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Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper discusses the role of process evidence in accounting research. We define process evidence broadly as data providing insight into how and why cause-effect relationships occur, and we provide a framework to guide the provision and evaluation of process evidence in accounting studies. Our definition allows for an expanded understanding of techniques for gathering process evidence. The framework highlights the importance of the study's goals and theory in choosing how to provide process evidence, as well as how much process evidence to provide. The paper also outlines the strengths and limitations of three approaches to providing process evidence: mediation, moderation, and multiple-study-based designs. We provide recommendations for best practices for each approach to minimize threats to validity and maximize the value of process evidence. [ABSTRACT FROM AUTHOR]

Prior research indicates that analysts do not fully adjust for the general downward bias in earnings guidance issued by management. We report the results of two experiments designed to investigate how guidance track record and analysts’ incentives jointly explain the extent to which analysts adjust for guidance bias. Our results suggest that analysts with accuracy incentives adjust for management’s track record of downwardly biased guidance when the bias is relatively small (one cent), but those with relationship incentives do not. Furthermore, the difference in adjustment is larger when the bias track record is inconsistent than when it is consistent. Also, when guidance bias is larger (two cents) relative to smaller (one cent), analysts with relationship incentives partially adjust, as they appear to strike a balance between accuracy and their desire to please management. These findings hold implications for investors, regulators, and the interpretation of prior research. [ABSTRACT FROM AUTHOR]

A retraction of the article "Recognition v. Disclosure, Auditor Tolerance for Misstatement, and the Reliability of Stock-Compensation and Lease Information" is presented.

This paper reports an experiment demonstrating that MBA students overrely on old earnings performance when predicting future earnings performance in a laboratory setting. In the experiment, MBA students relied too heavily on old annual ROE information to predict future annual ROE. The experiment shows how a common cognitive error (overreliance on unreliable information) interacts with the structure of the earnings time series to create particular patterns of prediction errors. The results also suggest directions for research on two well-known anomalies, long-run overreactions (De Bondt and Thaler 1985, 1987) and post-earnings-announcement drift (Bernard and Thomas 1990). [ABSTRACT FROM AUTHOR]

This article presents findings of the authors study designed to determine whether results of prior studies of the determinants of audit expertise generalize to measures of actual performance. The authors provide an overview of previous studies of the determinants of audit expertise. The study showed that at the staff level, auditors with superior performance evaluations were distinguished by their technical knowledge while seniors with superior performance evaluations were distinguished by both technical knowledge and problem-solving abilities. The study also indicated that significant learning of tacit managerial knowledge occurs between the experienced staff and senior levels. The authors conclude that the results of the study have practical implications for the education and selection of entry-level auditors, as well as performance evaluation and retention/promotion decisions.

Using the same questions as Libby and Rennekamp (2015), we survey 110 experienced managers to examine their beliefs about the relationship between self-serving attribution bias, overconfidence, and management's issuance of earnings forecasts. As in Libby and Rennekamp (2015), we find that participants agree that, in general, managers are overconfident. They also agree that other managers likely overestimate the extent to which they contribute to positive firm performance, and that both optimism about the firm's future performance, as well as managers' confidence in their ability to predict future performance, increase the likelihood that earnings forecasts are provided. Finally, participants agree that providing earnings forecasts amplifies the costs of negative outcomes and the benefits of positive outcomes, consistent with the experimental assumption in Libby and Rennekamp (2012). These findings suggest that the experimental findings in Libby and Rennekamp (2012) match experienced managers' beliefs about how real-world earnings forecast decisions are made. [ABSTRACT FROM AUTHOR]