Business Commons^™

Do Auditors’ Incentives Affect Materiality Assessments Of Prior-Period Misstatements?*, Brant E. Christensen, Roy Schmardebeck, Timothy Seidel

Faculty Publications

We examine whether auditors' incentives affect materiality assessments of prior-period misstatements. Interviews with global network firm partners reveal consistency across firms in the process used to assess prior-period misstatements and highlight points in the process where judgments are most susceptible to auditors’ conscious or subconscious biases. In related empirical tests, we find that auditors assess misstatements as less material (i.e., misstatements are disclosed less prominently) when auditors face greater engagement risk (comprised of the risk of litigation and reputation loss) or have greater incentives to please important clients. These effects only occur when auditor incentives to avoid further litigation or …

Fairness And Luck: Contract Away Or Come What May?, H. Scott Asay, Jace Garrett, William B. Tayler

Faculty Publications

In practice, managers and employees often enter into risky, uncertain contracts. Prior works shows that managers use ex post discretion to reduce the effect of uncontrollable “bad luck” on employees’ performance-based compensation, but do not use ex post discretion to reduce the effect of uncontrollable “good luck,” due to fairness concerns. We investigate whether ex ante, objective compensation plans can help address the fairness concerns that lead to this asymmetric treatment of uncontrollable events. We provide evidence that compensation plans that account for uncontrollable factors can reduce differences between individuals’ fairness perceptions in good and bad luck settings. However, controlling …

An Fmri Investigation Of The Neurocognitive Processing Of Measures And Strategic Objectives, Paul Black, C. Brock Kirwan, Thomas Meservy, William B. Tayler, Jeffrey O. Williams

Faculty Publications

A central feature of most organizations is the use of measures to represent key elements of performance across multiple strategic objectives. Prior research has demonstrated a tendency for individuals to treat these measures as though they are the higher-order strategic objectives the measures were intended to represent, as opposed to imperfect representations of those strategic objectives—a phenomenon labeled surrogation. We employ an experiment to further understand this phenomenon. In this study, we capture neural activation when processing measures and when processing strategic objectives. We find that differences in brain activity when processing measures and strategic objectives are similar to the …

Value And Purpose Of Management Education: Looking Back And Thinking Forward In Global Focus, Eric Cornuel, Howard Thomas, Matthew Wood

Research Collection Lee Kong Chian School Of Business

Without a doubt, business schools have been a success story in higher education over the last 50 years (the period of EFMD’s existence). Even so, they have come under scrutiny, and attack, over their academic legitimacy and value proposition for business and society. In this book, drawn from a special issue of Global Focus, the EFMD has selected around 25 of the best, most thoughtful short papers published in Global Focus to examine the role and purpose of EFMD in the evolution of management education. Each of the chapters interpret current strategic debates about the evolution of business schools and …

Accounting Academics Perceptions Of 12 Research Journals, F. Greg Burton, William G. Heninger, Scott L. Summers, David A. Wood

Faculty Publications

This paper reports perceptions of over 1,000 accounting faculty regarding 12 accounting journals (including the traditional Top 3/6), specifically in: (1) how open they are to diverse topic areas, (2) how open they are to diverse research methodologies, (3) how effectively they produce new and useful knowledge for academics, and (4) how effectively they produce new and useful knowledge for non-academic stakeholders. We find that the traditional Top 3/6 journals do not lead the academy along these four dimensions; in fact, some are viewed as the worst performers in these areas. Furthermore, we find that academics have a relatively poor …

Relevance Of Accounting Research (Roar): Ratings Of Abstracts By Accounting Professionals, F. Greg Burton, Scott L. Summers, T. Jeffrey Wilks, David A. Wood

Faculty Publications

The relevance of academic accounting research to practice has been frequently discussed in the accounting academy, yet very little data has been put forth in these discussions. We create relevance of accounting research (ROAR) scores by asking accounting professionals to read and evaluate the titles and abstracts of every article published in 12 leading accounting journals for the years 2016 to 2018, inclusive. These scores allow for an evidence-based evaluation and discussion of how academic accounting research is perceived by accounting professionals. The scores also allow us to identify the articles, authors, journals, and accounting topic areas that are perceived …

