Advances in Accounting Behavioral Research: Volume 8

The Editor and Associate Editors at AABR would like to thank the many excellent reviewers who have volunteered their time and expertise to make this an outstanding publication. Publishing quality papers in a timely manner would not be possible without their efforts.

Advances in Accounting Behavioral Research (AABR) publishes articles encompassing all areas of accounting that incorporate theory from and contribute new knowledge and understanding to the fields of applied psychology, sociology, management science, and economics. The journal is primarily devoted to original empirical investigations; however, literature review papers, theoretical analyses, and methodological contributions are welcome. AABR is receptive to replication studies, provided they investigate important issues and are concisely written. The journal especially welcomes manuscripts that integrate accounting issues with organizational behavior, human judgment/decision making, and cognitive psychology.

The belief-adjustment model has been an integral part of accounting research in belief revision, especially in the examination of order effects. Hogarth and Einhorn ((1992) Cognitive Psychology, 24, 1–55) created the belief-adjustment model to serve as a theoretical framework for studying individuals’ decision-making processes. The model examines several aspects of decision-making, such as encoding, response mode, and task factors. The purpose of this chapter is to provide a comprehensive examination of the accounting studies that have used the theoretical framework of the belief-adjustment model in auditing, tax, and financial accounting contexts. Roberts’ ((1998) Journal of the American Taxation Association, 20, 78–121) model of tax accountants’ decision-making is used as a guideline to organize the research into categories. By using Roberts’ categorization, we can better sort out the mixed results of some prior studies and also expand the review to include a more comprehensive look at the model and its application to accounting. While many variables have been examined with respect to their effect on accounting professionals’ belief revisions, most studies examine them in isolation and do not consider the interaction effects that these variables may have. Our framework also identifies areas of the belief-adjustment model that need further research.

A recent change to audit workpaper review has been the movement toward delegating more review tasks to senior auditors and including more staff auditors in the review process. This study investigates the efficiency and effectiveness implications of this change. It considers the calibration of reviewers of different levels of experience on both conceptual and mechanical errors. The results reveal that reviewers are miscalibrated (overconfident) in their workpaper error judgments. No differences are found in the calibration of staff and senior auditors across hierarchical level or type of error. The implications for audit effectiveness are discussed in the paper.

This chapter introduces linguistic delivery style to auditing research, demonstrates how linguistic delivery style relates to client credibility, and shows how linguistic delivery style and client credibility influences auditors’ judgment. Two hundred auditors participated in an analytical procedures task. The results indicate that high client credibility and powerful linguistic delivery style increase the auditor's assessed likelihood that the explanation accounts for the fluctuation and decrease their intent to perform additional testing. Moreover, powerless linguistic delivery style from an otherwise high credibility client leads to auditor judgments and intentions that are indistinguishable from those that arise from a low credibility client. Finally, evidence indicates that linguistic delivery style is a fourth component of credibility.

Face-to-face meetings between auditors and clients are becoming increasingly more difficult and expensive to arrange, due in large part to the ceaseless expansion of commerce across the globe. Relying on electronic communication media such as e-mail messaging or video-conferencing for auditor–client inquiry purposes is one way to enhance the timeliness of such communications; however, questions arise with respect to potentially biasing influences of certain technical aspects of electronic media on auditors’ judgment and decision-making processes. Drawing on information processing theories, the current study posits that media and message attributes can interact, thereby differentially affecting auditors’ belief revisions – holding information content constant. The media attributes examined in the current study are cue multiplicity (i.e., the range of central and peripheral cues a medium is capable of transmitting) and message reprocessability (i.e., the extent of archival and retrieval features a medium is capable of handling); and the message attribute studied is evidence strength (e.g., the credibility of client-provided evidence). Research findings from a laboratory experiment with 189 graduate accounting students indicate the following: (1) when client-provided evidence is strong, neither message reprocessability nor cue multiplicity significantly affect the auditors’ belief revisions; (2) when evidence is weak and reprocessability is present, higher cue multiplicity leads to significantly greater belief revision in favor of the client; (3) when evidence is weak and reprocessability is absent, lower cue multiplicity results in significantly greater belief revision in favor of the client. Study results suggest theoretical and practical implications for globally distributed auditor–client communications.

