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
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
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