Finally Laux 2014 finds that managers who are compensated under more convex

Finally laux 2014 finds that managers who are

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sensitive to the program ratio will misreport fundraising expenses to a greater degree than otherwise. Finally, Laux (2014) finds that managers who are compensated under more convex compensation plans (i.e., plans where compensation is more sensitive to earnings numbers) manipulate accounting information provided to the board to a greater degree than do those paid under less convex compensation plans. Specific observations that might inspire future research in auditing include the following: ± Informal communication of management goals and preferences can have significant impact on employee behavior, even when nonbinding. Thus, one question to address is how important is it for auditors to understand the more informal goals and objectives of management to understand the motivation of employees to engage in (or not engage in) dysfunctional behaviors? ± Scarcity of resources leading to high levels of competition between managers to access these resources tends to reduce their likelihood to request more resources than they need. Thus, should audit risk be evaluated as higher in settings where competition for scarce resources is low rather than high? ± Some subordinates who are pressured by their superiors to misreport will do so. Thus, to what degree do auditors need to understand the nature of the relationship between superiors and subordinates in the organization in terms of power and pressure to comply? Does this increased knowledge allow auditors to better understand the likelihood that misreporting has occurred? ± To what extent do non-profit organizations face similar pressures as for-profit managers to achieve financial targets and goals? If pressure is high, to what extent does this impact the auditor’s evaluation of inherent risk assessment? Being Complicit in Accounting Manipulation Feng, Ge, Luo, and Shevlin (2011) examine a sample of accounting and auditing enforcement releases (AAERS) issued by the SEC and related compensation data for executives of these firms to better understand whether accounting manipulation is more likely to be driven by CFOs’ own equity incentives or by pressure on CFOs from CEOs of these firms to engage in accounting manipulation. Results are consistent with the explanation that CFOs involved in accounting manipulation do so because they are pressured by CEOs rather than because they are looking to personally benefit from their own equity incentives. Similarly, Friedman (2014) finds high CEO power over the CFO results in the CFO engaging in accounting manipulation more often than when CEO power over the CFO is low. Finally, Mowchan, Lowe, and Reckers (2015) examine how individual characteristics, including impulsivity and authoritarianism, influence employees’ willingness to comply with a superior’s request to behave unethically and the ability to identify ethical dilemmas. The authors define impulsivity as an individual’s willingness to act before thinking carefully about the potential negative consequences that could result and authoritarianism as an individual’s willingness to unconditionally accept directives from an authority figure. Results indicate that high impulsivity
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