Accounting-based earnings management: motivations, players, implementation, and detection from the perspective of certified accountants

In the scope of Behavioral Decision Theory, Accounting-based Earnings Management (AEM) may compromise the success of decision making of a firm’s stakeholders. Given that AEM constitutes a barrier to the decision-making process, we aim to identify the main motivations of the players of AEM. Besides, in this study we also intend to analyze the implementing and detecting of AEM practices in financial statements and to evaluate whether individual characteristics influence the ability to implement and detect creative accounting practices. To achieve the proposed objectives, a quantitative methodology approach was used. A survey was applied to Portuguese’s certified accountants. In the data analyses, we applied the univariate and multiple analysis. Based on 159 observations, we find that most certified accountants indicate the main motivations are related to the reduction of the cost of capital and tax burden, the strength of the “code law system”, and that the managers are the main players. Our evidence also shows that the AEM practices are easily implemented and detected in the financial statements. In addition, we find that age, professional experience, and academic qualifications of the certified accountant tend to have an impact on the ability to implement AEM in the financial statements, contrary to gender and training area. Furthermore, gender and academic financial statements. This research is important for the development of the literature, entities that operate in accounting standardization and for the users of accounting and financial information. This study contributes to a better understanding of AEM practice, and it originally combines individual characteristics of accounting professionals with AEM practice.

Effect of Trust between the Time Pressure and Complexity in Judging and Decision-Making in Auditing

ABSTRACT Objective: the study aimed to assess the moderating effect of confidence in the joint influence of time pressure and complexity in judgment and decision-making (JDM) in auditing. The behavioral decision theory (BDT) was used from the perspective of the anchoring heuristic. Methods: as a method, the 2x2x2 experiment was used with a final sample of 126 independent auditors. For analysis, the t-test and multiple linear regressions were used. Results: the findings allow us to infer that factors such as trust, time pressure, and complexity, individually and jointly, influence JDM. The study showed that trust moderates the joint influence of time pressure and complexity on JDM. Time pressure and task complexity negatively influence JDM, but when including trust as a moderating factor, the effect of time pressure and complexity is mitigated, reducing the auditor’s difficulties and uncertainties in JDM. Conclusion: the study contributes to BDT, moving academic research toward understanding the interrelationships between personal, environmental, and task factors. It also contributes by presenting evidence that there is a need for considering and observing the effects generated by the factors altogether, in order to contribute to improving the quality of the audit.

Efeito da Confiança entre a Pressão de Tempo e Complexidade no Julgamento e Tomada de Decisão em Auditoria

ABSTRACT Objective: the study aimed to assess the moderating effect of confidence in the joint influence of time pressure and complexity in judgment and decision-making (JDM) in auditing. The behavioral decision theory (BDT) was used from the perspective of the anchoring heuristic. Methods: as a method, the 2x2x2 experiment was used with a final sample of 126 independent auditors. For analysis, the t-test and multiple linear regressions were used. Results: the findings allow us to infer that factors such as trust, time pressure, and complexity, individually and jointly, influence JDM. The study showed that trust moderates the joint influence of time pressure and complexity on JDM. Time pressure and task complexity negatively influence JDM, but when including trust as a moderating factor, the effect of time pressure and complexity is mitigated, reducing the auditor’s difficulties and uncertainties in JDM. Conclusion: the study contributes to BDT, moving academic research toward understanding the interrelationships between personal, environmental, and task factors. It also contributes by presenting evidence that there is a need for considering and observing the effects generated by the factors altogether, in order to contribute to improving the quality of the audit.

Factors influencing the value added tax compliance in small and medium enterprises in Jordan

This study aims to obtain the results of value added tax (VAT) compliance through behavioral decision theory with work personal attributes of the taxpayer's, tax understanding and taxpayer education, and ability to pay theory with tax compliance cost and audit system as a connecting variable to VAT compliance. The researcher randomly selected sample of n= 172 small and medium enterprise owners from Jordan by using web-based survey questionnaires. Data analysis uses the SPSS 23.0 and validates the relationship between study variables. The researchers also propose a research model support by the behavior decision theory and the ability to pay approach. Findings reveal a strong positive relationship between personal characteristics, VAT education and tax compliance under both theoretical grounds and also indicate a positive correlation between VAT compliance cost, audit system and VAT compliance in Jordan. Addressing the understudies, this study extends the role of value added tax practices in SMEs. It provides some useful information to the government and policy makers to develop and impose the value added tax law on SMEs Level. Therefore, the researcher suggests more studies to investigate the factors affecting VAT compliance in Jordan by using the proposed conceptual model under consideration.

A Novel Regret Theory-Based Decision-Making Method Combined with the Intuitionistic Fuzzy Canberra Distance

In practical decision-making, the behavior factors of decision makers often affect the final decision-making results. Regret theory is an important behavioral decision theory. Based on the regret theory, a novel decision-making method is proposed for the multiattribute decision-making problem with incomplete attribute weight information, and the attribute values are expressed by Atanassov intuitionistic fuzzy numbers. At first, a new distance of intuitionistic fuzzy sets is put forward based on the traditional Canberra distance. Then, we utilize it for the definition of the regret value (rejoice) for the attribute value of each alternative with the corresponding values of the positive point (negative point). The objective of this method is to maximize the comprehensive perceived utility of the alternative set by the decision maker. The optimal attribute weight vector is solved, and the optimal comprehensive perceived utility value of each alternative is obtained. Finally, according to the optimal comprehensive perceived utility value, the rank order of all alternatives is concluded.

Behavioral Decision Theory

Behavioral decision theory is a descriptive psychological theory of human judgment, decision making, and behavior that can be applied to political science. Behavioral decision theory is closely related to behavioral economics and behavioral finance. Behavioral economics is an attempt to understand actual human economic behavior, and behavioral finance studies human behavior in financial markets. Research on people’s decision making represents an important part of these fields, in which various aspects overlap with the scope of behavioral decision theory. Behavioral decision theory focuses on the decision-making phenomena that are broadly divisible into those under certainty, those under risk, and others under uncertainty that includes ambiguity and ignorance. What are the theoretical frameworks that could be used to explain the decision-making phenomenon? Although numerous theories related to decision making have been developed, they are, in essence, often broadly divided into two types: normative theory and descriptive theory. The former is intended to support rational decision making. The latter describes how people actually make decisions. Both normative and descriptive theories reflect the nature of actual human decision making to a degree. Even descriptive theory seeks a certain level of rationality in actual human decision making. Consequently, the two are mutually indistinguishable. Nonetheless, a major example of normative theory is regarded as the system of utility theory that is widely used in economics. A salient example of descriptive theory is behavioral decision theory. Utility theory has numerous variations, such as linear and nonlinear utility theories. Most theories have established axioms and mathematically developed principles. In contrast, behavioral decision theory covers a considerably wide range of variations of theoretical expressions, including theories that have been developed mathematically (such as prospect theory) and those expressed only with natural language (such as multiattribute decision-making process models). Behavioral decision theory has integrated the implications of the normative theory, descriptive theory, and prescriptive theory that help people to make better decisions.