Exam 13: Behavioural Research

Consider the following linear equation model regarding an accountant's judgements regarding the likelihood of business failure: Likelihood of Insolvency/Solvency= constant + 0.1 Net profit + 0.3 Cash flow + 0.15 Acid test ratio + 0.25 Debt to Equity ratio + other information cues + error According to the model which of the following statements is correct?

Research has found that the use of rules of thumb such as representativeness,availability,and anchoring and adjustment have improved the quality of decision making for auditors and accountants."

Behavioural accounting research does have limitations,which of the following is not a limitation of this research?

The heuristic (rule of thumb)'availability' can be described as:

The consequence of anchoring and adjustment is that there is a possibility of insufficient adjustment when a circumstance changes.

With respect to the probabilistic judgement model the true statement is:

Accounting is a function of human behaviour and activity.J.Godfrey,et el,'Accounting Theory',7^th Ed.p.471.Discuss.

Research shows that investors react as though they perceive auditor independence as impaired when auditors receive non-audit service revenue from their audit clients even if actual auditor independence is not affected.

One of the limitations of BAR is that it is not useful for revealing the systematic errors made by all decision makers in specific contexts.

According to the judgement confidence literature which of the following is not the factor that causes overconfidence?

The Brunswik lens model always outperforms the process tracing model in any decision-making scenario.

Which of these accounting research types can be called 'normative' research?

Discuss the limitations of behavioural accounting research.

The higher the beta in the Brunswik lens regression model,the more important the information cues will be to a person in making decisions.

'Findings reveal that auditors and others use the same rules of thumb as have been prevalent in research in psychology,although often to a lesser extent.The rules of thumb of representativeness,availability,and anchoring and adjustment seem to be adopted in auditing and other business contexts in order to simplify complex judgement tasks and alleviate limitations in the cognitive processes of humans.' J.Godfrey,et el,'Accounting Theory',7^th Ed.p.476. Explain the meaning of each of the three rules of thumb referred to in the quotation and describe and summarise the findings of one accounting or auditing research study that has been carried out in relation to one of the rules of thumb referred to above.

Which of these is true of the research evidence obtained in the literature regarding the presentation of financial information?

It is not true regarding research conducted using the Brunswik lens model that:

The statement concerning research on expert judgement that is correct is:

Behavioural accounting research is considered important to economic practitioners for the following reasons,except:

Explain and discuss some of the findings concerning behavioural research in the field of auditing.