Perceptions Of Robotic Process Automation In Big 4 Public Accounting Firms: Do Firm Leaders And Lower-Level Employees Agree?, Lauren A. Cooper, D. Kip Holderness, Trevor L. Sorensen, David A. Wood

Faculty Publications

The use of Robotic Process Automation (RPA) is a recent innovation in the public accounting industry, and the Big 4 firms are at the forefront of its implementation. This paper examines how the adoption and use of RPA is affecting the perceived work experience of firm leaders and lower-level employees at Big 4 accounting firms. We interview 14 RPA leaders, survey 139 lower-level employees, and compare and contrast their responses. We find that the two groups generally agree that RPA is having a positive influence on the profession. Both groups believe that RPA is positively changing the work employees perform …

A Framework For Using Robotic Process Automation For Audit Tasks, Marc Eulerich, Justin Pawlowski, Nathan J. Waddoups, David A. Wood

Faculty Publications

The ability to automate tasks and processes using robotic process automation (RPA)—or the development of bots—is receiving significant attention in accounting. Auditors often struggle to know what tasks to automate and how to prioritize bot development. Drawing upon sociotechnical systems theory and using a design science methodology, we develop and validate a three-step evaluation framework to assist auditors as they decide what activities to automate. We validate this framework using interviews, surveys of experienced internal and external auditors, and two case studies. By developing and validating our framework through the lens of sociotechnical systems theory, we also provide several insights …

The Status Of Robotic Process Automation, Steven A. Harrast, David A. Wood

Faculty Publications

Modern information technology (IT) has greatly expanded the capability of companies to coordinate activities and process large numbers of transactions. Unfortunately, large companies often support thousands of individual applications, and the data necessary for financial reporting is scattered across these applications. As applications and data proliferate, companies must link together the applications and systems, often using spreadsheets and expending significant amounts of time in manual data entry and manipulation. This manual work is slow, expensive, and error prone and lacks useful business insights. Also, the employees who must perform these tasks are often overwhelmed and unsatisfied with the mundane work. …

Publication Benchmarking Data Based On Faculty Promoted At The Top 200 Worldwide Accounting Research Institutions, Jared S. Moon, Scott L. Summers, Nathan J. Waddoups, David A. Wood

Faculty Publications

The primary purpose of this paper is to update and extend past promotion benchmarking studies. We update prior benchmarking studies by providing publication benchmarking data for faculty promoted between 2013 and 2019, inclusive. We extend prior benchmarking studies by evaluating a larger number of institutions (the top 200 worldwide accounting institutions), using a more global journal list, and providing sensitivity analyses between journal lists. We group institutions based on rankings and report a possible minimum publication hurdle for each group in each journal category. In addition, we provide data on the mix, or percentage, of publications in each journal category …

Internal Auditors’ Role In Organizational Innovation: A Social Network Perspective, Margaret H. Christ, Anna Eulerich, Marc Eulerich, David A. Wood

Faculty Publications

Organizations use innovations to adapt, grow their business, and differentiate themselves from their competitors. However, innovations can introduce new risks to the organization that the internal audit function (IAF) should address. We interview and survey internal auditors about how they respond to innovations, such as the use of emerging technologies, adopted by their organizations. We find that social network theory provides a useful lens through which to interpret our interview results and to guide our survey development and analysis. In particular, we find that the embeddedness of the internal auditors with management, but not with the audit committee, is a …

Personalized Priority Policies In Call Centers Using Past Customer Interaction Information, Brett A. Hathaway, Seyed Morteza Emadi, Vinayak Deshpande

Faculty Publications

Companies are increasingly personalizing their product or service offerings based on their customers' history of interactions to increase revenue or improve customer service. In this paper we show how call centers can improve customer service by implementing personalized priority policies. Under personalized priority policies, managers use customer contact history to predict individual-level caller abandonment and redialing behavior and prioritize them based on these predictions to improve operational performance. We provide a framework for how companies can use individual-level customer history data to capture the idiosyncratic preferences and beliefs that impact caller abandonment and redialing behavior, and quantify the improvements to …

Earnings Virality*, Brett Campbell, Michael S. Drake, Jacob Thornock, Brady Twedt

