Honesty in Accounting & Control: A Discussion of Hannan, Rankin and Towry

Abstract

We provide a discussion of Hannan, Rankin and Towry (HRT) (2006) The effect of information systems on honesty in managerial reporting: A behavioral perspective. Some agency theorists have suggested that while individuals have some preference for honesty, their honesty threshold is so low that they would lie for very small payoffs. HRT's results showing a significant preference for honesty raise questions about agency theory's boundary conditions. Our discussion: provides an overview of findings on honesty and lying from the organizational research literature; summarizes management control systems research on the prevention and detection of lying; critically evaluates several aspects of HRT's predictions, design and results; and generates possible directions for future research.

Keywords: management control systems, honesty, lying, agency theory

JEL Classification: M40, M46, M54