AAA Spark Meeting of the Regions

The Objectivity of Accounting Professionals Based in India

• In Event: Accounting Professionals' Behaviors

Abstract

This study examines the objectivity of accounting professionals based in India. We perform an experiment using a well-established instrument from prior literature. We asked accounting professionals based in India to act as either the seller or buyer in a hypothetical acquisition scenario. Participants were asked to evaluate the obsolescence of an apparel company’s inventory, assessing both the probability of inventory obsolescence and the likelihood they would propose an inventory write-down. The results indicate external auditors and tax professionals were able to remain objective, reflected in the consistency of their assessments across the buyer and seller conditions. Internal auditors were less objective, evaluating inventory obsolescence as more likely when their client was considering buying a subsidiary than when their client was considering selling a subsidiary. Internal auditors were also more likely to recommend an inventory write-down adjustment when hired by the buyer than when hired by the seller. The study informs regulators and accounting professionals. While we do not prescribe specific actions, our study provides evidence on the decision-making process of accounting professionals based in India that regulators might use to craft policy. Further, we respond to calls for additional evidence on the decision-making process of accounting professionals based in India, and for evidence on the objectivity of internal auditors.

Authors

• Cristina Bailey, The University of New Mexico

• Richard G. Brody, The University of New Mexico

• Gaurav Gupta, The University of North Carolina at Wilmington

• Jonathan Nash, University of New Hampshire