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March 18, 2026The Accounting Review

Auditors' Incentives and Their Application of Financial Accounting Standards.

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Authors

KHKarl HackenbrackUniversity of FloridaMNMark W. Nelson

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Implication

Experiment shows auditors permit aggressive reporting under moderate risk, altering interpretations of standards accordingly.

Key Points

  • This research investigates how auditors' incentives influence their application of financial accounting standards and reporting decisions.
  • Conducted an experiment with experienced auditors to assess reporting method choices.
  • Manipulated accounting standards and engagement risk between subjects to observe variations in outcomes.
  • Evaluated auditors' justifications for aggressive or conservative reporting methods.
  • Auditors allowed aggressive reporting under moderate engagement risk, justified by aggressive interpretations.
  • Under high engagement risk, auditors required conservative reporting, substantiated by conservative interpretations.

Cite This Study

Hackenbrack et al. (1996) studied this question.

synapsesocial.com/papers/69ba42cf4e9516ffd37a3657https://doi.org/10.2308/tar-9602190348
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Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1The Effect of Experience with Different Sized Clients on Auditor Evaluations of Fraudulent Financial Reporting Indicators.1993 · 1 citations
  2. 2Ambiguity in international financial reporting standards (IFRS) and its impact on judgments of auditors2024 · 8 citations
  3. 3Is auditor financial decision-making affected by prior audit report information? A behavioral approach2024 · 3 citations
  4. 4Behavioral Determinants of Auditor Aggressiveness in Client Relations.1994
  5. 5Sampling Information in Strategic Audit Settings.1989