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This study examines the influence of peers in the tax compliance setting using a social learning theory approach to investigate the effect of observing a peer's likelihood of reporting income. We also examine the role that gender plays in these decisions. We ask participants to estimate the likelihood of reporting income and to make a binary compliance decision in a setting where they are able to observe what they believe is another's response to a hypothetical tax reporting scenario. Participants who viewed the decision of a noncompliant peer were less likely to report honestly than those who viewed the decision of a compliant peer. This finding provides further evidence of a potential effect for peer influence. Consistent with prior literature, we find that women are more likely to comply than men, but do not find an interactive effect with peer observation. A supplemental experiment indicated that participants who believed their responses would be seen by a peer were less likely to report honestly than participants who believed their responses would remain private. This result, although counter-intuitive, is consistent with Wenzel's (2005a) description of a self–other discrepancy and conformance to a misperceived social norm.

This study explores feedback-induced and spontaneous postdecision restructuring in a complex decision environment. We examine the impact of experience, decision norms, and the actual decision on postdecision restructuring tendencies. Experienced and novice auditors performed an aspect rating task as part of a going concern judgment. After a break, all participants were asked to recreate their decision stage aspect ratings, but only the experiment group received outcome feedback. We find that the restructuring tendencies are impacted primarily by experience and the original audit report choice. The post-decision restructuring more often than not is a result of adjustments made by participants lacking outcome feedback. This spontaneous defense is particularly vigorous when the report choice violates perceived experience-group norms and base-rates

Financial reporting decisions are influenced by environmental and individual factors. One environmental factor is the example set by management. Research has shown that the tone at the top is related to financial reporting decisions. However, this does not take into consideration that ethical cues from an employee's supervisor might also be relevant. On an individual basis, people who make unethical financial reporting decisions do not appear to be bad or evil people. So, why do these seemingly “good” people make these decisions? The theory of self-concept maintenance (Mazar et al., 2008) posits that individuals balance the desire to gain by behaving unethically with the desire to maintain a positive self-image by behaving ethically. How one balances these is based on one's ability to rationalize an action as honest, with decisions seen as having an ethical component being more difficult to rationalize. Findings indicate that having one person in a leadership position demonstrate a commitment to ethical behavior is related to more ethical financial reporting decisions, whether that person is at the top or closer to the middle. Additionally, a strong tone at the top is related to perceiving a situation is an ethical dilemma while a strong tune in the middle is not. Last, the authors find that a stronger perception that a situation is an ethical dilemma is associated with more ethical financial reporting decisions when the tune in the middle is controlled for, but not when the tone at the top is controlled for.

Multiple stakeholders in the financial reporting process have articulated concerns over the rules-based orientation that U.S. accounting standards have adopted. Many argue that a more principles-based approach to standards setting, typified by international accounting standards, would improve the quality of financial reporting and strengthen the auditor's position when dealing with client pressure, thereby enabling a focus on transparency and fairness of financial reports. In early 2009, the U.S. appeared poised to transition U.S. accounting standards to international accounting standards. The transition decision was made after the recommendations of the SEC Advisory Committee on Improvements to Financial Reporting (i.e., SEC Pozen Committee) publicly expressed strong support in its final report (SEC, 2008a). The SEC in turn issued its “Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers on November 14, 2008” (SEC, 2008b) outlining the transition procedures. However, with Shapiro taking over as chairperson of the SEC, this move now appears less likely pending a stronger review of how principles-based international standards may impact the strength of financial regulatory oversight – a potential delay met with disdain by the pro principles-based European regulatory community (Doran, 2009). While transition to international standards continues to progress, little research examining whether principles-based standards affect auditor decision-making has been conducted. The purpose of this study is to explore the impact of principles- vs. rules-based standards on auditors' willingness to allow preparers leeway in reporting practices and to consider how auditors' decision behavior is influenced by potential client pressure and/or opposing pressure from the SEC. Based on a sample of 114 experienced auditors, the results show that auditors are more willing to allow clients to manage earnings under rules-based standards; and, these results are persistent even under external pressure. Results also indicate that more experienced auditors are less willing to allow clients who exert high pressure to report earnings aggressively, while SEC pressure has more affect on less experienced auditors. These results provide important insights to the FASB, SEC, and IASB as they weigh arguments underlying the principles- vs. rules-based debate.

The accounting profession’s strong focus on internal control and fraudulent financial reporting has led to new standards relating to internal control and fraudulent financial reporting. The control environment and specifically, management integrity, is an important component. The purpose of this article is to determine if the control environment forces ‐ the tone at the top, codes of conduct, and short‐term targets ‐ are related to financial reporting decisions. The results are based on a survey mailed to 400 CPAs who prepare financial reports. The findings indicate there is some reason for concern about fraudulent financial reporting. In addition, a tone at the top in an organization that fosters ethical decisions is of overriding importance to reliable financial reporting. Codes of conduct and pressure for short‐term performance, alone, had no significant effect on financial reporting decisions. The findings emphasize the importance of learning about an organization’s tone at the top during an audit.

Corporate social responsibility (CSR) reporting is a widely accepted procedure for firms to disclose their performance in multiple domains, including environmental protection, labour welfare, protection of human rights, community services, contribution to society and pursuit of product safety. This study aims to investigate whether and how board interlocks affect firms’ decisions with respect to CSR reporting. This study argues that board interlocks act as an important source of social pressure and firms are influenced by their peer firms to adopt CSR reporting.

