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The balanced scorecard is one of the major developments in management accounting in the past decade (Ittner and Larcker 2001). Lipe and Salterio (2000) find that managers ignore one of the key scorecard features, the inclusion of measures that are unique to the strategic objectives of a business unit, when making performance evaluation judgments. This study identifies and tests two approaches to reducing this “common measures bias.” We examine whether increasing effort via invoking process accountability (i.e., requiring managers to justify to their superior their performance evaluations) and/or improving the perceived quality of the balanced scorecard measures (i.e., via an independent third-party assurance report on the balanced scorecard) increases managers' usage of unique performance measures in their evaluations. Results suggest that either the requirement to justify an evaluation to a superior or the provision of an assurance report on the balanced scorecard increases the use of unique measures in managerial performance evaluation judgments. Implications for theory and practice are discussed.

Modern manufacturing settings increasingly rely upon workgroups; however, evidence concerning the best fit among incentive structure, production environment, and group performance has been mixed. Young et al. (1993) examine the effect of group incentives on group performance in cooperative and noncooperative environments. Although theory and evidence from practice indicate that group incentives combined with cooperation should result in higher group performance, their results were contrary to this prediction. To further explore this issue, we examine the effect of individual, group, and mixed incentive structures on group performance in assembly lines and teams. We find no difference in group performance depending on incentive structure for assembly lines; however, group performance is higher under group incentives for teams. Supplemental analysis indicates group incentives support the teams’ ability to implement beneficial task strategies and although mixed incentives are theoretically appealing, they may send confusing signals to employees about where to direct their effort.

This study examines the effects of fairness in budgeting on individual performance in a nonparticipative budgeting setting. An experiment was conducted in which subjects performed a production task and were compensated under a budget-based incentive contract. Performance was lowest when an unfair budget target was assigned using an unfair budgeting process. When the budget target assigned was fair, the fairness or unfairness of the budgeting process had no effect on performance. When an unfair budget target was determined using a fair budgeting process, mean performance was not significantly different from mean performance of the subjects assigned fair budget targets. Implications of this result in assigning stretch targets are discussed.

Auditors’ virtue comprises those qualities of character that manifest the ideals of the audit community (c.f., Maclntyre, 1984, After Virtue. (University of Notre Dame Press, Notre Dame)), and are instrumental in ensuring that auditors’ professional judgment is exercised according to a high moral standard (Thorne, 1998, Research on Accounting Ethics. (JAI Press, Greenwich, CT)). Nevertheless, the lack of valid and reliable quantitative measures of auditors’ virtue impedes research that furthers our understanding of how best to promote virtue in the audit community. To address this gap, we develop two measures of auditors’ virtue. We report the results of the validity and reliability of the scales. In addition, we use the findings from the administration of these scales to professional accountants to refine and validate the theoretical characterization of virtues developed by Pincoffs (1986, Quandaries and Virtues. University Press of Kansas, Lawrence, KS) and Libby and Thorne (2004, Business Ethics Quarterly). In so doing, this study provides a foundation by which future audit research can study ways to ensure that auditors’ virtue is promoted throughout the audit community. Copyright Springer 2007accounting ethics, virtue ethics, auditors’ virtue scale,

Vertical pay dispersion is the difference in pay across different hierarchical levels within an organization (Milkovich and Newman 1996). While vertical pay dispersion may be useful in attracting, retaining, and motivating highly skilled employees (Lazear and Rosen 1981;Lazear 1995;Prendergast 1999), our study investigates a potential disadvantage; specifically, the negative impact of perceived unfairness of vertical pay dispersion on employees' budgeting decisions. We predict and find that high vertical pay dispersion motivates subordinates to misreport costs to a greater extent than low vertical pay dispersion. Furthermore, we predict and find that superiors, on average, exercise more lenient cost controls when vertical pay dispersion is high rather than low. Supplemental analysis indicates superiors are more lenient on average because of their aversion to inequity caused by vertical pay dispersion. Our results suggest that high vertical pay dispersion can compromise the overall corporate budgeting environment, where higher levels of misreporting by subordinates goes unchecked by superiors.Les r epercussions de la dispersion verticale des salaires :observations exp erimentales en contexte budg etaireLa dispersion verticale des salaires est l' ecart salarial entre diff erents echelons hi erarchiques au sein d'une organisation (Milkovich et Newman, 1996). Même si la dispersion verticale des salaires peutêtre utile pour attirer, fid eliser et motiver des employ es hautement comp etents (Lazear et Rosen, 1981;Lazear, 1995;Prendergast, 1999), elle risque de pr esenter un inconv enient qu' etudient les auteurs : l'incidence n egative de l'iniquit e perc ßue de la dispersion