The Effects of Incentives and Time Reporting Delays on Time Reporting Accuracy and Directional Bias: An Experimental Investigation of Underreporting of Time

36 Pages Posted: 27 Jun 2011

Date Written: June, 27 2011

Abstract

Prior survey studies imply that time budgets create incentives for auditors to underreport time and that such incentives decrease time reporting accuracy. Our study, however, hypothesizes that incentivising time reporting provides a signal that time reports are important, which increases the effort individuals direct towards recalling time, thereby increasing time reporting accuracy. Results of an experiment indicate that providing individuals with incentives to underreport time reduces the size of time reporting misstatements (i.e. increases time reporting accuracy) but also, under certain conditions, biases such misstatements downward. Specifically, participants who were provided with incentives to underreport time, consistent with motivated reasoning theory, systematically underreported time when they reported time one-week after task completion, but not when they reported time immediately after task completion. Overall, this study enhances our understanding of the causes of inaccurate and directionally biased time reporting, which provides practical insights into how firms might address these issues.

Keywords: underreporting time, motivated reasoning, biased recall and time budget

Suggested Citation

Reffett, Andrew, The Effects of Incentives and Time Reporting Delays on Time Reporting Accuracy and Directional Bias: An Experimental Investigation of Underreporting of Time (June, 27 2011). Available at SSRN: https://ssrn.com/abstract=1873250 or http://dx.doi.org/10.2139/ssrn.1873250

Andrew Reffett (Contact Author)

Miami University of Ohio ( email )

Oxford, OH 45056
United States

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