Advances in Accounting Behavioral Research: Volume 5

This article reflects on recent dramatic changes that have forever reshaped accounting practice and research. Specifically, the digital revolution, which is still unfolding before our eyes, has changed the very nature of work for accountants and forced researchers and practitioners alike to struggle with a host of new threats and opportunities facing the profession. Accounting behavioral researchers in particular must deal with a wide array of human-to-computer, information processing and decision-making issues that did not exist a mere two decades ago. We academics can put our collective heads in the sand, as some have already chosen to do, or we can view these turbulent times in the global business community as exciting, provoking and enlightening. Herein, I attempt to address many ways in which psychology-based researchers can engage in meaningful studies aimed at raising the accounting profession to a new level of quality and relevance by incorporating the impact of information and communication technologies on human attitude, cognition and performance.

The primary purpose of this study is to examine how and why contingent economic rents can lead to biased audit judgment via a cognitive processing phenomenon known as predecisional distortion of information. The secondary research objective is to develop a more refined measure of predecisional distortion, thereby yielding a more robust and predictive metric. A total of 73 audit partners representing four of the Big Five CPA firms participated in a two (low-balling: present or absent) by two (non-audit revenue: present or absent) between-subjects experiment. Research findings indicate that contingent economic rents can potentially impair audit independence, as such rents heighten an initial desire to maintain a long-term relationship with the client, trigger favorable predecisional distortion of client-related information, and bias audit judgment in favor of the client. Study results also reveal that the refined predecisional distortion metric is more predictive than past measurement techniques. Between-subject and within-subject debriefings suggest that predecisional distortion of information operates, at least partially, at the subconscious level.

This study examines the relationships among auditors' evidence documentation mode, their memories for the documented evidence, and judgment. We find that prepared checklists are completed faster and require less time reviewing evidence, yet the risk assessments did not differ from those using written documentation. Those who used written documentation tended to include a higher proportion of positive fraud indicators. Memory measures, shows that documented items are correctly recognized significantly more often than undocumented items. We also find that the recognition rate for those using written documentation is significantly lower than for those using a checklist. Ex post analyses find that checklist users have better recognition of positive items and, as their memory for positive indicator increases, so does their perceived likelihood of fraud.

While prior research has found that outcome information affects jurors' evaluations of auditor performance, little is known about the underlying cognitive processes that give rise to this outcome information effect in auditor liability settings. This study extends previous research in accounting and psychology by investigating whether jurors' recall, interpretation and weighting of trial evidence mediates the relationship between outcome information and the evaluation of the auditors' performance. The research question was examined using an experiment with 71 surrogate jurors. Path analytic modeling reveals that the effect of outcome information on the evaluation of the auditors' performance is mediated by the jurors' interpretation and weighting of the trial evidence, but that recall had no impact on the performance evaluations of the auditors.

This study employs multiple measures of schema acquisition and analyzes subjects' problem-solving error patterns in order to investigate schema acquisition by decision aid users. Results of both the error analysis and multiple schema acquisition measures indicate that: (1) problems of ordered complexity can effectively capture differences in schema acquisition of decision aid users; and (2) problem solvers rely on incorrect simple schemata to solve problems when they have not acquired the complex schemata necessary to solve a problem. The results also provide additional support for prior findings that problem-solving schemata are acquired in a linear order flowing from computationally simple problems to more complex problems, and that cognitive load interferes with the acquisition of schemata from decision aids.

The explosion of accounting ethics research in the past decade has been fuelled by the availability of the Defining Issues Test (DIT: Rest 1979–1993). Despite existing criticisms regarding the DIT (Emler et al., 1983) and research indicating that the measure is a biased reflection of accountants' moral reasoning (Sweeney & Fisher, 1998,(Sweeney & Fisher,1999), the validity of the instrument is rarely questioned. This paper discusses the evolution of the political attitude-moral reasoning debate. A between-subjects experiment provides further support for the existence of political bias, implying that ethics researchers may have confounded political ideology with moral reasoning when interpreting results.

The purpose of this study is to examine the effects of process and product complexity on participative leadership style (i.e. perceptions of the primary decision maker in a resource allocation decision. Data from a descriptive judgment task provide evidence that product and process complexity operate as antecedents to choosing differential participative leadership decision styles. Analysis uses the Vroom Jago model (1988) to show that situations characterized by high (low) process complexity provide an increased (decreased) incentive to employ participative leadership styles. However, situations characterized by high (low) product complexity do not appear to significantly affect choices regarding participative leadership style.

Research on the impact of performance evaluative style on managers' behavior suggests that organizational interest is best served if a high budget emphasis evaluative style is used in a high participatory environment, whilst a low budget emphasis evaluative style is used in a low participatory environment. However, research results are not always consistent. This may be due to the omission of the influence of organizational commitment on managers' behavior. Highly committed managers are likely to strive for organizational goals and interests whereas lowly committed managers are likely to strive for personal goals and interests. These conflicting attitudes are likely to affect the relationships among budget emphasis, budgetary participation and managers' behavior. Highly committed managers, striving for organizational goals, may react favorably to the compatible combinations of high (low) budget emphasis and high (low) budgetary participation. In contrast, lowly committed managers, striving for personal goals, may prefer other combinations of budget emphasis and budgetary participation. Based on a sample of 112 financial services sector managers, these expectations are supported by the results of this study.

This paper examines how a red-flag item (RFI), an unfavorable projection error (UPE) and time pressure affect the aggressiveness of tax preparers' recommendations. We hypothesize that a RFI causes preparers to make more conservative recommendations, and UPE and time pressure lead to more aggressive recommendations. The hypotheses were tested on 153 tax practitioners using a hypothetical tax scenario. There was a strong indication that practitioners made more conservative recommendations when a RFI was present. Additionally, the results indicated that the effect of time pressure on tax preparers' recommendations was dependent upon other variables in their decision-making environment.

The Keirsey Temperament Sorter (KTS) is a psychometric instrument that can be useful to researchers interested in investigating the impact of personality traits in accounting practice and education. The KTS may be used to investigate: (a) the nature of personality of accounting practitioners, faculty and students; and (b) how personality traits affect the performance of accounting practitioners, faculty and students. This paper provides KTS users with the empirical and conceptual information necessary to conduct research in these areas. The psychometric properties and underlying theory of the KTS are examined, as are its limitations. The paper also compares the KTS to the Myers-Briggs Type Indicator (MBTI), another widely used psychometric instrument. The two instruments are compared in order to determine the relative advantages of each for accounting research.