The Effect of Moods on Auditors' Inventory Valuation Decisions

43 Pages Posted: 27 Mar 2007 Last revised: 9 Oct 2009

See all articles by Janne Chung

Janne Chung

York University - Schulich School of Business

Jeffrey R. Cohen

Boston College - Department of Accounting

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2007

Abstract

This paper investigates the effect of different mood states¿specifically positive, neutral, and negative mood¿on inventory valuation decisions. Psychological research suggests that different mood states can lead to different professional judgments in the performance of an ambiguous task. Compared with neutral- and negative-mood individuals, positive-mood individuals have the lowest consensus and make the least conservative judgment (i.e., the highest inventory valuation) and negative-mood individuals have the highest consensus and make the most conservative judgment (i.e., the lowest inventory valuation). An experiment conducted with 102 Australian audit professionals found that, consistent with the literature, mood states affect the dispersion and extent of conservatism in the inventory valuation judgment. A follow-up experiment conducted with 170 final year Australian auditing students suggests that the effect of moods on judgment may be due to the mood congruent retrieval of information by the participants. Implications for practice and research are also provided.

Keywords: Moods, Inventory valuation judgments, Auditors' conservatism, Consensus

JEL Classification: M49, M41, M44

Suggested Citation

Chung, Janne and Cohen, Jeffrey R. and Monroe, Gary S., The Effect of Moods on Auditors' Inventory Valuation Decisions (December 1, 2007). Available at SSRN: https://ssrn.com/abstract=975454 or http://dx.doi.org/10.2139/ssrn.975454

Janne Chung

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Jeffrey R. Cohen (Contact Author)

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3165 (Phone)
617-552-2097 (Fax)

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
+61293856443 (Phone)

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