Peter R. Gillett

The effects of moral reasoning and self-monitoring on CFO intentions to report fraudulently on financial statements

This study adapts the theory of reasoned action (Ajzen and Fishbein, 1980) to the behavior of fraudulent reporting on financial statements so as to examine the effects of moral reasoning and self-monitoring on intention to report fraudulently, using structural equation modeling. The paper seeks to investigate two of the red flags for financial statement fraud identified in Loebbecke et al.s (1989) paper: client management displays a significant lack of moral fiber and client personnel exhibit strong personality anomalies. As expected, high moral reasoners are more influenced than low moral reasoners by their own attitude towards the behavior. Contrary to prior research, low self-monitors are found to be more influenced than high self-monitors by subjective norms. Future research is recommended to investigate the counter-intuitive results for self-monitors, to consider the implications of group decision making as regards the promulgation of fraudulent financial statements, and to examine additional red flags for financial statement fraud.

A new understanding of subjective probability and its generalization to lower and upper prevision

Abstract This article introduces a new way of understanding subjective probability and its generalization to lower and upper prevision. Instead of asking whether a person is willing to pay given prices for given risky payoffs, we ask whether the person believes he can make a lot of money at those prices. If not––if the person is convinced that no strategy for exploiting the prices can make him very rich in the long run––then the prices measure his subjective uncertainty about the events involved. This new understanding justifies Peter Walley’s updating principle, which applies when new information is anticipated exactly. It also justifies a weaker principle that is more useful for planning because it applies even when new information is not anticipated exactly. This weaker principle can serve as a basis for flexible probabilistic planning in event trees.

The logic of events

An event space is a set of instantaneous events that vary both in time and specificity. The concept of an event space provides a foundation for a logical – i.e., modular and open – approach to causal reasoning. In this article, we propose intuitively transparent axioms for event spaces. These axioms are constructive in the intuitionistic sense, and hence they can be used directly for causal reasoning in any computational logical framework that accommodates type theory. We also put the axioms in classical form and show that in this form they are adequate for the representation in terms of event trees established by Shafer [40] using stronger axioms.

Monetary unit sampling: a belief-function implementation for audit and accounting applications

Abstract Audit procedures may be planned and audit evidence evaluated using monetary unit sampling (MUS) techniques within the context of the Dempster–Shafer theory of belief functions. This article shows: (1) how to determine an appropriate sample size for MUS in order to obtain a desired degree of belief that the upper bound for misstatements lies within a given interval; and (2) what level of belief in a specified interval is obtained given a sample result. The results are consistent with the view that a specified level of belief in an interval is semantically a stronger claim than the same numerical level of probability. The paper describes two variants of MUS in both probability and belief-function forms, emphasizing the systematic similarities and the numerical differences between the two frameworks. The results, based on the Poisson distribution, extend results already available for mean-per-unit variables sampling, and may readily be developed to give similar results for the binomial distribution.

A probabilistic logic based on the acceptability of gambles

This article presents a probabilistic logic whose sentences can be interpreted as asserting the acceptability of gambles described in terms of an underlying logic. This probabilistic logic has a concrete syntax and a complete inference procedure, and it handles conditional as well as unconditional probabilities. It synthesizes Nilssons probabilistic logic and Frisch and Haddawys anytime inference procedure with Wilson and Morals logic of gambles. Two distinct semantics can be used for our probabilistic logic: (1) the measure-theoretic semantics used by the prior logics already mentioned and also by the more expressive logic of Fagin, Halpern, and Meggido and (2) a behavioral semantics. Under the measure-theoretic semantics, sentences of our probabilistic logic are interpreted as assertions about a probability distribution over interpretations of the underlying logic. Under the behavioral semantics, these sentences are interpreted only as asserting the acceptability of gambles, and this suggests different directions for generalization.

Conflict, Consistency and Consonance in Belief Functions: Coherence and Integrity of Belief Systems

This paper discusses how the belief function formalism gives rise to new concepts of conflict and nonspecificity that are more important than conflict in the case of probability theory; assessing this conflict can be important for the strategic choices of whether to seek additional evidence or to discount or retract existing evidence, and which beliefs to retract; it is important to consider not just the external conflict between beliefs, but the internal conflict within belief functions arising from masses assigned to non-intersecting focal elements. The paper considers six measures of conflict: two that apply only to separable belief functions, and that require the canonical decomposition to be found (based on Shafer’s work), and four based on extension of the entropy concept (by Yager, Hohle, Ramer, Klir and others). Detailed computations of the various measures are exhibited for two illustrative examples. Axioms for conflict in the context of its intended use are given, and it is argued that dissonance may be the conflict measure that fits them most closely. Finally, a method is given for using conflict to decide which of a set of beliefs to retract (or discount).