Deck 11: Reactions of Individuals to Financial Reporting: An Examination of Behavioural Research in Accounting

Question 1

An auditor does not revise his or her initial assessment of the quality of a firm's internal controls when contradictory evidence is subsequently obtained.This is an example of the:

A) Anchoring and adjustment heuristic
B) Availability heuristic
C) Representativeness heuristic
D) Assessment heuristic

Answer 1

C

Question 2

Some of the issues that have been considered in behavioural research include assessing the impact of:

A) The presentation of cues
B) The perceived rewards of cues
C) The scaling of cues
D) All of the given options are correct.

Answer 2

D

Question 3

The purpose of behavioural research is:

A) To comprehend individual decision-making
B) To improve individual decision-making
C) To predict individual decision-making
D) All of the given options are correct.

Answer 3

D

Question 4

Behavioural research suggests the presentation of financial information in pictorial formats:

A) Makes little difference to decision making
B) Can improve decision making
C) Is perceived to improve decision making, but does not actually improve decision making
D) None of the given options are correct.

Question 5

According to behavioural research,the most useful accounting information for analysts is:

A) Earnings
B) Sales and earnings
C) Sales, earnings and cash flows
D) Sales, earnings, cash flows and dividends

Question 6

The limitations of protocol analysis do not include difficulties with:

A) Ensuring that verbal protocols are complete
B) Ensuring that verbal protocols match cognitive processes
C) Developing theory from verbal protocols
D) Coding verbal protocols

Question 7

Which of the following was revealed by behavioural research on bankruptcy prediction?

A) Group predictions outperformed individual predictions.
B) Group predictions underperformed individual predictions.
C) Bankruptcies were not typically predicted.
D) Models which combined the judgments of different subjects underperformed individual models.

Question 8

Behavioural research in accounting has been used to investigate which of the following decision-making processes?

A) The valuation of market shares by individual analysts
B) The lending decisions of loan officers
C) The assessment of bankruptcy by bankers or auditors
D) All of the given options are correct.

Question 9

Which of the following are not among the limitations of behavioural research?

A) Many studies present conflicting results.
B) Small sample sizes limit the reliability of conclusions.
C) Studies are typically conducted in the 'real world', which makes findings difficult to generalise.
D) Theory development is incomplete.

Question 10

Which of the following is not a branch of behavioural research?

A) Auditing processes
B) Accounting information processing
C) Accounting standard setting processes
D) All of the given answers are branches of behavioural research.

Question 11

Which of the following statements is true about the Lens Model?

A) Cues may be either independent or interrelated.
B) Cues may be inter-related but not independent.
C) Cues may be independent but not inter-related.
D) None of the given options is correct.

Question 12

'Heuristics' are:

A) Rules
B) Cues
C) Behaviours
D) Decisions

Question 13

The Lens Model enables researchers to determine the cues that are:

A) Considered important by an individual in creating a certain outcome
B) Actually important in creating a certain outcome
C) Both A and B
D) None of the given options are correct.

Question 14

Some of the issues that have been considered in behavioural research do not include:

A) How decisions are valued by the market
B) The importance of prior experience to the decision process
C) Whether decisions are stable over time
D) How individuals weigh up cues to make decisions

Question 15

In relation to current cost information,behavioural research:

A) Does not support the inclusion of current cost information, as this information does not appear to alter investment decisions
B) Does not support the inclusion of current cost information, as this information does not appear to alter investment returns
C) Supports the inclusion of current cost information, as this information appears to alter investment decisions
D) Supports the inclusion of current cost information, as this information appears to alter investment returns

Question 16

Which of the following is not a branch of behavioural research?

A) Managerial control systems
B) Stakeholder management systems
C) Accounting information systems design
D) Organisational sociology

Question 17

Behavioural research is concerned with how:

A) Individuals behave when provided with particular items of information
B) Individuals should behave when provided with particular items of information
C) Firms behave when provided with particular items of information
D) Firms should behave when provided with particular items of information

Question 18

The primary data source for behavioural research is:

A) Observation
B) Archival data
C) Computer simulations
D) All of the given options are correct.

Question 19

Behavioural research could be useful to accountants because it could demonstrate the items which should be included in financial reports on the basis that they are:

A) Useful to stakeholders
B) Useful to decision-makers
C) Necessary to discharge management accountability
D) All of the given options are correct.

Question 20

Theories important to behavioural research are drawn from:

A) Behavioural science
B) Behavioural science and psychology
C) Finance and economics
D) Finance and behavioural science

Question 21

Which of the following is an issue that has to be considered at the output or decision level of the Lens Model?

A) Characteristics of the person making the judgment
B) Scaling characteristics of individual cues
C) Qualities of the judgment
D) Characteristics of the decision rule

Question 22

According to Wood and Ross (2006),which of the following environmental and social controls is the most influential factor in affecting managers' capital investment decisions with respect to investing in less polluting plant and equipment?

A) Mandatory disclosure required by law and accounting standards
B) Regulatory costs, such as direct payments on pollutant emissions and clean-up costs
C) Stakeholder opinion, that is, how the investment will be approved by various stakeholder groups
D) None of the given options are correct.

Question 23

Which of the following is not an example of secondary data?

A) Data collected through survey
B) Data collected through qualitative methodologies
C) Published printed sources
D) Organisational records

Question 24

Which of the following statements is true when comparing behavioural research with capital markets research?

A) Both behavioural research and capital markets research assess the aggregate effect of financial reporting.
B) Both behavioural research and capital markets research analyse individual responses to financial reporting.
C) Behavioural research analyses individual responses to financial reporting, while capital markets research assesses the aggregate effect of financial reporting.
D) None of the given options are correct.

Question 25

Can behavioural research complement research undertaken using other paradigms?

A) Yes, because behavioural archival research can be used as a complement to other research paradigms, such as those used in capital markets experimental research.
B) Yes, because behavioural research can be used to address issues that might be unresolved by researchers who embrace other research paradigms, such as those used in capital markets research.
C) No, because behavioural research might provide some relevant insights to explain the perceived market inefficiency which other research paradigms, such as those used in capital markets research can provide adequately.
D) None of the given options are correct.

Question 26

Which of the following statements is not true about behavioural research?

A) There can ultimately be a normative component to behavioural research.
B) Behavioural research can be classified as positive research, because it seeks to explain particular actions or behaviours.
C) Behavioural research is typically grounded in organisational theory, and theories from psychology and sociology.
D) Behavioural research is an example of economics-based theories where assumptions about what motivates human actions are made and such motivations are attributed to all individuals.

Question 27

How is behavioural research relevant to accounting?

A) Standard-setters could see how particular stakeholder groups react to particular disclosures or accounting methods before particular disclosure requirements are made mandatory.
B) New possibilities need to be tested (e.g. accounting and auditing standards, presentation alternatives, performance measurement systems)
C) By generating knowledge about how different categories of financial statement users react to particular accounting disclosures, corporations, the accounting profession and regulators will be better placed to anticipate how different individuals will react to particular information
D) All of the given options are correct.

Question 28

Which of the environmental social controls that influence a manager's capital investment in less-polluting plant and machinery is least significant?

A) Regulatory costs
B) Mandatory disclosure
C) Stakeholder opinion
D) Depreciation allowances

Question 29

Which of the following is an issue that has to be considered at the input level of the Lens Model?

A) Characteristics of the person making the judgment
B) Scaling characteristics of individual cues
C) Qualities of the judgment
D) Characteristics of the decision rule