D. Jordan Lowe

The expectation gap: perceptual differences between auditors, jurors and students

The expectation gap has been presumed to be caused by the differing perceptions of the accounting profession and third parties regarding the profession’s role, responsibilities, and related performance. Prior research regarding the expectation gap has focused on diverging perceptions of different groups (i.e. financial analysts, bank loan officers, small business owners, and auditors). While this research has identified an expectation gap between auditors and certain third parties, it has neglected examining the perceptions of judicial third parties. This absence is somewhat ironic given the role that jurors and judges play in determining auditors’ legal liability. This void is filled by comparing jurors’, auditors’, and accounting students’ attitudes towards the accounting profession. Results reveal a large divergence in perceptions of auditors and jurors regarding their expectations of the accounting profession. However, accounting students responded in a manner very similar to practicing auditors.

An Investigation of Factors Influencing the Use of Computer-Related Audit Procedures

ABSTRACT: We provide data on the extent to which computer‐related audit procedures are used and whether two factors, control risk assessment and audit firm size, influence computer‐related audit pr...

The Influence of Gender, Ethnicity, and Individual Differences on Perceptions of Career Progression in Public Accounting

Prior research examining gender and diversity issues has generally lacked supporting theory and experimental investigation. This study provides theory-based experimental evidence regarding the effects of gender, ethnicity, and other individual differences on performance evaluations of audit seniors. We utilized organizational socialization theory in examining the accounting professions view of diversity issues. The process model of performance evaluation provided guidance in the selection of ratee, rater, and contextual characteristics as factors to analyze. An experiment was conducted with 95 audit seniors from one of the Big 5 public accounting firms. Results indicate that gender and ethnic heritage are important factors in the career prospects of audit seniors. The demeanor of an auditor was also important as an interactive factor and influences judgments differently depending on the gender or ethnic origin of the auditor evaluated. These results suggest that diversity is a very complex issue. Examining single factors without considering the interactions of a variety of factors may lead to incorrect conclusions.

Factors that affect accountant's perceptions of alternative work arrangements

Abstract Advances in technology have impacted accounting careers with resulting changes in where, when and how accountants perform their job duties. In addition, employee attitudes towards, and need for, better work/life balance has led to more firms offering alternate work arrangements (AWA). Research suggests that AWA programs can lead to many benefits for both employers and employees. Despite the prevalence of these programs there are relatively few accountants working under these arrangements and concerns about work/life balance continue. This study examines factors that shape perceptions of the cost and benefits associated with the adoption and/or support of AWAs across work culture, gender and participation experience. Our results suggest that work environment had a significant effect on perceptions of AWAs. Public accountants perceived greater costs related to career advancement but correspondingly less concern about administrative issues than management accountants. We also found that accountants who have participated (or are currently participating in an AWA), perceived greater benefits and less concern for potential negative consequences to their careers than non-participants. Finally, women perceived greater benefits to result from participation in an AWA and men perceived correspondingly more costs. Regardless, both genders perceived that AWAs were not strictly a womens issue. These findings contribute to our understanding of alternate work arrangements and point to factors that must be addressed to increase the acceptance and success of these programs.

Causality as an influence on hindsight bias: An empirical examination of judges' evaluation of professional audit judgment

Abstract Evaluators often overestimate, ex-post, their ability to have predicted a known outcome. Arguably, judges and juries, in turn, blame external auditors for their failure to anticipate negative client outcomes and to disclose what in hindsight is outcome diagnostic information. The extent to which judges succumb to nonnormative hindsight bias may relate to the perceived feasibility (or ease) of reconstructing a causal relationship between the outcome and antecedent conditions. That is, hindsight bias arguably relies upon: (1) the ability of the evaluator, ex-post, to reconstruct a cogent causal series of related events leading up to the outcome, and (2) the tendency of overestimate the ex-ante likelihood of the reconstructed scenario. If ease of causal reconstruction of events is determined to enhance hindsight effects, remedial attention might be directed at this feature of the phenomenon. An experiment was conducted involving 96 general jurisdiction judges. We examined whether the nonsusceptibility of events to causal reconstruction would serve to moderate the magnitude of hindsight effects. Our hypothesis was that if an outcome could be attributed to a causal series of related events, judges would exhibit greater hindsight bias than if an outcome was perceived to be unforeseeable. That is, outcomes attributable in increasing degree to unforeseen causes were expected to be associated with decreasing hindsight effects. Results confirmed these expectations; implications for audit legal liability are also discussed.

