Slide AKT 405 Teori Akuntansi 13 Godfrey
GODFREY
HODGSON
HOLMES
TARCA
CHAPTER 13
BEHAVIOURAL RESEARCH IN
ACCOUNTING
Behavioural accounting research:
definition and scope
• ‘Positive’ research encompasses
– Capital markets research
• asks how do securities markets react to accounting
information
– Agency theory research
• asks what are the economic incentives that determine
the choice of accounting methods
– Behavioural accounting research
• asks how do people actually use and process accounting
information
2
Behavioural accounting research:
definition and scope
• Capital markets research looks at the macro
level of aggregate securities markets
• Agency and behavioural research both focus
on the micro level of individual managers and
firms
3
Behavioural accounting research:
definition and scope
• Capital markets and agency research are both
based on economics and assume everyone is a
rational wealth maximiser
• Behavioural research is based on psychology,
sociology and organisational theory and
generally makes no assumptions about how
people behave
4
Behavioural accounting research:
definition and scope
Definition
The
The study
study of
of the
the behaviour
behaviour of
of
accountants
accountants or
or the
the behaviour
behaviour of
of
non-accountants
non-accountants as
as they
they are
are
influenced
influenced by
by accounting
accounting functions
functions
and
and reports.
reports.
Hofstedt
Hofstedt&&Kinard
Kinard
5
Behavioural accounting research:
definition and scope
• The major type of BAR is
– Human judgement theory (HJT) or
– Human information processing (HIP)
• Looks at the judgement and decision making of
accountants and auditors and the influence
their output has on users’ judgements and
decision making
– aim is to explain and predict behaviour and improve
decision making
6
Why is BAR important?
• It discovers how people use and process
accounting information
• It provides valuable insights into the ways
different types of decision makers produce,
process and react to particular items of
accounting information and communication
methods
7
Why is BAR important?
• It provides useful information to accounting
regulators
• It leads to efficiencies in the work practices of
accountants and other professionals
8
Development of behavioural
accounting research
• HJT research began in 1954
• The term BAR appeared in 1967
• Last 30 years has seen an explosion in BAR
– especially auditing
– importance of judgement
– the ‘Brunswik lens model’
9
An overview of approaches to
understanding information processing
• Three major research approaches
– Brunswik lens model
• the dominant approach
– process tracing
• build representative decision trees
– probabilistic judgement
• probability statements based on Bayes’s theorem
10
The Brunswik lens model
• Used as an analytical framework and the basis
for most judgement studies involving
– prediction (e.g. bankruptcy)
– evaluation (e.g. internal control)
11
The Brunswik lens model
• Has provided valuable insights regarding
– patterns of cue use evident in various tasks
– weights that decision makers implicitly place on a variety
of information cues
– the relative accuracy of decision makers of different
expertise levels in predicting and evaluating a variety of
tasks
– the circumstances under which an expert system and/or
‘model of human behaviour’ outperforms humans
12
The Brunswik lens model
• Valuable insights (continued)
– the stability (consistency) of human judgment
over time
– the degree of insight decision makers possess
regarding their pattern of use of data
– the degree of consensus displayed in a variety of
group decision tasks
13
The Brunswik lens model
• The model usually has good predictive powers
– it removes much of the random error due to
human things such as tiredness, illness or
distraction
• An important limitation is that it is not a good
descriptor of how people actually make
decisions
– so process tracing methods developed
14
Process tracing methods
• Provides an explanation about how a decision
is made
– ‘process tracing’ or ‘verbal protocol’
– produces a ‘decision tree’ to represent the
decision process
– ‘classification and regression trees’ (CART)
15
Probabilistic judgement
• Useful where initial beliefs about a prediction
or evaluation need to be revised as new data
arrives
Posterior odds = Likelihood ratio x Prior odds
• Found use of rules of thumb to simplify
complex judgment tasks
16
Lens model studies – the
evidence
• accuracy of humans’ predictions of business
failure
• model of human behaviour
• information overload literature
• judgement confidence literature
17
Process tracing studies – the
evidence
• Brunswik lens models and process tracing
style studies are different technologies with
the same objective of modelling decision
processes as completely as possible
18
Format and presentation of
financial statements
• Libby (1976) – 3 options for improved decision
making
– changing the presentation and amount of
information
– educating decision makers
– replacing decision makers with a model of
themselves or with an ideal cue-weighting
