The Balanced Scorecard: The Effects of Assurance and Process Accountability on Managerial Judgment

Abstract

The balanced scorecard has been hailed as one of the major developments in management accounting in the last decade. Lipe and Salterio (2000) show that one of the key features of this development, the inclusion of measures that are unique to the strategic objectives of a business unit, tend to be ignored by managers when making performance evaluation judgments. This study employs a debiasing framework (Kennedy 1993, 1995) to examine whether assurance over the reliability and relevance of the performance measures and/or invoking process accountability via a requirement to justify one's performance evaluation mitigates this bias. Results suggest that both an assurance report over all measures and the requirement to justify an evaluation to a superior reduce the common measures bias. Implications for theory and practice are discussed.

Keywords: balanced scorecard, performance measures, performance evaluation, debiasing, assurance, justification, and process accountability

JEL Classification: M40, M46, J33, L21