The Effects of Profit-Sharing Plans, Client Importance, and Reinforcement Sensitivity on Audit Quality

2020 ◽  
Author(s):  
Herman van Brenk ◽  
Barbara Majoor ◽  
Arnold M. Wright
Keyword(s):  
Agency Theory ◽  
Detrimental Effect ◽  
Audit Quality ◽  
Profit Sharing ◽  
Economic Incentives ◽  
Reinforcement Sensitivity Theory ◽  
Sensitivity Theory ◽  
Reinforcement Sensitivity ◽  
Reporting Decisions ◽  
Auditor Reporting

Despite concerns that profit-sharing plans might have a detrimental effect on audit quality, there is little empirical evidence on this issue. We examine the effects of the type of profit-sharing plan, level of client importance, and auditor reinforcement sensitivity (joint sensitivity to rewards and punishments) on auditor reporting decisions. By relying on agency theory and reinforcement sensitivity theory, we posit that the joint effects of profit sharing and client importance on auditors' decisions are contingent on reinforcement sensitivity. In an experiment with 450 audit partners and managers, we manipulate type of profit-sharing plan and client importance, and measure extroversion and neuroticism. We find the highest audit quality when profit sharing is based on firm performance, client importance is low, and reinforcement sensitivity is high. Thus, instead of just modifying the type of profit-sharing plans, it is the mix of economic incentives and personality traits that affect audit quality.

Reinforcement Sensitivity Theory of Personality Questionnaire--Dutch Version

2020 ◽  
Author(s):  
Serafine Dierickx ◽  
Dirk Smits ◽  
Philip J. Corr ◽  
Penelope Hasking ◽  
Laurence Claes
Keyword(s):  
Personality Questionnaire ◽  
Reinforcement Sensitivity Theory ◽  
Dutch Version ◽  
Sensitivity Theory ◽  
Reinforcement Sensitivity

The New Reinforcement Sensitivity Theory: Implications for Personality Measurement

2006 ◽  
Vol 10 (4) ◽  
pp. 320-335 ◽  
Author(s):  
Luke D. Smillie ◽  
Alan D. Pickering ◽  
Chris J. Jackson
Keyword(s):  
Formal Models ◽  
Personality Measurement ◽  
Reinforcement Sensitivity Theory ◽  
Sensitivity Theory ◽  
Interdependent System ◽  
Reinforcement Sensitivity ◽  
Psychometric Measures ◽  
Trait Impulsivity ◽  
Psychometric Measurement ◽  
Future Work

In this article, we review recent modifications to Jeffrey Gray's (1973, 1991) reinforcement sensitivity theory (RST), and attempt to draw implications for psychometric measurement of personality traits. First, we consider Gray and McNaughton's (2000) functional revisions to the biobehavioral systems of RST. Second, we evaluate recent clarifications relating to interdependent effects that these systems may have on behavior, in addition to or in place of separable effects (e.g., Corr, 2001; Pickering, 1997). Finally, we consider ambiguities regarding the exact trait dimension to which Gray's “reward system” corresponds. From this review, we suggest that future work is needed to distinguish psychometric measures of (a) fear from anxiety and (b) reward-reactivity from trait impulsivity. We also suggest, on the basis of interdependent system views of RST and associated exploration using formal models, that traits that are based upon RST are likely to have substantial intercorrelations. Finally, we advise that more substantive work is required to define relevant constructs and behaviors in RST before we can be confident in our psychometric measures of them.

scholarly journals The conceptualisation, measurement and scope of reinforcement sensitivity in the context of a neuroscience of personality

2008 ◽  
Vol 22 (5) ◽  
pp. 411-425 ◽  
Author(s):  
Luke D. Smillie
Keyword(s):  
Differential Sensitivity ◽  
Reinforcement Sensitivity Theory ◽  
Sensitivity Theory ◽  
Process Theories ◽  
Reinforcement Sensitivity ◽  
Underlying Causes ◽  
Target Paper ◽  
Approach Avoidance ◽  
Reinforcing Stimuli

Reinforcement sensitivity theory (RST) is complex, and there are subtle differences between RST and other approach‐avoidance process theories of personality. However, most such theories posit a common biobehavioural mechanism underlying personality which we must therefore strive to understand: differential sensitivity to reinforcing stimuli. Reinforcement sensitivity is widely assessed using questionnaires, but should we treat such measures as (a) a proxy for reinforcement sensitivity itself (i.e. the underlying causes of personality) or (b) trait constructs potentially manifesting out of reinforcement sensitivity (i.e. the ‘surface’ of personality)? Might neuroscience paradigms, such as those I have reviewed in my target paper, provide an advantage over questionnaires in allowing us to move closer to (a), thereby improving both the measurement and our understanding of reinforcement sensitivity? Assuming we can achieve this, how useful is reinforcement sensitivity—and biological perspectives more generally—for explaining personality? These are the major questions raised in the discussion of my target paper, and among the most pertinent issues in this field today. Copyright © 2008 John Wiley & Sons, Ltd.

The effect of real activities manipulation on going concern audit opinions for financially distressed companies

2018 ◽  
Vol 17 (4) ◽  
pp. 514-539
Author(s):  
Hongkang Xu ◽  
Mai Dao ◽  
Jia Wu
Keyword(s):  
Audit Quality ◽  
Positive Association ◽  
Content Type ◽  
Going Concern ◽  
Accruals Management ◽  
Reporting Decisions ◽  
Going Concern Opinion ◽  
Distressed Firms ◽  
Real Activities Manipulation ◽  
Auditor Reporting

Purpose This study aims to examine the effect of real activities manipulation (RAM) on auditors’ decision of issuing going concern (GC) opinions for distressed companies. Design/methodology/approach This study estimates and examines three types of RAM: reduction of discretionary expenses, sales manipulation and overproduction. It investigates the effect of RAM on auditor reporting conservatism by including the three measures of RAM methods in logistic regressions that explain the issuance of going concern opinions. The authors perform the analysis specifically on distressed firms for 2004-2013 period. Findings This study finds a significant and positive association between RAM and the likelihood of receiving going concern opinion in the financial distressed firm sample, suggesting that client’s abnormal business activity affects the auditor reporting conservatism. Practical implications This study provides evidence that auditors make going concern reporting decisions in consideration of the client’s abnormal operating decisions and management’s opportunism. Originality/value Recent literature argues that auditors have little recourse other than to resign if a client uses RAM to impact earnings or the financial statements, and hence the enhanced audit quality in the post-SOX period is due to the shift from using accruals management to RAM (Cohen et al., 2008; Chi et al., 2011; Kim and Park, 2014). The evidence provided in this study indicates that auditors report more conservatively (rather than simply resign) in response to the aggressive RAM.

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