This study examines the effects of incentive compensation and guanxi, a type of informal personal relationship between people, on the objectivity of Chinese internal…
This study examines the effects of incentive compensation and guanxi, a type of informal personal relationship between people, on the objectivity of Chinese internal auditors. Given that the objectivity of internal auditors is essential for promoting financial reporting quality, it is important to investigate the effectiveness of internal audit functions, especially in emerging markets where the corporate governance mechanisms designed to promote objectivity are less mature.
The research employs a 2 × 2 between participants experiment with 116 graduate accounting student participants.
After controlling for internal auditors’ ethicality, we find that close-guanxi between management and internal auditors and incentive compensation in the form of bonuses based upon meeting earnings targets both have the capacity to impair the objectivity of Chinese internal auditors. Participants were more tolerant of management’s attempts to manage earnings when there was close guanxi or bonus compensation. Further, compensation structure only influenced internal auditors’ support of management when guanxi was distant, but when there was close guanxi between internal auditors and management, internal auditors were unlikely to challenge management regardless of the compensation structure.
Organizations regularly use budgets as benchmarks for performance, and budgets represent a key control feature for almost every organization (Brown and Solomon (1993))…
Organizations regularly use budgets as benchmarks for performance, and budgets represent a key control feature for almost every organization (Brown and Solomon (1993)). Research has demonstrated that outcome effects are pervasive in performance evaluation processes, and that performance evaluators do not interpret situational information consistently. An experiment is conducted to examine the effects of situational information on managers’ performance and ability attributions under conditions of favorable and unfavorable financial outcomes. The findings indicate that when financial outcomes are unfavorable, outcome effects dominate the performance evaluation process, and situational information has little effect on performance evaluations. The results of cognitive load manipulations indicate that situational information is not ignored, but rather discounted when financial outcomes are favorable.
This study employs multiple measures of schema acquisition and analyzes subjects' problem-solving error patterns in order to investigate schema acquisition by decision aid…
This study employs multiple measures of schema acquisition and analyzes subjects' problem-solving error patterns in order to investigate schema acquisition by decision aid users. Results of both the error analysis and multiple schema acquisition measures indicate that: (1) problems of ordered complexity can effectively capture differences in schema acquisition of decision aid users; and (2) problem solvers rely on incorrect simple schemata to solve problems when they have not acquired the complex schemata necessary to solve a problem. The results also provide additional support for prior findings that problem-solving schemata are acquired in a linear order flowing from computationally simple problems to more complex problems, and that cognitive load interferes with the acquisition of schemata from decision aids.
While collegiality is often discussed and touted as a critical aspect of academia, there is little research that empirically examines collegiality in university business…
While collegiality is often discussed and touted as a critical aspect of academia, there is little research that empirically examines collegiality in university business schools. One cause of the paucity of research is the lack of a reliable scale to measure collegiality (Sabharwal, 2011). The purpose of this paper is to develop a scale that measures collegiality at the departmental level for university faculty, and then uses it to understand the implications of collegiality within an academic department within a business school.
The present study uses a scale development process consisting of: defining the domain of the construct; item generation; and psychometric assessment of the scale’s reliability and validity. Items were adapted for a university business school context from Shah (2011) and Seigel and Miner-Rubino (2009). The scale was administrated using a convenience non-random sample design drawn from active marketing and entrepreneurship academics who subscribe to the American Marketing Association’s ELMAR and the Academy of Management’s ENTRE list-serves.
The faculty collegiality scale (FCS) was found to exhibit sound psychometric properties in this study. The study found that assessments of department-level collegiality are associated with budgets, performance evaluation processes, and workload allocations. In addition, factors from the FCS mediate the relationships between institutional variables and work satisfaction, which indicate that collegiality is an important determinant of work satisfaction in a contemporary university environment.
The FCS developed in the present study offers business school academics and administrators a glimpse into the dimensions of what the marketing and entrepreneurship academics perceive makes a good colleague – one that provides professional and social support and is trustworthy; does not engage in politics, positioning, or rent-seeking to advantage their own situation; and that contributes to the well-being of the students, the department, the discipline and the university. In addition, the present study found that the FCS was related to budgets, performance evaluation processes, and faculty workloads.
We investigate auditor objectivity as it relates to engagement quality reviews by examining whether engagement quality reviewers (EQRs) exhibit lower levels of objectivity…
We investigate auditor objectivity as it relates to engagement quality reviews by examining whether engagement quality reviewers (EQRs) exhibit lower levels of objectivity when they have administrative, economic, or social ties with the audit engagement partner. Motivated reasoning theory suggests that EQRs with ties to the engagement partner will reach less conservative conclusions and be more willing to accept an engagement partner's decision relative to reviewers who have no connections with the engagement partner. We conduct an experiment where EQRs must review a decision by an engagement partner related to a contingent liability.
Results suggest that engagement quality reviews are an effective mechanism for reducing the effects of engagement partner biases to accept client-favored accounting choices. Participants with ties to the engagement partner (i.e., from the same office) and without ties (i.e., from the national office) both challenged the decision of the engagement partner and recommended disclosure of a contingent liability, which client management opposed. We also find an interaction of ties with the engagement partner and the probability of the contingent liability. National office EQRs were less likely to decide that disclosure was necessary than were local office partners when the probability of the contingent liability was low. With regard to the need to recognize a liability, EQRs with and without ties to the engagement partner concurred with the decision of the engagement partner.
This research provides accounting-ethics authors and administrators with a benchmark for accounting-ethics research. While Bernardi and Bean (2010) considered publications…
This research provides accounting-ethics authors and administrators with a benchmark for accounting-ethics research. While Bernardi and Bean (2010) considered publications in business-ethics and accounting’s top-40 journals this study considers research in eight accounting-ethics and public-interest journals, as well as, 34 business-ethics journals. We analyzed the contents of our 42 journals for the 25-year period between 1991 through 2015. This research documents the continued growth (Bernardi & Bean, 2007) of accounting-ethics research in both accounting-ethics and business-ethics journals. We provide data on the top-10 ethics authors in each doctoral year group, the top-50 ethics authors over the most recent 10, 20, and 25 years, and a distribution among ethics scholars for these periods. For the 25-year timeframe, our data indicate that only 665 (274) of the 5,125 accounting PhDs/DBAs (13.0% and 5.4% respectively) in Canada and the United States had authored or co-authored one (more than one) ethics article.