John J. Masselli
Texas Tech University
Robert C. Ricketts
Texas Tech University
Abstract: In this study, we extend the analysis of Masselli et al. (2002) to determine how personal characteristics, such as risk appetite and attitudes toward filing a correct return, affect how novice taxpayers respond to automated warnings of increased audit risk embedded in commercial tax preparation software. We analyze the responses of two groups of students one drawn from the undergraduate accounting curriculum at a large state university in the Southwest United States, and the other from the MBA program at the same university to a tax preparation experiment in which some students receive automated audit warnings and the others do not. Our results indicate that both groups of students respond to audit warnings triggered by certain positions taken in the experimental tax return, by reducing the level of deductions claimed (or increasing the amount of income reported) for those items triggering the audit flags. Although both groups respond to the audit flags, the average response of the undergraduate student sample is considerably greater than that of the MBA student sample. Moreover, the responses of the MBA students, unlike those of the undergraduate students, are considerably influenced by the participants tolerance for risk.
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