Do Effects of Client Preference on Accounting Professionals' Information Search and Subsequent Judgments Persist with High Practice Risk?

Posted: 9 Dec 2007 Last revised: 5 Feb 2008

See all articles by Kathryn Kadous

Kathryn Kadous

Emory University - Goizueta Business School

Anne M. Magro

George Mason University - Department of Accounting

Brian C. Spilker

Brigham Young University

Multiple version iconThere are 2 versions of this paper

Abstract

Prior research indicates that audit and tax professionals' judgments are influenced by their client's preferences, both directly and indirectly (via information search). In an experiment with tax professionals as participants, we examine whether high practice risk (i.e., exposure to monetary and nonmonetary costs of making inappropriate recommendations) mitigates these effects. We find that, when facing a client with low practice risk, professionals' search is biased in a manner that leads judgments to be consistent with client preference; however, search is less biased when facing a client with high practice risk, and resulting judgments are less consistent with client preference. We also find that, after controlling for the impact of information search, professionals tend to adjust their recommendations away from the client-preferred position, regardless of practice risk. This study sheds light on the direct and indirect paths by which client preference and practice risk affect professionals' judgments.

Keywords: Confirmation bias, information search, practice risk, path analysis

JEL Classification: M41, M49, H25, D83, H20, K34, C91

Suggested Citation

Kadous, Kathryn and Magro, Anne M. and Spilker, Brian, Do Effects of Client Preference on Accounting Professionals' Information Search and Subsequent Judgments Persist with High Practice Risk?. Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1062181

Kathryn Kadous (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-4967 (Phone)

Anne M. Magro

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States
703-993-1765 (Phone)

Brian Spilker

Brigham Young University ( email )

Marriott School of Management 523 TNRB
Provo, UT 84602
United States
801-378-4644 (Phone)
801-378-5933 (Fax)

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