The purposes of this study are to explore framing effects in a managerial accounting decision context and to test the explanatory power of prospect theory and two competing theories, fuzzy-trace theory and probabilistic mental models, on such effects. In Experiment 1, 86 undergraduate students made a choice between two alternatives in a managerial decision problem that illustrates a classic, Asian disease-type business scenario. Results show that the subjects committed the framing effect bias and that prospect theory, fuzzy-trace theory, and probabilistic mental models all predict the bias. In Experiment 2, a business variant of the Asian disease problem was designed to distinguish among the explanatory abilities of these theories in an accounting context. One hundred eighty-five undergraduate students participated in the experiment. Results of Experiment 2 indicate that the fuzzy-trace theory provides additional power to explain the framing effect. Hence, accounting professionals can design better approaches to reporting/presenting financial information that will help managers alleviate the framing effect in decision making.

Rapid developments in information technology (IT) have posed many challenges to the accounting profession. In this study we examined what has been done in US colleges by polling auditors' perceptions to investigate whether US accounting firms provide their auditors with more information on current IT topics than colleges do. Also educators in the USA are surveyed to find out what they are planning to do in college courses to ensure that accounting graduates acquire necessary IT knowledge/skills. The results indicate that the entry-level auditors have had significantly more exposure to IT topics while in college than the senior auditors had, which suggests that educators have modified their curricula by incorporating more IT topics into accounting programmes. According to the findings, educators recognize the importance of IT topics, but only a few IT topics can/will be covered in accounting curricula. Implications, limitations, and future research directions of this study are also discussed.accounting education, accounting firm training, information technology,

This research examines the individual and interactive effects of client retention incentive and client business risks on auditors' decisions regarding whether to accept clients' aggressive reporting practices. Fifty-five audit seniors and managers from all of the Big 5 accounting firms participated in this experimental study. We find a significant main effect of client business risks and an interactive effect between client retention incentives and client business risks on auditors' decisions. Specifically, the results indicate that, when a client's business risks are high, auditors tend to scrutinize such risks and carefully evaluate a client's proposed accounting practices. However, when there is less concern over a client's business risks, auditors may be willing to accept the client's aggressive reporting proposal if retention incentives are high.

Purpose This paper aims to examine major cognitive biases in auditors’ analyses involving visualization, as well as proposes practical approaches to address such biases in data visualization. Design/methodology/approach Using the professional judgment framework of KPMG (2011), this study performs an analysis of whether and how five major types of cognitive biases (framing, availability, overconfidence, anchoring and confirmation) may occur in an auditor’s data visualization and how such biases potentially compromise audit quality. Findings The analysis suggests that data visualization can trigger and/or aggravate the common cognitive biases in audit. If not properly addressed, such biases may adversely affect auditors' judgment and decision-making. Practical implications To ensure that data visualization improves audit efficiency and effectiveness, it is essential that auditors are aware of and successfully address cognitive biases in data visualization. Six practical approaches to debias cognitive biases in auditors’ visualization are proposed: using data visualization to complement rather than supplement traditional audit evidence; positioning data visualization to support rather than replace sophisticated analytics tools; using a dashboard with multiple dimensions; using both visualized and tabular data in analyses; assigning experienced audit staff; and providing pre-audit tutorials on cognitive bias and visualization. Originality/value The study raises awareness of psychological issues in an audit setting.

adverse selection, agency theory, moral development, project continuation,