The Effects of Exposure to Practice Risk on Tax Professionals' Judgements and Recommendations
Tax professionals are responsible for objectively evaluating tax authorities and evidence relevant to their application and for serving as client advocates. We predict that practice risk — that is, exposure to monetary and nonmonetary costs of making inappropriate recommendations — will affect tax p...
Saved in:
Published in | Contemporary accounting research Vol. 18; no. 3; pp. 451 - 475 |
---|---|
Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Oxford, UK
Blackwell Publishing Ltd
01.09.2001
Canadian Academic Accounting Association |
Subjects | |
Online Access | Get full text |
Cover
Loading…
Summary: | Tax professionals are responsible for objectively evaluating tax authorities and evidence relevant to their application and for serving as client advocates. We predict that practice risk — that is, exposure to monetary and nonmonetary costs of making inappropriate recommendations — will affect tax professionals' ability to meet these responsibilities by influencing the manner in which they process information about a tax situation as well as their resulting recommendations for clients. We conduct an experiment in which we manipulate practice risk through client characteristics. We also manipulate provision and nature of outcome information. We find that tax professionals process information differently for clients of different risk levels. Specifically, tax professionals weight negative outcome information more heavily when forming likelihood assessments underlying recommendations for a high‐risk client, relative to a low‐risk client. Further, risk directly affects recommendations in that tax professionals more strongly recommend an aggressive position for a low‐risk client. Differential processing of information for clients with identical transactions but different risk levels may protect the tax professional from the higher expected costs of making inappropriate recommendations to high‐risk clients. However, it indicates that tax professionals do not evaluate evidence objectively for all types of clients. |
---|---|
Bibliography: | ArticleID:CARE248 Accepted by Sarah Bonner. We thank Peng Jia for research assistance and Richard Helleloid for providing us with data and research materials from his 1988 study. Thanks also to Hal Arkes, Fran Ayres, Jean Bedard, Sarah Bonner (associate editor), Bob Bowen, Bryan Cloyd, Andy Cuccia, Jackie Hammersley, Michelle Hanlon, Richard Helleloid, Peggy Hite, Jim Jiambalvo, Jane Kennedy, Lisa Koonce, Joseph Limacher, Marlys Lipe, Mark Peecher, Ira Solomon, Terry Shevlin, D. Shores, workshop participants at Rutgers University and the universities of Oklahoma and Washington, attendees of the Accounting, Behavior and Organizations Research Conference and the Behavioral Decision Research in Management Conference, and an anonymous reviewer for helpful comments on earlier drafts. ark:/67375/WNG-0DP0WS4H-4 istex:E4EA9C8E9C9408D35C9AFFBC06E394EE7FE4105D ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0823-9150 1911-3846 |
DOI: | 10.1506/TF76-653L-R36N-13YP |