AAA Spark Meeting of Regions

How Does Professional Skepticism Offset the Effect of the Familiarity Threat on Professional Judgement?

• In Event: Earnings Management and Professional Judgement

Abstract

In the variance investigation setting, management accountants interview operating managers about unexpected variances. We hypothesize that the familiarity threat (i.e., friendship causing biased judgement) implicit in this setting puts management accountants at risk of violating the objectivity that the accounting profession expects them to exhibit, but professional skepticism may offset this effect on their judgement. We perform a repeated measures quasi-experiment to test our new model of familiarity threat and professional skepticism. We find that management accountants who perceive the operating managers they speak with as more similar to themselves then perceive those operating managers as more likable and more trustworthy, and these perceptions make them more satisfied with the explanations offered by those operating managers and less willing to engage in further information search. When perceived similarity is (not) salient, we also find that state skepticism and interpersonal understanding decrease (neutral view skepticism increases) satisfaction with the explanation offered.

Authors

• Elena Klevsky, University of Tampa

• Andrea L. Hetrick, University of New Mexico

• Robert Rankin, Texas A&M University - Commerce

• Leila Emily Hickman, California Polytechnic State University - San Luis