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

2000, Volume 12


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Organizational Design and Manipulative Behavior: Evidence from a Negotiated Transfer Pricing Experiment

Dipankar Ghosh
University of Oklahoma

This research examines the implications of complementarity of organizational design involving two key factors associated with transfer pricing, sourcing and compensation structure, on the behavior of negotiators determining transfer prices. The results demonstrate that the transfer pricing policy is perceived as unfair when organizational designs are not complementary compared to when the designs are complementary. Further, in the absence of complementary designs, the manipulative disposition of negotiators is a significant predictor of which negotiator will achieve higher outcomes in dyadic negotiations of transfer prices. Thus, the motivation of organizational members is not simply an exogenous variable to which the organizational design needs to be altered, but is endogenous to the system, being in part the result of the organizational design. This has implications for control systems since both the organization designs that define the scope of control systems and the behavior due to organizational designs are antecedents to the behavior from control systems.

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Antecedents and Consequences of Burnout in Accounting: Beyond the Role Stress Model

Timothy J. Fogarty
Case Western Reserve University
Jagdip Singh
Case Western Reserve University
Gary K. Rhoads
Brigham Young University
Ronald K. Moore
Pocatello, Idaho

The burnout condition of employees is a well-known phenomenon in psychology and several applied business disciplines. Despite some degree of recognition in the practice community, little explicit recognition of this topic appears to exist in the accounting literature. This paper develops the burnout construct for the accounting occupation, in part by showing that it has not been captured by other concepts in the literature. In addition to showing that burnout is directly related to several of the familiar behavioral and attitudinal outcomes in public accounting practice, this paper proposes that burnout is a key mediator of the impact of role stressors on critical outcomes. Within a national sample of accountants, the burnout condition is found to partially mediate the influence of role conflict, role ambiguity, and role overload on satisfaction, performance, and turnover intentions. To some extent, burnout is capable of separating the functional and dysfunctional aspects of the role stressors on these job outcomes. In order to provide greater direction for future research, a separate treatment of each of the three dimensions of burnout is provided.

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Group Decision Making: The Impact of Opportunity-Cost Time Pressure and Group Support Systems

Vicky Arnold
Steve G. Sutton
Texas Tech University

Stephen C. Hayne
Arizona State University West

Charles A. P. Smith
SPAWAR Defense Center

This paper reports on an experimental study designed specifically to examine the impact of opportunity-cost time pressure on group decision making during completion of an audit judgment task. In Phase I of the study, trained audit students, working in groups, completed a series of materiality judgments in both the presence and the absence of time pressure. In Phase II of the study, the experiment was replicated with a second set of subjects where communication was assisted through the use of a Group Support System (GSS).

The results of Phase I indicate that the groups became more efficient in their information search strategy, but chose to accelerate their decision-making approach rather than alter the information load from the available cues. These actions are consistent with underlying theory and result in a significant decrease in decision quality under time pressure. Phase II provides similar results for information processing, and also indicates that use of the GSS led to slower processing of information cues and a corresponding increase in time required to reach a group decision. Additionally, a comparison of the two groups indicates that the GSS may have impeded the decision quality.

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The Use of Foresight Decision Aids in Auditors’ Judgments

D. Jordan Lowe
University of Nevada, Las Vegas

Philip M. J. Reckers
Arizona State University

A major cause of the expectation gap may be attributable to the different time frames in which auditors and judges/jurors view auditor performance. In our legal system, hindsight judgments are used to evaluate auditor decisions performed in foresight. The effect of outcome knowledge is to create a gap between hindsight and foresight perspectives. The purpose of this research is to evaluate whether it is possible to alter auditors’ foresight expectations to approximate a hindsight perspective. Specifically, we propose that foresight strategies embedded into two separate decision aids could mitigate hindsight effects. An experiment was conducted with 131 audit seniors from one of the Big 5 public accounting firms. Our results indicate that one of the decision aids was effective in mitigating hindsight effects. These results suggest that auditors’ ex ante decision process can be altered so their judgments approximate those of ex post evaluators. This has implications for audit legal liability as it suggests that rather than focusing exclusively on influencing judges’ and jurors’ expectations in hindsight, it may be expedient to also modify auditor expectations in foresight.

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The Role of Ambiguity in Auditors’ Determination of Budgeted Audit Hours

A. Kay Guess
St. Edward’s University

Timothy J. Louwers
Louisiana State University

Jerry R. Strawser
University of Houston

This is a study which investigates the role of ambiguity on auditors’ consideration of risk factors and subsequent determination of budgeted audit hours during the planning stages of audit examinations. Eighty-five practicing auditors responded to an experimental case that provided background information regarding factors affecting inherent risk and control risk for a hypothetical audit and also requested them to estimate the number of planned audit hours for the engagement. Consistent with previous research (e.g., Dusenbury et al. 1996), our results indicated that both ambiguity and risk play significant roles in the auditor’s determination of the extent of substantive testing; however, the effect(s) of ambiguity are limited to engagements characterized by lower combined levels of risk. Some of our results are inconsistent with previous findings by Nelson and Kinney (1997), who reported a symmetric (moderating) effect of ambiguity on auditors’ decisions, suggesting that the influence of ambiguity may be dependent upon the decision context examined.