model
19
Format and presentation of
financial statements
20
Format and presentation of
financial statements
• Little research has been undertaken regarding
ideal presentation formats
– e.g. graphs versus tables
– e.g. colour versus black & white
• Mixed results
• No well developed and tested theory
21
Probabilistic judgement studies
– the evidence
• Three rules of thumb (heuristics)
– representativeness
– availability
– anchoring and adjustment
• Expert judgement and rules of thumb
22
Probabilistic judgement studies
– the evidence
Representativeness
• When judging the probability that a particular
item comes from a particular population of
items, people’s judgement will be determined
by the extent to which the item is
representative of the population
23
Probabilistic judgement studies
– the evidence
Availability
• The assessment of the probability of an event
is based on the ease with which instances of
that event come to mind
24
Probabilistic judgement studies
– the evidence
Anchoring and adjustment
• An initially given response serves as an
anchor, and other information is used to
adjust that response
25
Accounting and behaviour
• The techniques adopted and the subsequent
interpretation of reported information are
matters of perspective
• Accounting is a direct function of human
behaviour and activity
• Two-way influence
26
Limitations of BAR
• Frequent contradictions between the findings of
similar studies
• Human information processing is far more complex
than the development of current research theories
and methods
• Research settings fail to adequately replicate realworld settings
• Should policy be influenced by research on individual
decision makers
27
Limitations of BAR
• The major limitation is the lack of a single
underlying theory to unify diverse research
questions and findings
– has borrowed from a multitude of disciplines and
contexts and so no common framework
• A single theory is unlikely in the foreseeable
future
28
Issues for auditors
• The process of auditing is often treated as a
‘black box’
– what are the characteristics of better auditors
– what are the factors that affect auditors’
judgement
– research challenges in balancing realism and
simplicity in research design
29
Summary
• If we are to have a better understanding about how people
use accounting information, then we need to study peoples’
actual behaviours and decision processes
• BAR can be used to explain and predict behaviour and
improve decision making
• Research in this area has relied heavily on the Brunswik lens
model, process tracing methods and the probabilistic
judgement model
• There are significant limitations in BAR
30
Key terms and concepts
•
•
•
•
•
•
•
•
•
•
•
Behavioural accounting research (BAR)
Human judgement theory (HJT)
Human information processing (HIP)
Brunswik lens model
Process tracing methods
Classification and regression trees (CART)
Probabilistic judgement
Rules of thumb (heuristics)
Representativeness
Availability
Anchoring and adjustment
31
32
HODGSON
HOLMES
TARCA
CHAPTER 13
BEHAVIOURAL RESEARCH IN
ACCOUNTING
Behavioural accounting research:
definition and scope
• ‘Positive’ research encompasses
– Capital markets research
• asks how do securities markets react to accounting
information
– Agency theory research
• asks what are the economic incentives that determine
the choice of accounting methods
– Behavioural accounting research
• asks how do people actually use and process accounting
information
2
Behavioural accounting research:
definition and scope
• Capital markets research looks at the macro
level of aggregate securities markets
• Agency and behavioural research both focus
on the micro level of individual managers and
firms
3
Behavioural accounting research:
definition and scope
• Capital markets and agency research are both
based on economics and assume everyone is a
rational wealth maximiser
• Behavioural research is based on psychology,
sociology and organisational theory and
generally makes no assumptions about how
people behave
4
Behavioural accounting research:
definition and scope
Definition
The
The study
study of
of the
the behaviour
behaviour of
of
accountants
accountants or
or the
the behaviour
behaviour of
of
non-accountants
non-accountants as
as they
they are
are
influenced
influenced by
by accounting
accounting functions
functions
and
and reports.
reports.
Hofstedt
Hofstedt&&Kinard
Kinard
5
Behavioural accounting research:
definition and scope
• The major type of BAR is
– Human judgement theory (HJT) or
– Human information processing (HIP)
• Looks at the judgement and decision making of
accountants and auditors and the influence
their output has on users’ judgements and
decision making
– aim is to explain and predict behaviour and improve
decision making
6
Why is BAR important?
• It discovers how people use and process
accounting information
• It provides valuable insights into the ways
different types of decision makers produce,
process and react to particular items of
accounting information and communication
methods
7
Why is BAR important?