Faculty Publications

We examine the determinants and market consequences associated with earnings announcements going viral on social media, a phenomenon we label “earnings virality.” Using a comprehensive panel of historical Twitter data, we find that the typical earnings announcement receives relatively little social media coverage, but others go viral on social media, quickly reaching the feeds of millions of people. We find that viral earnings announcements generally have Twitter content that is more extreme in tone and contains less unique content. Further, earnings virality is positively associated with revenue surprises, investor recognition, retail investor ownership, and retail investor trading around the announcement. …

Social Media Analysts And Sell‑Side Analyst Research, Michael S. Drake, James R. Moon Jr., Brady J. Twedt, James D. Warren

Faculty Publications

We examine how research posted by “social media analysts” (SMAs)—individuals posting equity research online via social media investment platforms—is related to research subsequently produced by professional sell-side equity analysts. Using data from Seeking Alpha, we find that the market reaction to sell-side analyst research is substantially reduced when the analyst research is preceded by the report of an SMA, and that this is particularly true of sell-side analysts’ earnings forecasts. We further find that this effect is more pronounced when SMA reports contain more decision-useful language, are produced by SMAs with greater expertise, and relate to firms with greater retail …

A Review Of Sensory Imagery For Consumer Psychology, Ryan S. Elder, Aradhna Krishna

Faculty Publications

his review of mental imagery research has the core objective of fostering more research on the topic of sensory imagery. The review is organized around a conceptual framework highlighting (a) how mental imagery is formed, (b) the elicitation and elaboration of mental imagery, (c) the multi-modal nature of sensory imagery, and (d) the consumer behavior consequences of mental imagery. This conceptual framework provides many new lenses through which researchers can view prior findings, and thereby motivates innovative new research ideas. Future research directions are provided in each section of the review, with additional unexplored opportunities presented in a final section

Seeking Stability: Consumer Motivations For Communal Nostalgia, Minju Han, George E. Newman

Research Collection Lee Kong Chian School Of Business

Existing research has examined why consumers are drawn to things from their past (personal nostalgia). However, little empirical work has examined why consumers prefer products that were never a part of their personal history (communal nostalgia). For example, a consumer may purchase vinyl records even though she grew up listening to mp3 files. Here, we find that one reason why consumers may be drawn to communal nostalgia is that it can provide a sense of social stability. Drawing on System Justification Theory (Jost & Banaji, British Journal of Social Psychology, 33, 1994 and 1-27), we demonstrate that perceived threats to …

A Simple Approach To Better Distinguish Real Earnings Manipulation From Strategy Changes, Theodore E. Christensen, Adrienna Huffman, Melissa F. Lewis-Western, Kristen Valentine

Faculty Publications

Researchers typically infer real earnings management when a firm’s operating and investing activities differ from industry norms. A significant problem with classifying deviations from industry averages as myopic earnings management is that companies can change their operating and investing decisions for strategic business reasons rather than to mislead stakeholders. Using principal components analysis, we systematically evaluate existing measures and develop a comprehensive real activities measure to better capture earnings manipulation. Our measure reflects (i) deviations from industry averages across multiple activities and (ii) other signals of manipulation. This approach is promising because, although there are many sources of abnormal activities, …

Students Coming Prepared To Class? A Review Of The Literature With A Call To Research, Melissa P. Larson, Jace Linnell

Faculty Publications

In this literature review, we show that little attention has been given to pre-class learning in a flipped classroom setting. To support learning, a flipped classroom shifts the learning of basic content from a classroom setting to a pre-class setting, thereby freeing up time within class for more active learning activities. Active learning activities support student-centered learning as peers collaborate with deep application of pre-class learning concepts. Thus, higher-order skills of critical thinking and lifelong learning, which are valued in the accounting education curriculum and profession, can be developed through a flipped classroom pedagogy. However, if pre-class learning is not …

Fool Me Once, Shame On You; Fool Me Twice, Shame On Me: The Long-Term Impact Of Arthur Andersen’S Demise On Partners’ Audit Quality*, Feng Guo, Ling Lei Lisic, Jeffrey Pittman, Timothy Seidel, Mi Zhou, Ying Zhou