This paper sampled listed companies on China’s Shanghai and Shenzhen Stock Exchanges from 2009 to 2015. The data were collected from Runling database and China Stock Market and Accounting Research database. A multi-period logit model was used to conduct the main regression analysis and the propensity score matching method was used in the robustness checks.

A study based on a sample of Chinese publicly listed firms from 2009 to 2015 confirms the argument and shows that sharing a common director on the board with a previous CSR reporter facilitates the firm’s engagement in CSR reporting. Furthermore, this study shows that the influence of board interlocks on CSR reporting depends on the following three characteristics: status of the interlocking director, size of the linked CSR reporter and performance implications of previous CSR activities.

The interpretation of the current findings should be considered in light of these limitations. First, while board interlocks are an important social aspect of institutional pressure, other types of social pressure exist. Second, the focus is on CSR reporting decisions. However, CSR reporting can also be symbolic, with little substantive quality to improve CSR-related activities. Third, this study argues that both regulatory and social pressures influence the decision to report on CSR. However, this study was unable to determine the weight of each pressure. Future research should follow this direction. Finally, the influence of certain behaviours through interlocks is stronger in the initial stage of the institutionalisation process.

The findings of this study have important implications for practitioners. First, the messaging role of interlocking directors suggests that director selection should consider the effectiveness of information transfer. Knowing and analysing specific interlock and its links with the firm’s strategy is very important. Meanwhile, firms should be vigilant that the balance between the access to information and loss of autonomy because searching for information related to firms’ strategic decisions might challenge current strategy. Second, the results of the study suggest that to effectively urge companies to engage in CSR reporting, government and policy makers should consider beyond institutional pressure, but also be sensitive to the social pressure exerted upon the companies.

The positive role of board interlocks on corporate voluntary CSR reporting can not only make valuable contributions to the Chinese society but also, as an important participant of global economy and trade, the Chinese interlocking directors’ contribution to CSR reporting have global benefits.

This study extends the institutional perspective on CSR reporting by uncovering the effect of social pressure. It advances the literature on the antecedents of CSR reporting by linking board interlocks to CSR reporting. Finally, the study enriches the broader interlock literature by delineating three specific characteristics of interlocks that influence CSR reporting.

The purpose of this paper is to explore the impact on communication of changes in an accounting standard arising from the transition to International Financial Reporting Standards. It investigates inter and intragroup differences in measured connotative meaning of the old and new definitions of “cash”, as held by three key groups of parties to the accounting communication process (preparers, auditors and users); and determines the effect of changes in connotative meaning on decision behaviour (outcomes).

The study adopted a between‐participants 2×3 factorial design whereby the first factor reflected the definition type: old vs new definition of the concept “cash”; while the second reflected three financial reporting groups: preparers, auditors and users. The semantic differential technique developed by Osgood, Suci and Tannenbaum was used to measure connotative meaning.

The study finds that the three financial reporting groups do not share the same meaning of the concept “cash” and that the introduction of the new definition has changed the interpreted connotative meaning for these three groups. A link between measured meaning and the decisions made by the participants was also established.

The explanatory power of the typical three (evaluative, potency and activity) factor structure should be acknowledged; these factors typically explain 50 per cent of the total phenomena known as “meaning”. The study's findings make an important contribution to the earnings management and creative accounting literature.

The findings are particularly relevant to standard‐setters and regulators as a lack of shared meaning may lead to unnecessary misunderstandings and tensions among the many parties to the reporting process.

The study extends prior measurement of meaning studies in accounting through first, the inclusion of all three major groups of parties to the accounting communication process; second, examination of an accounting concept which is defined differently by two accounting standards in the same jurisdiction; and last, investigation of the impact on decision behaviour (outcomes) resulting from changes in meaning brought about through the introduction of a new standard across the three groups.

The dangers of management bias and the resulting increased need for auditors to be cognizant of environmental characteristics may be particularly acute in the area of accounting estimates. Accounting estimates pose relatively unique auditing problems because it is an area where management has significant discretion (to set estimates) and there is limited ability to apply traditional accounting controls. Thus auditors have difficulty obtaining conclusive evidence to challenge management′s estimates. Research examining auditors′ accounting estimate judgments, however, has been scant, especially with regard to the relationship of auditors′ assessment of materiality and risks of fraudulent financial reporting. Reports the results of an empirical study examining the reporting decisions of audit seniors and audit managers related to a client′s decision to change four accounting estimates relative to the prior year. The auditor′s task was to review the changes and to indicate whether audit adjustments proposed by the audit staff were necessary to preserve an unqualified opinion. Three environmental red flags related to management lifestyle, bonus compensation programme and internal audit department strength were manipulated between subjects. The results indicated that the direct effect of the red flags on reporting decisions was limited. The findings provided greater support for an indirect model. In the indirect model, red flags affected auditors′ assessments of management intent, which, in turn, influenced auditors′ reporting decisions in combination with assessed materiality and level of auditor experience.

When reporting wrongdoing internally, whistleblowers are confronted with the dilemma of weighing up their loyalty toward the organization (e.g., ethical standards) and their co-workers (e.g., the social norm of not snitching on peers). However, the role played by peers in the whistleblowing decision process and in the aftermath has rarely been addressed in existing reviews. We therefore perform a systematic review that identifies seven thematic clusters of peer factors, offering researchers an informative overview of (a) the peer factors that have been examined to influence the whistleblowing decision, and (b) the extent to which the whistleblower experiences adverse consequences from peers in the aftermath of whistleblowing. As peer factors seem to be important to explain and predict internal whistleblowing, researchers are encouraged to address in future works the research gaps our review unraveled.