We conduct an experiment to investigate whether the effects of an SAS No. 90-like quality assessment standard (QAS) on auditors’ decision to accept a client-preferred accounting method is jointly moderated by the nature of advice from an audit firm’s technical department and the strength of the client’s justification. Results indicate that, in the absence of advice, the presence of QAS does not affect auditors’ decision, regardless of client justification strength. However, in the presence of advice from the technical department, the presence of QAS significantly reduces auditors’ propensity to accept the client-preferred method, but only when the advice explicitly recommends the use of the most appropriate method and the client’s justification is strong. These findings demonstrate the complementary roles that professional standards and audit firms’ technical departments play in enhancing the quality of auditors’ decisions, and indicate that the nature of advice matters.

Research indicates that justifiability of a decision is a key determinant of work quality. In this paper, we investigate whether and how the requirement for preparers to justify an audit conclusion to a reviewer with task preferences that are similar to or dissimilar from their explicitly stated initial task preferences determine the nature and extent of justifications documented in their workpapers, and how this effect is moderated by their technical and tacit managerial knowledge. Results of an experiment with auditors as participants indicate that auditors use different forms of justifications under different circumstances. Auditors with high tacit managerial knowledge and high technical knowledge have a higher proclivity to enumerate more pro versus con reasons, and to consider a wider breadth of issues when they are required to justify their conclusions to reviewers with dissimilar task preferences. In contrast, high tacit managerial knowledge auditors required to justify to reviewers with similar initial task preferences have a greater tendency to employ an evidence framing approach, in which language is used to emphasize consistent evidence by downplaying associated inconsistent evidence. In additional analyses, we find that these three specific forms of justifications are positively associated with evaluations of work quality.

SUMMARY We examine the joint effects of incentive schemes and working relationships on auditors' propensity to report an audit partner's wrongdoing that impairs financial reporting quality in an experiment involving 90 audit seniors and managers. We predict and find that, relative to a control condition without an incentive scheme, a reward-based career-related incentive scheme is less likely to increase auditors' whistle-blowing propensity in the presence of a close working relationship with the wrongdoer than in its absence. In contrast, a penalty-based career-related scheme increases auditors' whistle-blowing propensity relative to the control condition regardless of the presence of a close working relationship. These results are consistent with a heightened social stigma associated with whistle-blowing on someone close for personal gains, and a preference to avoid losses rather than to acquire gains as predicted by prospect theory. The findings have useful implications for practice and suggest boundary conditions under which an incentive scheme can promote whistle-blowing. JEL Classifications: M40; M42.

a b s t r a c tIn this study we examine the association between accounting students' lone wolf tendencies and their perceptions of the usefulness of team work, team interaction behaviors, and team performance. While prior studies find that students generally perceive positive benefits from engaging in team work, our study finds that students with greater lone wolf tendencies perceive fewer benefits from engaging in team work. We also find that during team interactions, teams with a greater proportion of students with higher lone wolf tendencies experience less team commitment and team leadership. Further, such teams rate the outcome of their project negatively, although, there is no significant association with the project marks earned by these teams. We discuss the implications of our findings and suggest directions for future research.

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