Search results

This study examines auditors' evaluation of audit risk at the financial statement level (risk of material misstatements). Specifically, the study investigates whether perceived audit risk is influenced by individual differences (e.g., tolerance-for-ambiguity (TFA) and experience), and changes in industry risk. Forty-eight auditors from two offices of a “Big Five” CPA firm participated in this study.

The results of this study support the contention that TFA significantly influences the assessment of audit risk. Auditors with a high TFA perceived less audit risk than auditors with a low TFA. Industry risk also is shown to have a significant influence on the assessment of audit risk at the financial statement level. Higher industry risk was found to be associated with higher perceived audit risk. Lastly, the results indicate that audit experience is not a significant factor in explaining perceived audit risk. Important implications from these results for the overall audit process are provided.

Heavy reliance on college students as surrogate experimental subjects has historically generated a great deal of controversy. Interestingly, despite its rudimentary importance to behavioral experimentation, recent dialogues on the issue are curiously scarce. This essay seeks to re-open a critical dialogue on the subject by reflecting on three theoretical or methodological issues central to the historical strife surrounding experimental subject surrogation.

Behavioral accounting research deals with a complex set of phenomenon including the broad domain of human decision making under uncertainty. Two aspects of decision making of particular relevance to accounting and auditing research are two constructs that are inexorably interrelated: uncertainty and information (evidence). This paper introduces a theoretical perspective that enriches the knowledge-set that may be used in behavioral accounting research when confronting decision contexts that involve uncertainly.

The main body of the paper is an introduction to belief functions. The introduction includes a discussion of the fundamental constructs and then illustrates the use of belief functions in two audit settings: traditional financial statement audit planning and the evaluation of evidence in a cascaded-inference setting involving the ebaluation of internal accounting control. The paper concludes with a brief exploration of some of the research issues and opportunities that are related to the potential use of belief functions in behavioral accounting research.

Prior research on accounting ethics has focused on the examination of an individual's moral reasoning capabilities and/or individual acts of unethical behavior. The relevance of such research is hampered, however, by the failure to recognize the importance of organizations to the ultimate behavior of their members. The research presented in this paper focuses on the development of a model that aids in the assessment, control, and/or motivation of ethical or curtailment of unethical activity within a firm. The model blends two perspectives from recent accounting ethics research (contractarian philosophy and stakeholder ethics) with an application of epidemic theory that has recently evolved in the medical field of epidemiology. The model developed in this paper emphasizes preventing epidemics of unethical activity and encouraging epidemics of ethical activity. The ultimate result is a model designed to aid organizations in attaining a greater level of ethical behavior.

The purpose of this study is to examine the influence of causal attributions and budget emphasis on individuals' framing perceptions and risk preferences under conditions of unfavorable budget variances. Prospect theory maintains that risk preferences are domain-specific; individuals tend to be risk-averse in gains and risk-seeking in losses. Prior accounting research has found that while individual actions clearly reflect prospect theory propositions during situations of gain, individuals demonstrate risk indifference when faced with situations of loss. We investigate potential explanations for this lack of strict adherence to prospect theory during situations of loss. Our study uses internal and external attributions and pressure to meet budget targets for performance appraisals to create salient loss conditions. The results demonstrate that budget decisions vary depending on the casual factors of the unfavorable variance and on the degree of emphasis placed on achieving time budget targets. As expected, subjects exhibited relatively more risk seeking behavior when faced with internal attributions and when they expected a greater emphasis on meeting budgetary goals in performance assessment. Our results also demonstrate the importance of controlling for framing effects in prospect theory related tests.