Managers can apply immediate economic and noneconomic

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Unformatted text preview: ic I 1 2 Several characteristics of auditing services increase auditors’ propensity to develop biases. Managers can apply immediate economic and noneconomic pressures against auditors who disagree with them, whereas economic penalties for audit errors are uncertain and delayed long into the future (Palmrose 1994). In addition, ambiguous financial-reporting standards allow auditors to rationalize a range of decisions (Libby et al. 2001). Bazerman et al. (1997) draw their conclusions about the impossibility of auditor independence based on a number of research articles that found subjects who were assigned different roles, such as plaintiff or defendant, made different decisions on how a judge would decide a case. See Babcock and Loewenstein (1997) for a review of this research. King—Investigation of Self-Serving Biases in an Auditing Trust Game 267 opportunities available to them by (1) providing managers a separate instructional session in which they play the roles of both auditor and manager, thus learning the vulnerabilities of auditors who trust managers, (2) having managers participate in multiple sessions...
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This note was uploaded on 01/27/2014 for the course ACCY 405 taught by Professor Staff during the Fall '08 term at University of Illinois, Urbana Champaign.

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