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

1999, Volume 11


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A Comprehensive Taxonomy of Audit Task Structure, Professional Rank and Decision Aids for Behavioral Research

Mohammad J. Abdolmohammadi
Bentley College

The primary objective of this paper is to provide a descriptive database on task structure, minimum professional rank and decision aids applicable to perform each task in a comprehensive inventory of audit tasks. In addition, analysis of the data and insight are provided as a means of motivating future behavioral research, particularly in areas of expertise, staff training and assignment, and decision aid development. To achieve these objectives, a comprehensive inventory of audit tasks was developed and presented to audit managers and partners for their assessment of task structure, professional rank and decision aids. The data are presented by various audit phases and in detail for each of the 332 audit tasks investigated.

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Budgeting and the Management of Role Conflict in Hospitals

Sue E. Comerford and Margaret A. Abernethy
University of Melbourne

Economic, political and social pressures have created an environment where it is considered critical for professionals performing health care services to extend their role to encompass the financial management of hospital resources. Prior research has argued that this dual role can potentially have adverse organizational consequences, through the creation of role conflict. Professionals tend to have a high commitment to professional values but a low commitment to managerial values and, thus, directly involving them in financial controls, such as budgeting, is likely to lead to role conflict. This paper argues that role conflict is not inevitable in this circumstance. It extends prior research by testing the proposition that individuals with a high professional orientation will not necessarily experience role conflict when involved in budgeting, provided they are committed to the managerial goal set. An empirical study, based on data collected from health care professionals in a large Australian public teaching hospital, was undertaken to test this proposition. The results support the position taken in the paper.

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Supervision Practices and Audit Effectiveness: An Empirical Analysis of GAO Audits

Parveen P. Gupta
Lehigh University

Narayan S. Umanath
University of Cincinnati

Mark W. Dirsmith
Pennsylvania State University

Generally accepted auditing standards promulgated by the U.S. General Accounting Office (GAO) and AICPA (1982) require the supervision of auditors. Earlier research on auditor supervision yielded relatively weak and conflicting results, and little effort has been devoted to examining the relationship between audit tasks, supervision practices, and the effectiveness of actual audit teams. In addition, this prior research examined auditors solely from public accounting firms, with virtually no attention being paid to auditors within the GAO.

Using work unit contingency theory, it is hypothesized here that when supervision practices (expressed in terms of bureaucratic, personal and group modes of control) fit the level of complexity and interdependence of audit tasks, as well as audit team size, audits will be performed more effectively. To evaluate this hypothesis, we administered test instruments to 299 auditors from 96 actual GAO audits. Using canonical correlation analysis, we found that GAO audit team effectiveness is significantly higher when the supervision practices fit the nature of the interdependence relations, as well as the size of the audit team. The study concludes by explaining the implications for practice and future research.

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A Cross-Cultural Investigation of Managers’ Project Evaluation Decisions

Paul D. Harrison
University of South Carolina

Chee W. Chow
San Diego State University

Anne Wu
National Chengchi University (Taipei)

Adrian M. Harrell
University of South Carolina

In the current era of intensifying competition and globalization, an increasingly important issue is how to ensure timely responses to continuing or discontinuing a declining or unprofitable project. There also exists a need to know how project evaluation decisions will differ across national settings.

This study contributes insights into this question by testing how private information, the potential for personal gain and national culture affect decision makers’ choice of whether to continue or discontinue a project projected to become unprofitable in the future. Experimental data from 230 U.S. and Chinese nationals indicated that: (1) when they had private information and the potential for personal gain, both national groups had a greater propensity to continue the unprofitable project, and (2) the Chinese subjects had less of an inclination to continue the unprofitable project than their U.S. counterparts. These results imply that both national culture and attributes of the employment setting affect employees’ behavior, which in turn affects firm profitability.

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The Role of Procedural and Declarative Knowledge in Performing Accounting Tasks

Paul J. Herz
Western State College of Colorado

Joseph J. Schultz, Jr.
Arizona State University

Cognitive research in accounting and auditing has focused on expertise and how that expertise is obtained. Implications include expert system construction, training and personnel assignment. Determining experts and eliciting their knowledge, however, is threatened by the dissociation between declarative and procedural knowledge. Gauging declarative knowledge relies on one’s ability to verbalize pertinent facts or processes; measuring procedural knowledge is more subtle as it relies on “automatic” linkages to performance that gradually deny access to declarative knowledge. This distinction limits experienced auditors’ ability to demonstrate their knowledge via ordinary recall or recognition measures commonly used in accounting studies.

Sixty-six advanced accounting students performed a structured accounting task in a computerized experimental setting to document the role of procedural knowledge within an accounting context. The participants practiced various combinations of the task to allow for development of “expertise,” and, subsequently, for testing of several propositions.

Findings indicate general support for the role that procedural knowledge plays in the accounting arena. These results suggest that more emphasis should be placed on performance in determining expertise, that caution should be exercised in eliciting experts to build expert systems, and that ACT* theory may represent a sound framework for studying such matters.

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The Influence of Budget Goal Attainment on Risk Attitudes and Escalation

Linda V. Ruchala
University of Nebraska–Lincoln

This study is an investigation of whether individuals who are not achieving budget goals will make riskier project investment decisions than individuals who are attaining budget goals and whether bonus-based compensation exacerbates this effect. This study also explores whether making riskier investment decisions extends to project escalation when expected value analysis would suggest that such continuance is not advantageous to achieving budget goals. Finally, the relationship between the duration of effort and project escalation is tested.

A two-period interactive computer experiment was conducted using 60 student subjects to test the research hypotheses. A two-factor, between-subjects design crossed two forms of performance-based compensation (bonus-based and profit-sharing) with achievement and nonachievement of a budget goal. Baseline risk attitudes, choice of investment projects, and the decision to continue a failing project were measured in this study, as was the duration of effort. The results support the proposition that individuals make riskier investment decisions when they are not achieving budget goals. Subjects not meeting budget goals and compensated with bonus-based incentives made the riskiest investment decisions. The increased willingness to take risks does not extend to project escalation. Individuals who took more time to analyze the investment options were less likely to escalate.

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Taxpayer Preference Between Income Tax and Consumption Tax: Behavioral Life Cycle Effects

Raymond A. Zimmermann
Patricia Eason
The University of Texas at El Paso

Mary Gowan
University of North Carolina at Charlotte

Public opinion surveys have documented a shift in the characterization of the income tax as the fairest tax in 1972 to the least fair tax in 1994. One potential explanation for this shift lies in Shefrin and Thaler’s (1988) Behavioral Life Cycle Hypothesis (BLCH). According to Shefrin and Thaler (1988), BLCH individuals maximize lifetime satisfaction as they advance through the life cycle by (1) exercising increased self-control in deferring consumption to later periods; (2) mentally segregating income into distinct accounts which carry different marginal propensities to consume; and (3) adjusting their saving rate on the basis of perceived gains/losses in these accounts. Anything that is perceived to permanently affect relative prices between these accounts would affect savings returns.

Given that the primary difference between income and consumption taxation lies in the taxation of savings yields, the relative price of saving is often affected by changes in tax law. BLCH individuals might view increased income taxes as a penalty on their own productive performance (i.e., diminished returns on accumulated savings). If true, BLCH suggests that individual preference between increases in income taxes vs. consumption taxes might depend, in part, on a person’s position in the life cycle. In an aging population, the results of this study suggest that shifting public preference from income taxation to consumption taxation may be related to changing demographics.

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