Faculty Publications

Although recent evidence suggests that individual audit partners explain a substantial portion of the variation in audit quality proxies, much less is known about what determines an audit partner’s quality. Psychology and behavioral economics theories hold that an individual’s experiences can have enduring impacts on subsequent behavior. We examine whether auditors’ direct exposure to Arthur Andersen’s collapse has a long-term impact on the quality of their audits. Our evidence implies that audit partners who directly experienced Andersen’s demise impose stricter monitoring evident in their clients exhibiting a lower propensity for misstatements and small profits, and paying higher audit fees. Importantly, …

The Impact Of Managerial Discretion In Revenue Recognition: A Reexamination*, Linda A. Myers, Roy Schmardebeck, Timothy Seidel, Michael D. Stuart

Faculty Publications

Although the FASB and IASB conceptual frameworks identify relevance and faithful representation as the fundamental qualitative characteristics of useful information, prior research suggests that revenue recognition accounting standards that restrict managerial discretion resulted in improved faithful representation but reduced relevance. We use the adoption of Accounting Standards Update (ASU) 2009-13 and ASU 2009-14 to examine the effects of increased managerial discretion to accelerate revenue recognition in multiple-deliverable arrangements; that is, transactions where vendors sell multiple products or services that are delivered at different points in time. We find that increased discretion results in an increase in the relevance of reported …

Dark Social Influencer Engagement In Brand Communication, Jason Shi-Yang Lim, Claresta Si Ya Yeo, Weihui Leow, Xian Hui Ng, Augustine Pang

Research Collection Lee Kong Chian School Of Business

Increasingly, consumers are seeking immediate and personalized communication with businesses (Facebook, 2018) and organizations are expected to engage customers in a two-way dialogue. Engagement encapsulates “high relevance of brands to consumers and the development of an emotional connection between consumers and brands” (Rappaport, 2007, p. 138). Online engagement connotes commitment to a relationship, “personified by the website or other computer-mediated entities designed to communicate brand value” (Mollen & Wilson, 2010, p. 923). To engage consumers, businesses are turning to social media influencers (SMIs), who have their own social networks online (Khamis et al., 2016). Growing concerns over privacy and control …

Double Trouble? Irs’S Attention To Financial Accounting Restatements, Zackery D. Fox, Ryan Wilson

Faculty Publications

We examine whether the Internal Revenue Service (IRS) uses public information to obtain qualitative signals regarding the quality of firms’ financial information or management integrity. Using the procurement of public information as a proxy for IRS attention, we test whether public signals of poor information quality (restatements) lead to an increase in IRS attention. To begin, we document that the IRS is both more likely and quicker to acquire public filings announcing a restatement than any other filing of the firm. Furthermore, we examine instances in which the IRS is more likely to learn of a restatement and find an …

Discussion Of ‘The Effect Of Changes In Income Shifting On Affiliate Managers’ Internal Reporting Decisions, Zackery D. Fox, Ryan J. Wilson

Faculty Publications

Klassen and Valle Ruiz (hereafter KVR) investigate an interesting question that has not been explored in existing research. Specifically, they look at the effect of a change in income shifting strategy on affiliate managers’ internal reporting choices. The paper adds to a growing category of the tax accounting literature examining the consequences of multinational enterprises (MNEs) tax-motivated income shifting for various stakeholders. KVR turn their focus within the firm by testing whether distortions caused by tax-motivated income shifting alter affiliate managers’ internal reporting behavior.

Sending Children To Camp: An Analysis Of Decision-Making By Family Income, Dan Richmond, Camilla Hodge, Jim Sibthorp

Faculty Publications

Objectives: This study sought to (a) identify the factors most salient to parents when sending their child to summer camp, (b) examine family members’ roles in the camp decision-making process, and (c) compare both by income and other family contextual factors in a sample of parents with a child who enrolled and participated in a summer camp experience.