• It provides useful information to accounting
regulators
• It leads to efficiencies in the work practices of
accountants and other professionals
8
Development of behavioural
accounting research
• HJT research began in 1954
• The term BAR appeared in 1967
• Last 30 years has seen an explosion in BAR
– especially auditing
– importance of judgement
– the ‘Brunswik lens model’
9
An overview of approaches to
understanding information processing
• Three major research approaches
– Brunswik lens model
• the dominant approach
– process tracing
• build representative decision trees
– probabilistic judgement
• probability statements based on Bayes’s theorem
10
The Brunswik lens model
• Used as an analytical framework and the basis
for most judgement studies involving
– prediction (e.g. bankruptcy)
– evaluation (e.g. internal control)
11
The Brunswik lens model
• Has provided valuable insights regarding
– patterns of cue use evident in various tasks
– weights that decision makers implicitly place on a variety
of information cues
– the relative accuracy of decision makers of different
expertise levels in predicting and evaluating a variety of
tasks
– the circumstances under which an expert system and/or
‘model of human behaviour’ outperforms humans
12
The Brunswik lens model
• Valuable insights (continued)
– the stability (consistency) of human judgment
over time
– the degree of insight decision makers possess
regarding their pattern of use of data
– the degree of consensus displayed in a variety of
group decision tasks
13
The Brunswik lens model
• The model usually has good predictive powers
– it removes much of the random error due to
human things such as tiredness, illness or
distraction
• An important limitation is that it is not a good
descriptor of how people actually make
decisions
– so process tracing methods developed
14
Process tracing methods
• Provides an explanation about how a decision
is made
– ‘process tracing’ or ‘verbal protocol’
– produces a ‘decision tree’ to represent the
decision process
– ‘classification and regression trees’ (CART)
15
Probabilistic judgement
• Useful where initial beliefs about a prediction
or evaluation need to be revised as new data
arrives
Posterior odds = Likelihood ratio x Prior odds
• Found use of rules of thumb to simplify
complex judgment tasks
16
Lens model studies – the
evidence
• accuracy of humans’ predictions of business
failure
• model of human behaviour
• information overload literature
• judgement confidence literature
17
Process tracing studies – the
evidence
• Brunswik lens models and process tracing
style studies are different technologies with
the same objective of modelling decision
processes as completely as possible
18
Format and presentation of
financial statements
• Libby (1976) – 3 options for improved decision
making
– changing the presentation and amount of
information
– educating decision makers
– replacing decision makers with a model of
themselves or with an ideal cue-weighting
model
19
Format and presentation of
financial statements
20
Format and presentation of
financial statements
• Little research has been undertaken regarding
ideal presentation formats
– e.g. graphs versus tables
– e.g. colour versus black & white
• Mixed results
• No well developed and tested theory
21
Probabilistic judgement studies
– the evidence
• Three rules of thumb (heuristics)
– representativeness
– availability
– anchoring and adjustment
• Expert judgement and rules of thumb
22
Probabilistic judgement studies
– the evidence
Representativeness
• When judging the probability that a particular
item comes from a particular population of
items, people’s judgement will be determined
by the extent to which the item is
representative of the population
23
Probabilistic judgement studies
– the evidence
Availability
• The assessment of the probability of an event
is based on the ease with which instances of
that event come to mind
24
Probabilistic judgement studies
– the evidence
Anchoring and adjustment
• An initially given response serves as an
anchor, and other information is used to
adjust that response
25
Accounting and behaviour
• The techniques adopted and the subsequent
interpretation of reported information are
matters of perspective
• Accounting is a direct function of human
behaviour and activity
• Two-way influence
26
Limitations of BAR
• Frequent contradictions between the findings of
similar studies
• Human information processing is far more complex
than the development of current research theories
and methods
• Research settings fail to adequately replicate realworld settings
• Should policy be influenced by research on individual
decision makers
27
Limitations of BAR
• The major limitation is the lack of a single
underlying theory to unify diverse research
questions and findings
– has borrowed from a multitude of disciplines and
contexts and so no common framework
• A single theory is unlikely in the foreseeable
future
28
Issues for auditors
• The process of auditing is often treated as a
‘black box’
– what are the characteristics of better auditors
– what are the factors that affect auditors’
judgement
– research challenges in balancing realism and
simplicity in research design
29
Summary
• If we are to have a better understanding about how people
use accounting information, then we need to study peoples’
actual behaviours and decision processes
• BAR can be used to explain and predict behaviour and
improve decision making
• Research in this area has relied heavily on the Brunswik lens
model, process tracing methods and the probabilistic
judgement model
• There are significant limitations in BAR
30
Key terms and concepts
•
•
•
•
•
•
•
•
•
•
•
Behavioural accounting research (BAR)
Human judgement theory (HJT)
Human information processing (HIP)
Brunswik lens model
Process tracing methods
Classification and regression trees (CART)
Probabilistic judgement
Rules of thumb (heuristics)
Representativeness
Availability
Anchoring and adjustment
31
32