Academic journal article Journal of Managerial Issues

An Experimental Examination of Underreporting of Time

Academic journal article Journal of Managerial Issues

An Experimental Examination of Underreporting of Time

Article excerpt

Prior survey studies indicate that auditors often underreport time in order to obtain more favorable performance evaluations (Sweeney and Pierce, 2006; Akers and Eaton, 2003; Donnelly et at., 2003; Anderson-Gough et at., 2001). These studies imply that auditors have incentives to underreport time (which cause underreporting). Survey studies, however, provide little evidence as to the causal effects of incentives on underreporting, and/or any moderating factors. Thus, the objective of this study is to examine the effect of incentives on time reporting behavior and, more importantly, to gain a better understanding of the conditions under which incentives are most likely to cause underreporting. The study examines two important aspects of time reporting behavior: (1) the probability of underreporting (i.e., the percentage who underreport time); and (2) the magnitude of underreporting (i.e., the total time underreported).

The theory presented in this study indicates that incentives can cause underreporting of time, but that such effects likely depend on the time delay between task completion and time reporting (time reporting delay). Specifically, the presented theory indicates that individuals with incentives to underreport time are more likely to do so, and to a greater magnitude when there is a significant time reporting delay, as opposed to when there is not. To test these predictions, a computer-based experiment was conducted in which participants are asked to complete an accounting task, and then self-report the time they spent on the task. The experiment manipulates incentives to underreport time at two-levels (no incentives vs. incentives), and the time reporting delay at two-levels (no delay vs. one-week delay). Time reporting behavior is measured by comparing participants' actual times spent on the task (as measured by the computer) versus self-reports of time spent on the task.

Consistent with expectations, providing incentives to underreport time increases both the probability and magnitude of underreporting of time. More importantly, however, such effects depend on the time reporting delay. Specifically, regardless of incentives to underreport time, systematic underreporting of time was only observed when participants reported time one week, as opposed to immediately, after task completion. (1) In addition, time reporting was less accurate when participants reported time one week, as opposed to immediately, after task completion. Further, the magnitude of the effect is noteworthy-time reporting misstatements were 67% larger when participants reported time one week versus immediately after task completion.

This study is useful because it extends the extant knowledge regarding the causes of underreporting of time, and the conditions under which individuals are most likely to underreport time. In the experimental setting, the probability and magnitude of underreporting of time was greatest when participants were provided with incentives to underreport time and when they reported time one week (as opposed to immediately) after task completion. Assuming that holding incentives to underreport time constant, intentional underreporting of time does not significantly vary across time reporting delay conditions, one could contend that the greater underreporting of time observed in the "incentives / one-week time reporting delay" versus the "incentives / no time reporting delay" condition is not attributable to intentional decision-making but rather to downwardly biased recall of time. Therefore, an important implication of this study is that systematic underreporting of time, in certain circumstances (e.g., when there is a time reporting delay), could be unintentional. Thus, real world auditors (who have incentives to underreport time and often report time well after task completion) might unintentionally underreport time.

This study also provides some encouraging results for accounting practice. …

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