Intrinsic Motivation and Extrinsic Incentives: An Experimental Investigation of Endogenous Guidance and Gatekeeper Behaviour

27 Pages Posted: 15 Jan 2008

See all articles by Amy K. Choy

Amy K. Choy

Independent

Ronald R. King

Washington University in St. Louis - John M. Olin Business School

Date Written: January 4, 2008

Abstract

Incentives affect the manner in which auditors conduct their audits and one important research question is how different types of incentives affect behavior. The objectives of this paper are to examine how auditors' intrinsic motivation could be augmented by their participation in developing the guidance, and to examine how extrinsic incentives such as financial sanctions affect auditors' willingness to withstand client pressure. We are also interested in examining the interaction between these two types of incentives. We find that both intrinsic motivation and extrinsic incentives increase auditor willingness to withstand client pressure; however, extrinsic motivation crowds out intrinsic motivation, leading to lower guidance standards. We also find that when auditors face financial sanctions for accepting low proposals, managers raise the value of their proposals to increase the chance of gaining approval from the auditors.

Keywords: Intrinsic motivation, extrinsic incentive, endogenous guidance, GAAP, gatekeeper, experiments

JEL Classification: M41, C79, M49

Suggested Citation

Choy, Amy K. and King, Ronald R., Intrinsic Motivation and Extrinsic Incentives: An Experimental Investigation of Endogenous Guidance and Gatekeeper Behaviour (January 4, 2008). (CAAA) 2008 Annual Conference Paper. Available at SSRN: https://ssrn.com/abstract=1080488 or http://dx.doi.org/10.2139/ssrn.1080488

Amy K. Choy (Contact Author)

Independent

No Address Available

Ronald R. King

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6385 (Phone)
314-935-6359 (Fax)

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