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The Development of Two Measures to Assess Accountants’ Prescriptive and Deliberative Moral Reasoning

Linda Thorne
York University

The purpose of this study is to develop two measures of accountants’ prescriptive moral reasoning and deliberative moral reasoning. Past accounting ethics research adopting a cognitive-developmental perspective has focused on understanding the factors that promote accountants’ development of cognitive moral capacity. Cognitive moral capacity does not necessarily correspond to the moral reasoning that accountants apply to the resolution of ethical dilemmas in the work place. Cognitive moral capacity describes the most sophisticated moral reasoning of which an individual is capable, whereas moral reasoning describes the actual cognitive assessment an individual applies to a particular ethical dilemma. There are two different types of moral reasoning: prescriptive reasoning and deliberative reasoning. As applied to the ethical decision process of accountants, prescriptive reasoning is analogous to an accountant’s formulation of his or her professional judgment of the ideal resolution to an ethical dilemma, and deliberative reasoning is analogous to an accountant’s intention to exercise professional judgment to resolve an ethical dilemma. To develop two accounting-specific measures of prescriptive and deliberative moral reasoning, the Defining Issues Test (DIT) was selected as a prototype. Professional accountants and experts were used to ensure the cases and scoring of the measures elicited a representative moral reasoning process of accountants, according to a cognitive-developmental perspective. The validity and reliability of the accounting-specific measures are comparable to that found in the DIT. The results of comparisons of scores on the accounting-specific measures to their DIT scores suggests that accountants do not resolve ethical dilemmas at their cognitive moral capacity. Thus, the accounting-specific measures of moral reasoning may be useful in future research to investigate factors and approaches that will encourage accountants to resolve ethical dilemmas at their cognitive moral capacity.

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Effects of Information Load on Capital Budgeting Decisions

Monte R. Swain
Brigham Young University

Susan F. Haka
Michigan State University

This study examined information load effects on information-processing behavior for 36 experienced and 48 inexperienced capital budgeters. Six capital investment choice scenarios were sequentially presented to each participant using a computerized process-tracing methodology. The amount of information attending each of the six choice tasks was randomly varied and indicators of the information search strategy employed were traced.

This is an extension of the information load effect to the capital budgeting domain. Results from this study are three-fold. First, consistent with related research, capital budgeters reduce the proportion of information searched and increase the variability in their search patterns as the information load increases. Second, contrary to prior research, our results suggest some adjustments to previous evidence demonstrating an effect of information load on the direction of search patterns. Finally, although information load interacts somewhat with an individual’s level of experience, the results did not clearly confirm that capital budgeting experience affects information search processes.

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Participation and Performance in Capital Budgeting Teams

Peter Chalos
University of Illinois at Chicago

Margaret C. C. Poon
City University of Hong Kong

Increasingly, organizations rely on cross-functional teams in the development of capital budgeting projects. To date, no studies appear to have examined conditions that affect team performance. Using structural equation analysis, this study of 177 managers in 55 capital budgeting teams examined the mediating effects of information sharing and budget performance emphasis between team budget participation and performance. A structural model provided a strong fit of the hypothesized relationships. The posited mediating effects were significant, suggesting the importance of contextual variables upon team performance. The effect of hierarchical controls on team performance was also examined. No performance effects were found.

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The Use of and Selection Biases Associated with Nonstatistical Sampling in Auditing

Thomas W. Hall
University of Texas at Arlington

James E. Hunton
University of South Florida

Bethane Jo Pierce
University of Texas at Arlington

This study investigated the extent to which nonstatistical sampling procedures are used by practicing auditors and tested the most popular form of nonstatistical sampling for evidence of selection biases. Respondents to a survey of practicing auditors reported that nonstatistical procedures are used in approximately 85 percent of all audit sampling applications. Within the domain of nonstatistical sampling, approximately 90 percent of the applications utilize a form of nonstatistical sampling known as haphazard selection. In a laboratory experiment, audit samples chosen via haphazard selection were tested for the existence of selection biases. These samples were found to exhibit selection biases in favor of larger, more brightly colored, and more conveniently located population elements, as well as elements with fewer adjacent neighbors. In extreme cases, selection likelihoods for certain population elements were approximately eight times larger than likelihoods for other elements. Study results suggest that organizations using haphazard selection procedures and standard-setting bodies in the accounting profession should reexamine the acceptability of haphazard selection and further develop guidelines for its use.

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An Examination of the Positive Test Strategy in Auditors’ Hypothesis Testing

Bonita K. Peterson
Montana State University

Bernard Wong-On-Wing
Washington State University

Studies on the extent of confirmation bias among auditors have obtained mixed results. Based on Klayman and Ha (1987, 1989), this study is an examination of confirmation bias in terms of a positive test strategy. The results suggest that inconsistent findings of prior studies may be attributed to the failure to consider intermediate hypotheses. Auditors in this study employed a predominantly positive test strategy. Moreover, contrary to prior implications, the strategy was found to be a useful heuristic for determining the truth of a hypothesis in some conditions.

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A Research Note Concerning the Dimensionality of the Professional Commitment Scale

Peggy D. Dwyer
University of Central Florida

Robert B. Welker
Southern Illinois University at Carbondale

Alan H. Friedberg
Florida Atlantic University

Accounting researchers investigating the construct of professional commitment have generally measured professional commitment using a 15-item scale. A previous study of the psychometric properties of that scale suggested that the scale may capture more than one dimension of commitment. The present study was designed to examine additional psychometric properties of the 15-item professional commitment scale. Analysis of responses collected from 159 practicing accountants suggests that the professional commitment scale contains potentially spurious dimensions. The 15-item scale was pared down to a five-item scale that may provide a more clearly interpretable and parsimonious measure of affective professional commitment.

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