A new culture? Evidence of support for diversity in public accounting performance evaluation judgments

Prior research has documented the existence of a white male culture in large public accounting firms that has long dominated most aspects of these firms. This culture has arguably resulted in systematic workplace bias against females and minorities and their exclusion from opportunities for advancement. The accounting profession, led by the Big Five firms, has recently focused efforts on developing a new “diversity culture” intended to make the workplace more accessible to and supportive of all personnel. This exploratory study examines the current impact of race and gender on the performance evaluation judgments of audit seniors representing one Big Five firm. The results indicate that, under some circumstances, the job performance and career prospects of females (both non-white and white) were rated as high as, or higher than, those of white males. The implications of these findings for the profession and future research are discussed.

The Impact of Management Image and Non-Audit Service Fees on Investors’ Perceptions of Earnings Quality

Abstract This research examines the extent to which the perceived credibility of a corporations audited financial statements is a function of the publics perception of the corporations leadership and/or the auditors independence. We look specifically at the public image of the CEO as projected in the press, and the perception of auditor independence as projected by mandated public information about non-audit services. We conducted an experiment to examine these two types of publicly available information for their potential effect on the perceived confidence that third year law students have in corporate financial information. The results reveal that even in an environment fully compliant with Sarbanes-Oxley (2002) reforms, public perceptions of the integrity of management and the independence of auditors influence individuals’ confidence in the financial statements. The implications of this research for practice and for future research are also discussed.

The influence of strategy map communications and individual differences on multidimensional performance evaluations

Multidimensional performance evaluation systems such as the Balanced Scorecard (BSC) were developed to overcome the documented tendency of managers to focus almost exclusively on short-term financial performance measures while disregarding or de-emphasising other short-term and/or long-term non-financial performance measures. Evidence suggests, however, that implementation of many of these systems has not achieved desired outcomes. Cogent communication of a corporations goals and managements strategy to achieve those goals can be expected to influence employee ‘buy-in’ and the subsequent use or resistance to multidimensional performance measures. In this study we examine the role of strategy maps in communicating goals and strategy. We also examine individual differences (tolerance of ambiguity and functional background) that we believe also influence individuals to be more (or less) receptive to the guidance of strategy maps. An experiment was conducted with 165 experienced professionals enrolled in MBA programmes in Spain and the US. Our experimental results indicate that a strategy map reflecting integrated dependencies can de-bias evaluations of certain groups of individuals, who have high tolerance for ambiguity and have a financial work background. Implications and suggestions for future research are also provided.

An Analysis of the First Two Decades of Advances in Accounting

Abstract This study reports the results of a content and citation analysis of the 295 articles appearing in the first 20 years of Advances in Accounting (AIA). A content analysis provides a taxonomy of the main research areas examined and research methods used in the articles published in the journal during its first two decades, i.e. from 1984 to 2003. Information is also summarized indicating contributing authors, their academic affiliation, and where they earned their doctoral degrees. Citation analysis is then used to classify the sources and types of citations most frequently used in AIA. In addition, citation of AIA articles is examined in seven leading journals covering related research topics over this period of time. Finally, findings and conclusions are discussed.

The Influence of Mood on Subordinates’ Ability to Resist Coercive Pressure in Public Accounting

This study reports on an experiment conducted to assess the influence of different affective mood states on auditors’ ability to resist obedience pressure to commit or overlook unethical acts in six audit contexts. Obedience pressure from superiors to comply with unethical directives is of particular concern in public accounting, given the hierarchical structure of audit teams and the power imbalance in superior–subordinate relationships. One hundred and seventy audit seniors from two large international public accounting firms participated in an experiment. Three different moods were induced in participants through work-related trigger events: one positive active mood state (arousal) and two negative passive mood states (fear and insignificance). These mood states were anticipated to influence auditors’ expressed willingness to comply with their superiors’ unethical directives as set forth in our ethical scenarios. Our results indicate that low levels of arousal and high levels of fear and insignificance influenced compliance intentions. Our results also indicate overall high levels of expressed willingness to comply with superiors’ unethical directives. Implications of our findings for understanding the antecedents of unethical conduct within the accounting profession and for future research are discussed.