Behavioral Research in Accounting
Published annually by the Accounting, Behavior and Organizations Section of the AAA

1998, Volume 10

 

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Critical Analysis and Recommendations Regarding the Role of Perceived Environmental Uncertainty in Behavioral Accounting Research

Walter G. Tymon, Jr. and David E. Stout and Karyll N. Shaw
Abstract


A model of the antecedents and consequences of perceived environmental uncertainty (PEU) for behavioral accounting research is presented in this paper. Within this model, PEU is defined as a strategic-level variable pertaining to top management's perceptions of uncertainties in the external environment (e.g., competitors, customers, government regulations). The role of PEU is differentiated from other constructs that are widely used in behavioral research (e.g., task uncertainty, role ambiguity). We use the model to critically evaluate two major streams of accounting research involving PEU: Duncan-based studies and studies based on the work of Khandwalla, and Miles and Snow. Those works are critically reviewed, both in terms of construct operationalization and appropriate model linkages. The paper concludes with recommendations regarding the use of PEU in future accounting research.


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An Examination of Potential Gender-Based Differences in Audit Managers' Performance Evaluation Judgments

Eric N. Johnson, Steven E. Kaplan and Philip M. J. Reckers
Abstract


This study applied an experimental approach to examine two possible rater-based explanations (overall gender bias and intolerance of ambiguity) for differences in audit managers' performance evaluations of an audit senior based on the senior's gender. Seventy-one audit managers were provided with a description of a substandard performance by either a male or a female senior on an audit engagement. The managers completed an evaluation of the senior's performance on the engagement and two measures of support for the senior on future engagements.

Senior gender was not significant as a main effect. However, managers classified as intolerant of ambiguity rated the female senior's engagement performance lower than the male senior's performance. Ambiguity-intolerant managers also were less likely to support the female senior for future job assignments. Conversely, managers classified as tolerant of ambiguity gave higher ratings to the female senior's engagement performance and exhibited greater career support for the female senior.

These results suggest that tolerance for ambiguity plays an important moderating role in audit managers' consideration of senior gender in performance evaluation judgments. Further, to the extent that female audit seniors' evaluations are influenced by supervisors' tolerance for ambiguity, their performance evaluations may reflect increased variability over time compared to male audit seniors' performance evaluations.


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The Use of Outcome Feedback and Task Property Information by Subjects with Accounting-Domain Knowledge to Predict Financial Distress

Brad M. Tuttle and Morris H. Stocks
Abstract


This study examined the use of outcome feedback and task property information by subjects with relevant domain knowledge to predict the likelihood of financial distress for various hypothetical companies. For each company, the subjects saw six financial cues prior to making their predictions. Performance was determined by comparing the subjects' responses with the predictions of a regression model derived using the same judgments made by groups of experienced loan officers. The presence of outcome feedback improved performance. Task property information interacted with feedback over time to affect performance. The difference in the results between this and studies that have failed to show performance improvements with outcome feedback may be attributed to the ability of the subjects to use their accounting-domain knowledge to bring meaning to the task.


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The Existence of Multiple Measures of Organizational Commitment and Experience-Related Differences in a Public Accounting Setting

Alice A. Ketchand and Jerry R. Strawser
Abstract


Previous accounting research has examined the effect of organizational commitment (OC) on important organizational consequences, such as job satisfaction and turnover intentions. To measure an individual's OC, these studies relied upon the Organizational Commitment Questionnaire (OCQ) developed by Porter et al. (1974), which operationalizes OC as a unidimensional construct. Subsequent research in non-accounting settings, however, has established the possible existence of two (Meyer and Allen 1984) and three (McGee and Ford 1987) distinct dimensions of OC. The purpose of this paper is to investigate whether a multidimensional measure of OC exists in a public accounting setting. The results of a sample of 63 less-experienced and 228 more-experienced public accounting professionals indicate that multiple measures of OC appear to exist. In addition, our results suggest that these dimensions of OC differ across experience levels and have differing effects with important organizational consequences (job satisfaction and turnover intentions) across experience levels.


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An Examination of the Validity of a New Measure of Moral Judgment

John T. Sweeney and Dann G. Fisher
Abstract


Rest et al. (1995) have proposed that a new measure of moral judgment based upon the Defining Issues Test, the N index, is a more valid metric than the widely utilized P score. This research examines whether the N index is vulnerable to potential political biases in the Defining Issues Test. Our results indicate that the N index is influenced by an imbedded political ideological content in the DIT, although to a lesser extent than the P score. Furthermore, while the N index seems to accurately capture the cognitive capacity of liberal accountants for advanced moral thinking, it understates the comprehension of moderate and conservative accountants. Importantly, this research examines the validity of the DIT N index before it attains acceptance as a measure of moral judgment and makes recommendations that mitigate the potential for bias.


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An Examination of Factors Influencing Financial Reporting Decisions of Small Business Owner-Managers

Peggy A. Hite
Abstract


This study reports the results of a survey questionnaire sent to small business owner-managers across the country. Experimental manipulations investigated how a tax reporting rule either to expense or capitalize an item influences financial reporting preferences. The results indicate that those owner-managers who prepare GAAP financial statements for their businesses may be more likely to capitalize ambiguous expenditures than those who do not prepare GAAP-based financial statements. Among those who use GAAP financial statements, owner-managers with controlling interests in the business are more likely to expense rather than capitalize ambiguous expenditures while minority owners are less likely to expense. In addition, the GAAP users who are minority owners are more likely than majority owners to make financial reporting decisions that are consistent with tax reporting rules. Although data on small businesses is difficult to obtain, this study provides some preliminary data on the financial reporting preferences of small business owner-managers.


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Going Concern Judgments: An Economic Perspective

Robert R. Tucker and Ella Mae Matsumura
Abstract


This research examines the effects of economic incentives on the strategic interaction between an auditor and client when a potential going concern situation exists. This experimental economics investigation has the following game structure. The auditor first obtains information relevant in predicting the client's viability and then conveys to the client an intention to express a clean or going concern opinion. A client can switch auditors in an attempt to avoid a going concern opinion and the potential self-fulfilling nature of the auditor's prediction of business termination. This incentive to switch auditors poses a credible threat to the incumbent auditor.

Conducting the test in the laboratory enables us to vary (1) the likelihood the successor auditor will issue a clean opinion and (2) the presence of the self-fulfilling prophecy effect. By varying the levels of these treatments, we are able to test the predicted effect on the audit partner's reporting decision and the client's switching decision.

The results strongly indicate that treatments (1) and (2) both had a significant effect on subject behavior. However, contrary to the equilibrium predictions, auditors did not sacrifice their independence as (1) and (2) increased. Clients, on the other hand, did respond opportunistically by switching auditors more frequently as (1) and (2) increased. The effect was strongly significant and was directionally consistent with the analytical predictions.


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