If individuals exhibit less ethical behavior in the workplace than in their personal decisions, this may constitute evidence of role morality behavior. Role morality can be defined as “claim(ing) a moral permission to harm others in ways that, if not for the role, would be wrong” (Applbaum, 1999. Ethics for adversaries: The morality of roles in public and professional life (p. 3). Princeton, NJ: Princeton University Press.) To investigate this issue, 55 practicing accountants completed and returned the experimental survey. Results show that in many situations, business decisions were less ethical than personal decisions, consistent with the theory of role morality. The implications and limitations of this study as they relate to practicing accountants are discussed.

This chapter uses agency theory and ethics literature to assess the moderating effect of manager's moral equity on the relation between budget participation and propensity to create slack. Moral equity is the major evaluative criterion for ethical judgment, is based on the overall concept of fairness, justice and right and is often very influential in contemporary moral thought (Robin & Reidenbach (1996) Journal of Business, 5(1) 17–28). The results indicate that a manager's moral equity moderates the effect of budget participation. For managers with high moral equity, the relationship between participation and manager's propensity to create slack is significantly negative while, for managers with low moral equity, the relationship is significantly positive. Further analyses indicate that high budget participation and high moral equity result in less propensity to create slack than high budget participation and low moral equity.

Despite the many proposed benefits of activity-based costing (ABC), many managers oppose implementing it. One important reason for this resistance that has generally not been addressed in the literature is the effect of cost reallocations on managers’ evaluations and compensation. This study examines how the impact of installing an ABC system on managers’ bonuses affects their support for ABC implementation. Because ABC systems usually allocate costs in different proportions than traditional systems, some products may appear to be more profitable while others may appear less so. This, in turn, causes the business units responsible for the products to appear to be more or less profitable.

Based on prospect theory (Kahneman & Tversky (1979). Econometrica, 47, 263–291; Tversky & Kahneman (1992). Journal of Risk and Uncertainty, 5, 297–323), we predict that the negative effect on managers’ support for ABC in business units reporting less profit is greater than the positive effect on managers’ support in the more profitable units. The results of an experiment support this prediction. Since management support is critical to successful system implementation, this asymmetric effect has implications for cost management system changes.

In the current environment, an important firm asset is the employee knowledge base, which in a large part depends on employee willingness to share information. Yet prior research has noted that while employees are delighted to reveal success they are often reluctant to reveal errors. While there are many factors affecting managers’ reluctance to reveal errors, this study focuses on cultural differences between Chinese migrants and Anglo residents as well as the role of acculturation. This is particularly relevant given the very significant foreign direct investment into China, and migration of managers and high-end technical staff from portions of Greater China to the management and higher technical classes of the Anglo world. Prior studies including Chow, Harrison, McKinnon, and Wu (1999a). Accounting, Organizations and Society, 24, 561–582, Chow, Deng, and Ho (2000). Journal of Management Accounting Research, 12, 65–95, and Tinsley and Pillutla (1998). Journal of International Business Studies, 29(4), 711–728, provide conflicting views and evidence for differences in information sharing between Chinese and Anglo managers, and there is no accounting or management literature that deals with changes in information sharing behavior in the migration process.

This study employs an experiment to test for differences in individuals’ willingness to share information about a prior costing error. Using a sample of students from two different nationalities drawn from a major Australian university (Australian and Hong Kong SAR, China), this study finds that migrant Chinese share less information than Anglo-Australians. This study further provides empirical evidence that the relative change in willingness to share this information when the supervisor is removed from the decision context is lower for the migrant Chinese than for the Anglo-Australians. Finally, this study finds evidence for acculturation as the willingness of migrant Chinese managers changes with the length of their stay in the new society. Acculturation occurs relatively quickly and highly acculturated Chinese information-sharing behavior is not significantly different from the Australian-born subjects.

This chapter examines the effects of the value attainment and cognitive roles of budgetary participation on job performance. A structural model consisting of variables such as budgetary participation, job-relevant information, job satisfaction, and job performance is proposed and tested using a survey questionnaire on 70 senior managers, drawn from a cross-section of the financial services sector. Their responses are analyzed using a structural equation modeling (SEM) technique. The results reveal that budgetary participation is positively associated with job-relevant information. These results lend support to the cognitive effect of budgetary participation, which suggests that subordinates participate in the budget setting process to share information. In addition, the results suggest that budgetary participation is positively associated with job satisfaction. These results support the value attainment role of budgetary participation, which increases subordinates’ levels of job satisfaction. Furthermore, the results reveal that there are positive relationships between job-relevant information and job satisfaction, job-relevant information and job performance, and job satisfaction and job performance.