Methods: Survey data were collected from a total of 354 families that included families from high, middle, and lower incomes. Surveys collected data on parental developmental goals for their child, factors related to camp–child and camp–family fit, and the level of involvement …

Measuring Social Connectedness During Shared Leisure Activities Using Oxytocin: A Comparison Of Sampling Urine Versus Saliva, Karen K. Melton, Camilla Hodge, Madeline L. Haron, Maria Boccia

Faculty Publications

Leisure experiences are often associated with social connectedness. One measure of social connection underutilized in leisure studies is the neurohormone oxytocin. This methodological note considers issues researchers need to address when incorporating oxytocin in their study design. Noninvasive sources for sampling oxytocin include saliva and urine; however, the decision about which method to employ is not well documented. This study provides the first methodological note on collecting oxytocin in leisure studies and provides a comparison of urine vs. saliva measures for oxytocin in the context of leisure activities. Our findings indicate that urine samples are more sensitive to oxytocin change …

Free Public Lands Admission For Children And Spillovers In Family Recreation, Jocelyn S. Wikle, Camilla Hodge

Faculty Publications

This study evaluated the Every Kid in a Park program to understand recreation and the contextual interaction between family resources, race, and recreation costs in families with young children. Using a large, nationally representative data sample from the American Time Use Survey (N = 5,119), we analyzed changes over time in recreation patterns of different socioeconomic groups before and after the initiation of the Every Kid in a Park program of the United States National Park Service. We found that free admission corresponded with overall increased frequency of hiking with a child for individuals in affected households. Changes in hiking …

Challenges Of Ecological Momentary Assessments To Study Family Leisure: Participants’ Perspectives, Kelly D. Chandler, Camilla Hodge, Kara Mcelvaine, Ericka J. Olschewski, Karen K. Melton, Pascal Deboeck

Faculty Publications

Scholars have documented the research tradeoffs of using ecological momentary assessments (EMA) to study daily life. Less is known about participants’ perspectives. The aim of this research note was to delineate the challenges of participating in a 14-day EMA study of family leisure described by 41 individuals (mothers, fathers, and adolescents) from 14 families to inform future family leisure studies using EMA. Participants identified three potential challenges: repetitive questions, inconvenient signals, and short response windows. Despite these challenges, the majority of participants indicated that they would recommend a similar study to others. The reality that so many families feel squeezed …

Parent–Child Leisure And Parent Affect: The Role Of Family Structure, Camilla Hodge, Jocelyn Wikle

Faculty Publications

This study evaluates differences in parent–child leisure and parent affect across single- and two-parent families. The Ecology of Family Experiences framework suggests contextual factors such as family structure and the novelty of the activity environment contribute to heterogeneity in how parents experience leisure, partly because constraints may differ across family structures. Using a large, nationally representative data sample of parents from the American Time Use Survey (N = 78,353), this study shows single-parents experience leisure deficits compared to other parents, and leisure deficits are greatest in home-based leisure. Additionally, using a subsample (N = 16,214), we found that at-home leisure …

Ecology Of Family Experiences: Contextualizing Family Leisure For Human Development & Family Relations, Camilla Hodge, Kelly D. Chandler, Karen K. Melton, Kelly L. Hoke, Jennifer Blodgett

Faculty Publications

Research on family communication in the leisure context has been limited to retrospective survey reconstructions of perceptions of communication patterns. This study examines the validity of sociometric badges for measuring family communication in real-time. Seven families (married, two-parent families with at least one child ages 4–17 years) wore sociometric badges during a 30-minute leisure activity in a lab setting. We compared mean badge estimates of family communication duration to mean coded video data from the same 30-minute sessions. Intraclass correlation coefficients indicated sociometric badges are not as reliable as video-coded estimates of speech; however, among parents, non-significant mean comparisons partially …

Ecology Of Family Experiences: Contextualizing Family Leisure For Human Development & Family Relations, Karen K. Melton, Camilla Hodge, Mat D. Duerden

Faculty Publications

All family leisure is not equal. Yet, little is known about the mechanisms linking different types of family leisure to different human development and family relations outcomes. The Ecology of Family Experiences (EFE) framework provides a sensitizing lens for the study of the conditions under which family leisure is beneficial to individuals and families. Specifically, the framework suggests three domains—Family, Activity, and Time—iteratively interact to generate different levels of individual and family outcomes (i.e., responses, meaning, and development). The EFE necessitates research built on ecologically valid study designs that incorporate innovative measurement approaches. Scholars using such approaches can increase the …