. The Handbook brings together some of the leading scholars in the field of experimental economics. Kagel and Roth have not produced a narrowly focused manual for specialists. The Handbook covers a vast range of problems of interest to researchers in economics, psychology, business, political science, sociology, or even computer science. It should be required reading for anyone interested in the application of experimetnal methods in the social sciences.

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