Papers

Question 1

What is the paper from Nelson & Kinney (1997) about?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 1

The paper is about the effect of ambiguity on loss contingency reporting judgments.

Question 2

What is the result of ambiguity and a large chance of loss contingency on our assessment?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 2

We assess the chance of loss contingency as smaller (conservative)

Question 3

What is the result of ambiguity and a small chance of loss contingency on our assessment?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 3

We asses the chance of loss contingency as larger.

Question 4

What is loss contingency?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 4

a situation where there’s a reasonable chance that an asset has lost value or that a liability has been incurred.

Question 5

When must auditors report loss contingency?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 5

When loss of material amount is probable.

Question 6

The higher the ambiguity, the … the doubt

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 6

The higher the ambiguity, the higher the doubt.

Question 7

What is the paper from Brink & Raking 2013 (WK2) about?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Answer 7

The paper is about the effect of risk preferences and loss aversion on individual behavior under bonus, penalty, clawback and combined contract frames.

Question 8

What is the reason that people prefer differently framed, yet economically equivalent, incentive contract?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Answer 8

People have different preferences due to risk preferences and loss aversion.

Question 9

What is the order of preferences of incentive contract?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Answer 9

Bonus only –> bonus or penalty –> combination bonus & penalty –> Clawback

Question 10

What is the take away from the paper of Brink & Ranking 2013 about effect of risk preference and loss aversion on individual behavior under bonus, penalty, clawback and combined contract frames.

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Answer 10

Take away is to be wary of framing. The same contract can be experienced very different based on the way it is presented.

Question 11

What did Brink & Raking 2013 research?

Brink & Ranking 2013 (WK2)
The effects of risk preference and loss aversion on individual behavior under bonus, penalty, and combined contract frames.

Answer 11

Researched if individuals prefer differently framed, yet economically equivalent, incentive contracts.

Question 12

What is the paper from Rose et al. 2022 (WK3) about?

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

Answer 12

The paper is about effects of uncertainty visualization on attention, arousal and judgments.

Question 13

What do the researchers from Rose et al. 2022 (WK3) test?

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

Answer 13

The researchers test if different visualizations of information can influence judgments in the context of uncertainty of estimations.

Question 14

What is the key take away from Rose et al. 2022 (WK3)

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

Answer 14

Information that is more uncertain, should be relied upon less. Sometimes decision makers fail to account for uncertainty. Visualizations of uncertainty can improve judgment quality through attention and arousal.

Question 15

What is the paper from Joyce & Biddle 1981 (WK3) about?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Answer 15

Paper is about anchoring and adjustment in probabilistic inference accounting

Question 16

What does the paper Joyce & Biddle 1981 (WK3) research?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Answer 16

Anchoring and adjustment heuristics were known prior, but assumed to not influence professionals. Article applies known knowledge in a professional setting, and tests for cognitive biases.

Question 17

What are the results regarding anchoring?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Answer 17

Strong then weak –> more substantive tests
Weak then strong – > less substantive tests

Strong then weak shows bigger differences then weak then strong.

Question 18

What is the reason for the differences in strong vs weak system first?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Answer 18

Reason for difference is due to anchoring, with strong then weak order the weak becomes more noticeable.

Question 19

What is the result for the conjunctive event bias?

Joyce & Biddle 1981 (WK3)
Anchoring and adjustment in probabilistic inference in auditing

Answer 19

Conjunctive formulation –> higher chance
Disjunctive formulation –> lower chance.

Its about chance of auditor giving going concern statement.

Question 20

What is the paper from Chan & Thornock 2022 (WK4) about?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 20

The paper is about the impact of holistic vs disaggregated performance systems on supervisors’ subjective evaluation in a promotion setting.

Question 21

What two reasons might there be for a manager to give a better evaluations to a subordinate they want to promote?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 21

1. unconsciously (confirmation bias)
2. strategic choice (motivated reasoning)

Question 22

Under which system is it easier to bias performance evaluation?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 22

More holistic system

Question 23

Why is it harder to bias performance evaluation under a disaggregated system?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 23

It is harder because holistic gives just one score, disaggregation gives multiple. Harder to inflate performance with disaggregated, because manager needs to give arguments for every aspect.

Question 24

What does promotion + holistic system result in?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 24

Higher evaluation from manager

Question 25

What does promotion + disaggregated system result in ?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 25

Fairer evaluation compared to holistic.

Question 26

What is the paper from Hribar & Yang 2016 (WK4) about?

Hribar & Yang 2016 (WK4)
CEO overconfidence and management forecasting

Answer 26

The paper is about CEO overconfidence and management forecasting.

Question 27

What 3 relations are found between CEO overconfidence and management forecasting?

Hribar & Yang 2016 (WK4)
CEO overconfidence and management forecasting

Answer 27

Positive relation: overconfidence & likelihood issue
Positive relation: overconfidence & optimism in range
Negative relation: overconfidence & width of range

Question 28

What does overconfidence result in for likelihood, optimism, and width?

Hribar & Yang 2016 (WK4)
CEO overconfidence and management forecasting

Answer 28

Overconfidence leads to a higher likelihood of issuing a management earnings forecast, more optimism in the forecasts, and a narrower width of the range in the forecast.

Question 29

What does the paper of Hannan et al. 2012 (WK5) test?

Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 29

The paper tests how relative performance information (RPI) affects employee performance and allocation of effort across tasks in a multi-task environment.

Question 30

How is the study set up in Hannan et al. 2012 (wk5)?

Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 30

The respondents have to complete tasks (RPI measure) divided in two disciplines. One groups gets a 50/50 time allocation and the other group is free to allocate their time.

Question 31

What are the results regarding RPI and performance?

Hannan et al. 2012 (WK5)
Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 31

Private RPI leads to an increase in performance over no RPI, public RPI to an even bigger increase.

Question 32

What is are the results regarding RPI and time allocation?

Hannan et al. 2012 (WK5)
Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 32

With no RPI people allocate their time 50/50, with private RPI there is a shift, with public RPI an even bigger shift.

The shift can be suboptimal from a company perspective.

Question 33

What is the reason that RPI has an effect?

Hannan et al. 2012 (WK5)
Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 33

Social comparison process

Question 34

What is an implication for accountants regarding RPI?

Hannan et al. 2012 (WK5)
Title: The effect of relative performance information on performance and effort allocation in a multitask environment.

Answer 34

If the firm is able to control how employees allocate their efforts across tasks, RPI is likely to increase performance.

Question 35

What does this paper examine?

Koonce et al. 2015 (WK5)
Title: The effects of norms on investor reactions to derivative use.

Answer 35

This paper examines how investors react to a company’s use of derivatives for risk management in light of information and firm norms. The paper tests how much blame is put on management by investors (stock price measure) in the event of losses due to hedging.

Question 36

What are the results regarding hedging and norms?

Koonce et al. 2015 (WK5)
Title: The effects of norms on investor reactions to derivative use.

Answer 36

Deviating from the norm is punished more heavily by investors than not deviating in the event of losses. Deviation from industry norm is punished more strongly than deviation from firm norm.

Question 37

What is the justification given for investor blame with norms in the event of hedging?

Koonce et al. 2015 (WK5)
Title: The effects of norms on investor reactions to derivative use.

Answer 37

It’s harder to justify management decisions under deviation from the norm.

Question 38

What is an important lesson regarding norms?

Koonce et al. 2015 (WK5)
Title: The effects of norms on investor reactions to derivative use.

Answer 38

Deviating from the norm, means you will be punished more for this behavior than if you confirmed to the norm (in the event of losses).

Question 39

What is the paper about?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 39

Research is about managers’ belief regarding earnings management. SEC publishes egregious examples of EM to try to sway managers to not commit EM. Results of paper show this might not be effective.

Question 40

What was the study design?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 40

Two groups, choice and no choice

Divided further by egregious example, similar example and a unrelated example.

Question 41

What are the results regarding respondents who choose to commit EM?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 41

Respondents use the egregious example as a benchmark to rationalize their own, less severe, EM through advantageous comparison.

Question 42

What are the results regarding respondents who were not given a choice?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 42

Viewing the egregious example did not impact the no choice group’s perception of earnings management acceptibility.

Question 43

What are the results regarding the norms being changed?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 43

There is no support that publishing examples changes the norm of how acceptable EM is. However, managers may conclude that their own behavior was relatively appropriate by comparison

Question 44

What is required to use egregious examples of EM as a benchmark?

Brown 2014 (WK6)
Advantageous comparison and rationalization of earnings management.

Answer 44

The action of committing EM is required to use an egregious example as an excuse.

Question 45

What is this paper about?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 45

The paper is about honesty of managers’ budget reports when the financial benefit resulting from budgetary slack is shared by the manager and assistant, and if preferences of assistant has any impact.

Question 46

What is the research set up?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 46

There is a group that shares the benefits and a group that does not share. This group is further divided by assistant knowing or not knowing. Final divide is assistants preference for honesty or money from slack.

Question 47

What are the results for shared benefits?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 47

Shared benefits increase slack: when the benefits of slack are shared, managers create more slack, finding it easier to justify their actions.

Question 48

What are the results for assistant awareness?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 48

When assistants know about the slack, the amount of slack created is slightly lower.

Question 49

What are the results for assistants’ preferences?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 49

When assistant prefers money, managers are less honest (more slack)

When assistant prefers honesty, the manager is more honest (less slack)

Question 50

What leads to the highest slack condition?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 50

Highest slack condition: the greatest amount of slack occurs when benefits are shared and the assistant prefers monetary gain.

Question 51

What are the results regarding differences between users and auditors?

Nelson & Kinney 1997 (WK2)
The effects of ambiguity on loss contingency reporting judgments.

Answer 51

Financial statement users react more conservatively on average to ambiguity than auditors. They switch between conservative to unconservative at a greater probability.

Question 52

How can attention on uncertainty information be increased?

Rose et al. 2022 (WK3)
Effects of uncertainty visualization on attention, arousal, and judgment

Answer 52

Visualization of uncertainty information can increase attention on these items compared to textual depiction.

Question 53

What is the consideration that firms need to take into account regarding holistic vs disaggregated systems?

Chan & Thornock 2022 (WK4)
Disaggregated versus holistic performance evaluations in a promotion setting

Answer 53

Holistic nudges managers to promote candidate best suited for promotion, but disaggregated is fairer.

Question 54

What does the paper provide insights in?

Hribar & Yang 2016 (WK4)
CEO overconfidence and management forecasting

Answer 54

The study provides insights into why managers miss their own forecasts when the costs of failing to meet their own targets is so high.

Question 55

What is the effect on managers with shared slack?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 55

Shared benefits make slack more self-justifiable to the manager.

Question 56

What is the implication for organizations?

Paper Church et al. 2012 (WK6)
Shared interest and honesty in budget reporting

Answer 56

If organizations can build an ethical organization environment in which most employees live up to prosocial moral principles, it would be difficult for managers to justify potential opportunistic behavior.