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Separate and explicit assessment of fraud risk, as required by the Statement on Auditing Standards No. 82, will spur auditors to pay more attention to fraud cues and audit planning decisions. This was gleaned from the results of an experiment involving 108 auditors from two major auditing firms, wherein they were required to document risk assessments and audit planning judgments. The study sought to examine whether SAS No. 82 will lead auditors to spend more time reading signs of falsity in financial statements and to design audit plans that are more sensitive to fraud risk. Results revealed that SAS No. 82 can focus auditors' attention to fraud cues and lead to increases in hours spent for high- and low-fraud risk cases. However, SAS No. 82 was not found to have any effect on the nature of audit plans.

We provide a list of points to consider ( PTCs) to help researchers self-assess whether they have addressed certain common issues that arise frequently in accounting research seminars and in reviewers' and editors' comments on papers submitted to journals. Anticipating and addressing such issues can help accounting researchers, especially doctoral students and junior faculty members, convert an initial empirical accounting research idea into a thoughtful and carefully designed study. Doing this also allows outside readers to provide more beneficial feedback rather than commenting on the common issues that could have been dealt with in advance. The list, provided in the appendix, consists of five sections: Research Question; Theory; Contribution; Research Design and Analysis; and Interpretation of Results and Conclusions. In each section, we include critical items that readers, journal referees, and seminar participants are likely to raise and offer suggestions for how to address them. The text elaborates on some of the more challenging items, such as how to increase a study's contribution, and provides examples of how such issues have been effectively addressed in previous accounting studies. [ABSTRACT FROM AUTHOR]

Conventional economics assumes workers provide the same effort under penalty contracts and economically equivalent bonus contracts. However, prior research finds that although workers prefer bonus contracts, they provide more effort under penalty contracts. Given these findings, the prevalence of bonus contracts in practice is puzzling. If penalty contracts yield more worker effort, why would employers not use them more often? We conduct experimental labor markets to test whether the prior finding of more effort under penalty contracts than bonus contracts (i.e., the contract frame effect) persists when workers can choose their contract and know that their employer intentionally offered the contract they choose. As predicted, these features of labor markets eliminate the difference in effort between penalty and bonus contracts reported in prior studies. This finding suggests employers may use bonus contracts more often than penalty contracts because they can offer the contract most workers prefer without sacrificing worker effort. [ABSTRACT FROM AUTHOR]

Les travaux antérieurs qui ont porté sur la formulation d'hypothèses démontrent que les verificateurs ont tendance, dans la formulation de leurs hypotheses initiales, a attribuer les fluctuations imprévues aux erreurs qui se produisent fréquemment dans les états Financiers. L'on ne s'interroge cependant pas, dans ces travaux, sur la nature de Fin- cidence des l'hypothèses initiales sur la performance subsequente dans le diagnostic de l'er- reur véritable. Les auteurs avancent que l'hypothèse formuleé au départ et la capacité des vérificateurs de passer par la suite à une hypothèse différente interferent. Si, par exemple, l'hypothèse initiale était inexacte, il serait difficile pour les vérificateurs de changer d'hy- pothèse dans le diagnostic de l'erreur véritable. Plus encore, le fait d'invoquer initialement une erreur fréquente exacerberait cette difficulté. L'on a demandé aux vérificateurs-sujets de produire une hypothèse initiale relative à l'erreur aprés avoir pris connaissance d'un modèle de fluctuations dans lequel les ventes et les comptes clients étaient surévalués. Une fois formulée leur hypothèse initiale, la moitié des sujets recevaient de l'information supplémentaire r&ecute;vélant I'existence d'une erreur très fréquente (dans la démarcation des ventes) et l'autre moitié recevaient de Pinformation révélant I'existence d'une erreur peu fréquente (celle de la double comptabilisation d'une même vente). Conformement a leurs prévisions, les auteurs constatent que le fait, pour les vérificateurs, d'invoquer initialement [ABSTRACT FROM AUTHOR]

Previous analyses of the demand for accounting information include a decision facilitating and decision influencing demand. This paper investigates whether, In addition to these two demands, there is an additional accountability demand for information. An experiment was conducted with owner-subjects and manager-subjects to determine which of two internal control systems the owner-subjects would choose. The two systems differed both in their cash payoffs to the owners and in the degree to which they held the managers accountable. The results were consistent with the hypothesis that many individuals value ace countability beyond what it may contribute to their wealth, and suggest that the standard decision facilitating and decision Influencing roles of accounting information in economic models may not be sufficient to describe actual behavior In certain contexts. [ABSTRACT FROM AUTHOR]

Presents the Great Expectations case designed to help students understand the pressure inherent in the practice of public accounting. Securities and Exchange Commission (SEC) proceedings as bases; Ambiguities in both financial and auditing standards; New equity resulting from a new company and a new product.

Determines the categories used by auditors when they organize financial statement errors. Experience-related differences in the organization of auditors' knowledge bases; Participants in a card-sorting task; Influence on the task of audit planning and testing procedures.

Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, says that firms should recognize a deferred tax asset associated with deductible temporary differences to the extent that realization of the asset is expected. SFAS 109 adopts an "Impairment" approach to estimating the amount of net deferred tax asset to be recorded; i.e., one should start with the full potential asset amount and then adjust downward as negative evidence concerning realizability warrants. SFAS 109 also describes an alternative "Affirmative" approach under which one would start at zero and then adjust the deferred tax asset upward as positive evidence about realizability warrants. Although SFAS 109 requires the "Impairment" approach, it also asserts that both the Impairment approach and the Affirmative approach would lead to the same deferred tax asset amount if a "more likely than not" realization criterion is employed. However, prior research in psychology and accounting found that different starting points can affect individuals' judgments because of the psychological phenomenon of anchoring and (insufficient) adjustment. The anchoring and (insufficient) adjustment phenomenon suggests that the Impairment approach would lead to recording larger deferred tax asset values than the Affirmative approach. This paper reports results of an empirical test of whether this anchoring and adjustment prediction is correct or whether the FASB's assertion is correct. We provided different groups of practicing auditors with experimental cases that differed only in the approach (Impairment or Affirmative) used to judge the appropriate deferred tax asset amount to report on a hypothetical firm's balance sheet. Statistical analysis of the auditors' judgments shows that, consistent with the anchoring and adjustment expectation, the Impairment approach of SFAS 109 leads auditors to record larger amounts of deferred tax assets than the Affirmative approach. [ABSTRACT FROM AUTHOR]