Advances in Accounting Behavioral Research: Volume 17

There has been much discussion regarding the necessity of moving away from precise (rules-based) standards toward less precise (principles-based) standards. This study examines the impact of the proposed shift by using a controlled experiment to evaluate the influence of rule precision and information ambiguity on reporting decisions in the presence of monetary incentives to report aggressively. Using motivated reasoning theory as a framework, we predict that the malleability inherent in both rule precision and information ambiguity amplify biased reasoning in a manner that is consistent with individuals’ pecuniary incentives. In contrast, consistent with research exploring ambiguity aversion we predict that high levels of ambiguity will actually attenuate aggressive reporting. Our results support these predictions. Specifically, we find an interactive effect between rule precision and information ambiguity on self-interested reporting decisions at moderate levels of ambiguity. However, consistent with ambiguity aversion, we find decreased self-interested reporting decisions at high levels of ambiguity relative to moderate ambiguity. This study should be of interest to preparers, auditors, and regulators who are interested in identifying situations which amplify and diminish aggressive reporting.

This chapter addresses the criticisms that escalation of commitment research has focused only on individual (as opposed to team or group) decision-making. It has been suggested that research findings of individual-based decision on managers’ escalation behaviors may not be applicable in today’s business environment which is increasingly dominated by team or group-based decision. Specifically, this chapter examines the effects of information availability (public vs. private information) and type of responsibility (sole and joint responsibility) on managers’ project evaluation decisions. A laboratory experiment was conducted to test the hypotheses developed for this study. The results indicate that, consistent with prior research, project managers exhibited a greater tendency to continue a failing project under private information than public information conditions. In addition, in the private information condition, project managers with joint responsibility for an investment project expressed a greater tendency to continue a failing project than those with sole responsibility. Implications of our results for the design of management control systems are discussed.

Not all pressured, greedy, and opportunistic individuals actually commit white-collar crime. So what exactly is the common denominator for individuals to commit white-collar crime? This study investigates the propensity of an individual to commit white-collar crime and advances personality as an explanatory factor. Questionnaire survey data is collected from 357 undergraduate accounting students in a later year accounting course at a large university in Australia. Personality is measured using the Big Five Inventory. Support is provided for the view that individuals scoring lower in agreeableness and lower in conscientiousness have a higher propensity to commit white-collar crime. While no significant main effect associations emerged for extraversion, neuroticism, or openness to experience, inspection of individual parameter estimates revealed a significant negative association between neuroticism and propensity to commit white-collar crime but only in certain circumstances.

This study examines how leadership style, budget participation, and perceptions of budgetary fairness influence an important employee outcome, organizational commitment. In the proposed model, the leadership style of the superior, specifically consideration, is linked to subordinate participation in the budgeting process. Both leadership style and budget participation, in turn, influence employee beliefs about budgetary fairness, that is, beliefs concerning the procedural and distributive justice of the budgeting system. Finally, the justice of the budgeting system and its antecedents (leadership and budget participation) affect organizational commitment. Results from a survey of supervisors and managers in several firms support the proposed model.

This chapter presents a seven-part case developed for use in a graduate-level tax planning class. The case is organized in a taxpayer/business “life-cycle” approach. Over the semester the case follows a married couple as they consider a number of investments, start a business, and expand the business. As the case progresses, the couple faces increasingly complex tax and business issues. The couple eventually winds down their involvement in the business and begins to plan for their retirement years. This chapter also provides a review of behavioral tax research published in the top accounting journals over the period 2004–2013. The chapter concludes with a discussion of how the case could be adapted by behavioral tax researchers in their research programs and perhaps by accounting firms in their training programs.

This research note investigates the relationship between the constructs of professional skepticism and client advocacy as they relate to accountants’ roles as auditors and tax professionals. Although Pinsker, Pennington, and Schafer (2009) implicitly treat advocacy and professional skepticism as opposing constructs, the purpose of this research note is to explicitly examine whether an accounting professional can be both a professional skeptic and a client advocate. Two hundred and six experienced accounting professionals with a mixture of accounting and tax backgrounds responded to a client advocacy scale (Pinsker et al., 2009) and a professional skepticism scale (Hurtt, 2010). Results indicate that while tax professionals have higher levels of client advocacy than auditors, both groups have similar levels of professional skepticism. Moreover, no correlation emerges between participants’ responses to the advocacy and the full professional skepticism scale or five of its six sub-scales. These results provide evidence that client advocacy is a separate and distinct construct from professional skepticism. These findings have implications for behavioral accounting researchers by demonstrating that these two constructs are not related; thus, it is important to separately measure client advocacy and professional skepticism when they are relevant to a research question.

In this study, the construct validity and effectiveness of a newly identified influence tactic, organizational appeal, is tested. Utilizing a sample of practicing professional accountants, study results show that organizational appeal is distinct from other influence tactics, is perceived to be used frequently by supervisors, and is effective at influencing subordinates. The organizational appeal influence tactic could be particularly useful in situations where accounting supervisors and managers use proactive tactics to influence others to complete tasks or make decisions; to influence outsiders (e.g., suppliers, clients, government agents) over whom they have little authority; and where other influence tactics are not effective or appropriate.