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Kadous et al. (2003)

4 important questions on Kadous et al. (2003)

What is the motivated reasoning theory?

The motivated reasoning theory hold that individuals who are committed to directional goals engage in biased reasoning to reach those goals. Directional goals imply that one conclusion is preferred above others. Individuals with directional goals search for, interpret, and process information in a biased manner, and consequently, are more likely to reach the preferred conclusion.

What is/are the judgment(s) or decision(s) that are studied in this paper?

The decision is whether auditors should accept client's accounting method for financial reporting. Therefore, the auditors use their judgment to assess the quality of the client's accounting method.

What is/are the (normative) benchmark(s) against which the judgment(s) or decision(s) are compared?

According to the Advisory Panel on Auditor Independence (1994), the benchmark is asking auditors to identify the best method or to discuss the relative quality of alternative methods that could be applied and to make these high-quality benchmarks more salient. The best method is the one that is most consistent with the conceptual framework and accounting standards and that best captures the economic substance of the transaction under consideration.

Can you think of other accounting-related judgments / decisions that might be affected by this behavioral factor? Please describe

Many business decisions are affected by goal commitment. As a manager you would do the best for your company, managers are the production of the accounting information, they could be influential to motivated reasoning. And therefore give more weight to new information which leads that the company is doing well. The same is related to the auditors which are the certification of the accounting information. If they are closely related to the business and want to please the management they also are goal commitment.

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Judgment & Decision Making in Accounting

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