Cost variance, Dynamic task environment, Learning

Human information processing, Cost variance, Cost effectiveness

This study experimentally tests some implications of psychological diagnostic inference theories and begins to extend these theories into a performance evaluation context. Subjects, who were required to assume the role of a manufacturing division manager, were asked to estimate the likelihoods of four potential causes of an assembly department's labor efficiency variance. The subjects were asked to reevaluate their causal likelihoods following: 1) evidence concerning the magnitude of the labor variance and the deviations of the four potential causes from their normal levels (similarity evidence) and 2) evidence concerning the covariation of a potential cause, and labor efficiency variances over the past five years (covariation evidence). The results generally confirmed a set of hypotheses predicting the effects of cause/event similarity and covariation upon individuals' causal inferences. Implications of these results for accounting information systems design are discussed in a concluding section. Résumé. Cette étude teste, au moyen d'une expérience, quelques‐unes des conclusions des théories d'inférence diagnostique psychologique et amorce l'application de ces théories dans un contexte d'évaluation de la performance. Les sujets, qui devaient assumer le rôle de directeur d'une division de fabrication, ont été invités à estimer les probabilités de quatre causes possibles de l'écart de rendement sur main‐d'œuvre d'un atelier d'assemblage. Les sujets furent invités à réévaluer leurs probabilités causales selon: 1) des informations relatives à l'ampleur de l'écart sur main‐d'œuvre et à la dispersion des quatre causes potentielles par rapport à leur niveau normal (preuve de similitude) et 2) des informations relatives à la co‐variation d'une cause potentielle, et aux écarts de rendement sur maind'œuvre des cinq dernières années (preuve de co‐variation). De façon générale, les résultats confirment l'ensemble des hypothèses prévoyant les effets de similitude et de co‐variation cause/événement sur les inférences causales des individus. Les conséquences de ces résultats sur la conception des systèmes d'information comptable sont examinées dans la conclusion.

Studies investigating effects of outcomes on judgments and decisions have been increasing within the business/accounting research literatures. No study, however, has addressed the presence or absence of such effects in terms of potential explanations and the conditions affecting their viability. Three such explanations are the foci of the present study: cognitive reconstruction, self‐enhancing motive, and an escalation‐of‐commitment analogue. The viability of these explanations was investigated experimentally in an accounting context in which subjects evaluated a capital‐budgeting committee's funding priority decisions with or without project outcome information (five‐year operating results). Experimental results fully support the cognitive reconstruction explanation for outcome effects on decision appraisals but provide only limited support for the self‐enhancing motive and escalation‐of‐commitment explanations. Results of additional experimentation are presented, further supporting logic inherent in the hypothesis derived from the cognitive reconstruction explanation. The relationship of the present study to prior research and implications for future research and practice are discussed. Résumé. Les études portant sur l'analyse de l'incidence de l'issue d'une situation sur les jugements posés et les décisions prises par la suite se sont multipliées dans la recherche en gestion et en comptabilité. Aucun chercheur ne s'est pourtant penché sur la présence ou l'absence d'une telle incidence en s'interrogeant sur son explication potentielle et sur les facteurs qui influent sur sa viabilité. La présente étude s'articule autour de trois de ces explications: la reconstruction cognitive, la promotion personnelle et un équivalent de l'escalade de l'engagement. La viabilité de ces explications a été soumise à une étude expérimentale dans un contexte comptable dans lequel les sujets évaluaient les décisions d'un comité chargé du choix des investissements dans le cadre de l'établissement des priorités en matière d'affectation des fonds, avec ou sans information sur l'issue des projets (résultats d'exploitation de cinq ans). Les résultats de l'expérience confirment sans équivoque l'explication de la reconstruction cognitive relativement à l'incidence de l'issue des projets sur les évaluations décisionnelles, mais ils n'appuient que de façon mitigée les explications de la promotion personnelle et de l'escalade des engagements. Les auteurs exposent les résultats d'autres expériences, qui viennent étayer la logique sous‐jacente à l'hypothèse fondée sur l'explication de la reconstruction cognitive. Ils analysent enfin la relation entre la présente étude et les travaux de recherche antérieurs de même que ses conséquences éventuelles sur la recherche et la profession.

