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

Posted: 15 Apr 2005

See all articles by Theresa Libby

Theresa Libby

Kenneth G. Dixon School of Accounting - University of Central Florida

Alan Webb

University of Waterloo - School of Accounting and Finance

Steven Salterio

Queen's University - Smith School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

The balanced scorecard is one of the major developments in management accounting in the past decade (Ittner and Larcker 2001). Lipe and Salterio (2000) find that managers ignore one of the key scorecard features, the inclusion of measures that are unique to the strategic objectives of a business unit, when making performance evaluation judgments. This study identifies and tests two approaches to reducing this "common measures bias." We examine whether increasing effort via invoking process accountability (i.e., requiring managers to justify to their superior their performance evaluations) and/or improving the perceived quality of the balanced scorecard measures (i.e., via an independent third party assurance report on the balanced scorecard) increases managers' usage of unique performance measures in their evaluations. Results suggest that either the requirement to justify an evaluation to a superior or the provision of an assurance report on the balanced scorecard increases the use of unique measures in managerial performance evaluation judgments. 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

Suggested Citation

Libby, Theresa and Webb, Alan and Salterio, Steven E., The Balanced Scorecard: The Effects of Assurance and Process Accountability on Managerial Judgment. Accounting Review, Vol. 79, No. 4, pp. 1075-1094, October 2004, Available at SSRN: https://ssrn.com/abstract=530803

Theresa Libby

Kenneth G. Dixon School of Accounting - University of Central Florida ( email )

Orlando, FL
United States

Alan Webb (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Steven E. Salterio

Queen's University - Smith School of Business ( email )

Kingston, Ontario K7L 3N6
Canada
613-533-6926 (Phone)

HOME PAGE: http://smith.queensu.ca/faculty_and_research/faculty_list/salterio-steven.php

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