The effects of red-flag items, unfavorable projection errors, and time pressure on tax preparers' aggressiveness

Abstract

This paper examines how a red-flag item (RFI), an unfavorable projection error (UPE) and time pressure affect the aggressiveness of tax preparers' recommendations. We hypothesize that a RFI causes preparers to make more conservative recommendations, and UPE and time pressure lead to more aggressive recommendations. The hypotheses were tested on 153 tax practitioners using a hypothetical tax scenario. There was a strong indication that practitioners made more conservative recommendations when a RFI was present. Additionally, the results indicated that the effect of time pressure on tax preparers' recommendations was dependent upon other variables in their decision-making environment.

Citation

Newmark, R.I. and Karim, K.E. (2002), "The effects of red-flag items, unfavorable projection errors, and time pressure on tax preparers' aggressiveness", Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 5), Emerald Group Publishing Limited, Leeds, pp. 213-243. https://doi.org/10.1016/S1474-7979(02)05043-3