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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