A prominent stream of audit judgment research employs the policy-capturing paradigm and uses analysis of variance (ANOVA) to construct mathematical models of individual auditors' evaluations of internal control. Based on these "as if" representations, it may appear that auditors evaluate control systems by independently processing individual controls as opposed to the pattern (or configuration) of control features. indeed, with a few noteworthy exceptions, virtually no evidence has been reported of auditors configurally processing information while evaluating controls or assessing control risk. One such exception is a recent paper by Brown and Solomon (1990). Therein, it was suggested that judicious usage of context- and task-specific knowledge is necessary to guide the development of experiments capable of detecting configural information processing. The present study generalizes the concept that auditors will exhibit configural information processing in situations in which domain-specific knowledge implies that it is appropriate. Two experiments using auditor- subjects and investigating configural information processing are described. The task of the first experiment is assessment of account misstatement risk given evidence produced by specified substantive audit procedures; and the task of the second experiment is such assessment given the results of specified analytical audit planning procedures. Domain-specific knowledge suggests configural information processing strategies that will be manifest (within ANOVA) as a compensatory-form ordinal interaction for the former task and as a disordinal interaction for the later, task. Experimental results are consistent with expectations and are especially striking for the second experiment. Twenty of the second experiment's 22 auditor-subjects apparently used the predicted configural strategy, and ANOVA models of these auditors' risk assessments attributed on average about 40 percent of total judgment variation to the single predicted interaction of analytical procedure results (trial balance figure comparisons). `An implication of these results, in' concert with Brown and Solomon (1990), is that auditor information processing is more' complex than has' been reported by prior studies. That is, across a wide variety of tasks, many auditors apparently are able to configurally process information. The results also Imply considerable between-task and between-auditor con- figural processing differences (magnitude and prevalence), which anecdotal evidence suggests is due to domain-specific factors. Two factors, the rate-of-substitution between information cues (substitutable audit procedures or controls) and when auditors learn the domain-specific knowledge requisite for configural information processing, seem particularly important and could be worthwhile foci for future research.

[A prominent stream of audit judgment research employs the policy-capturing paradigm and uses analysis of variance (ANOVA) to construct mathematical models of individual auditors' evaluations of internal control. Based on these "as if" representations, it may appear that auditors evaluate control systems by independently processing individual controls as opposed to the pattern (or configuration) of control features. Indeed, with a few noteworthy exceptions, virtually no evidence has been reported of auditors configurally processing information while evaluating controls or assessing control risk. One such exception is a recent paper by Brown and Solomon (1990). Therein, it was suggested that judicious usage of context-and task-specific knowledge is necessary to guide the development of experiments capable of detecting configural information processing. The present study generalizes the concept that auditors will exhibit configural information processing in situations in which domain-specific knowledge implies that it is appropriate. Two experiments using auditor-subjects and investigating configural information processing are described. The task of the first experiment is assessment of account misstatement risk given evidence produced by specified substantive audit procedures; and the task of the second experiment is such assessment given the results of specified analytical audit planning procedures. Domain-specific knowledge suggests configural information processing strategies that will be manifest (within ANOVA) as a compensatory-form ordinal interaction for the former task and as a disordinal interaction for the latter task. Experimental results are consistent with expectations and are especially striking for the second experiment. Twenty of the second experiment's 22 auditor-subjects apparently used the predicted configural strategy, and ANOVA models of these auditors' risk assessments attributed on average about 40 percent of total judgment variation to the single predicted interaction of analytical procedure results (trial balance figure comparisons). An implication of these results, in concert with Brown and Solomon (1990), is that auditor information processing is more complex than has been reported by prior studies. That is, across a wide variety of tasks, many auditors apparently are able to configurally process information. The results also imply considerable between-task and between-auditor configural processing differences (magnitude and prevalence), which anecdotal evidence suggests is due to domain-specific factors. Two factors, the rate-of-substitution between information cues (substitutable audit procedures or controls) and when auditors learn the domain-specific knowledge requisite for configural information processing, seem particularly important and could be worthwhile foci for future research.]

[This paper examines the effects of outcome information on managerial decision evaluations. Specifically, based on cognitive considerations, hypotheses are developed about a base-line effect of outcome information and attenuation of that effect by: (1) the evaluator's prior involvement with the evaluatee's decision process, and (2) the extent to which reported outcomes imply evaluatee responsibility for anticipating such outcomes. The hypotheses are confirmed by the results of an experiment set within the context of capital budgeting. Implications of these results are discussed in terms of information system design and the process of generalizing psychological research into accounting contexts.]

ABSTRACT: This paper examines the effects of outcome information on managerial decision evaluations. Specifically, based on cognitive considerations, hypotheses are developed about a base-line effect of outcome information and attenuation of that effect by: (1) the evaluator's prior involvement with the evaluatee's decision process, and (2) the extent to which reported outcomes imply evaluatee responsibility for anticipating such outcomes. The hypotheses are confirmed by the results of an experiment set within the context of capital budgeting. Implications of these results are discussed in terms of information system design and the process of generalizing psychological research into accounting contexts.

Auditing, Auditor hypothesis testing, Diagnostic inference, Incentives