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Richard C. Hatfield

The evaluation of evidence is a key component of the tax research task. This study adds to the current literature regarding evidence evaluation and confirmation bias in…

Abstract

The evaluation of evidence is a key component of the tax research task. This study adds to the current literature regarding evidence evaluation and confirmation bias in the accounting profession. Previous studies have suggested that tax professionals prefer evidence that confirms their initial opinion, which is consistent with the findings in the psychology literature. This study considers the effects of the tax professional's environment in which these decisions are made. First, staff accountants responsible for finding and evaluating evidence are directly accountable to a supervising accountant. Second, client advocacy is prevalent in all decisions in public accounting. Client advocacy results in a preference for the client-favorable position. Staff accountant subjects in this study were found to be affected by the opinions of their supervisors. However, this effect was moderated by the preference for the client-favorable position. Subjects in an evidence evaluation task confirmed their supervisor's opinions (going against their own initial opinions) only when the opinion was the client-favorable position. When the supervisor's opinion was not client-favorable, accountants confirmed their own initial opinions (going against their supervisors' opinions). These findings supplement the findings of previous studies by determining how contextual factors such as accountability and client advocacy affect the influence of confirmation bias in an evidence evaluation task.

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Advances in Taxation
Type: Book
ISBN: 978-0-76230-670-1

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Donna Bobek and Richard C. Hatfield

The purpose of this study was to identify how individuals form fairness judgments about a tax system and what factors they attend to when comparing the fairness of a flat…

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The purpose of this study was to identify how individuals form fairness judgments about a tax system and what factors they attend to when comparing the fairness of a flat tax system with the current tax system. Based on equity theory and prior tax research the complexity of the tax system, the policy objectives achieved by the tax system and the financial effect of the tax system were hypothesized to influence individuals' fairness judgments. Further, the function served by an individual's attitude toward the tax system was expected to further explain when, self-interest would be particularly salient.The study's hypotheses were tested using the responses to a questionnaire sent to a cross-section of U.S. citizens. The study participants compared the current federal tax system with a flat tax system that differed from the current system on three dimensions. The alternative system was less complex than the current tax system, it achieved different policy objectives than the current system and the personal tax liability of the participants differed between the two systems. Regression analysis was used to assess the relative influences on the respondents' fairness judgments. Respondents' comparative fairness judgments were influenced by their judgments regarding economic goals achieved by each tax system, unjustified complexity, and, especially, self-interest.

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Advances in Taxation
Type: Book
ISBN: 978-0-76230-774-6

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Donna D. Bobek, Richard C. Hatfield and Sandra S. Kramer

As with most professional service occupations, liability claims are a major concern for accounting professionals. Most of the academic research on accountants 

Abstract

As with most professional service occupations, liability claims are a major concern for accounting professionals. Most of the academic research on accountants’ professional liability has focused on audit services. This study extends research on accountants’ professional liability by examining liability claims arising from the provision of tax services. In addition to a descriptive analysis, the current study explores the role of merit in tax malpractice litigation. Hypotheses are developed based on the legal construct of claim merit, which requires the presence of accountant error and damages as a result of that error for a claim to be considered meritorious. The hypotheses are tested using logistic and OLS regression of 89 actual claims filed with an insurer of tax professionals. The results suggest that the components of merit are significant in determining both the presence of compensatory payments to the client and the dollar amount of those payments, although the hypothesized interaction effect is only significant for the dollar amount of compensatory payments.

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Advances in Taxation
Type: Book
ISBN: 978-0-76231-134-7

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Donna D Bobek and Richard C Hatfield

Prior research has identified a number of variables that influence tax professionals’ judgments. However, these variables have usually been examined in isolation. This…

Abstract

Prior research has identified a number of variables that influence tax professionals’ judgments. However, these variables have usually been examined in isolation. This study has two main findings. First, using a structured questionnaire that allows for the collection of variables related to actual tax planning engagements, this study validates the findings of numerous laboratory studies using factor and regression analysis. Factors representing risks and rewards associated with the client and the IRS, along with task characteristics and client aggressiveness significantly affect the aggressiveness of tax advice given to clients. Second, tax professionals do not appear to charge a premium for aggressive tax advice. However, regarding the fee charged, a significant gender effect is found even after controlling for time spent on the engagement, experience, firm size and education.

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-280-1

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Advances in Taxation
Type: Book
ISBN: 978-0-76230-670-1

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Advances in Taxation
Type: Book
ISBN: 978-1-84950-158-3

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Advances in Taxation
Type: Book
ISBN: 978-0-76230-774-6

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Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-280-1

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Book part

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Advances in Taxation
Type: Book
ISBN: 978-0-76231-134-7

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Abstract

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Advances in Taxation
Type: Book
ISBN: 978-0-76231-134-7

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