Professional Documents
Culture Documents
W. Robert Knechel
University of Florida
Justin Leiby*
University of Georgia
June 2016
*Corresponding Author
255 Brooks Hall
310 Herty Drive
Athens, GA 30602
706.369.4012
jleiby@uga.edu
We are thankful for suggestions and comments from Denny Beresford, Joe Brazel, Tim Bauer,
Tim Brown, Frank Buckless, Jackie Hammersley, Robin Pennington, Linda Quick, Bridget
Stomberg, Eileen Taylor, and workshop participants at North Carolina State University, the
University of Georgia, and the 2015 International Symposium on Auditing Research (ISAR).
Justin Leiby is grateful for support from a University of Florida Fisher School of Accounting
Summer Research Grant.
If You Want My Advice:
Status Motives and Audit Consultations about Accounting Estimates
Abstract
Effective consultation is critical for improving the audit of estimates. In an experiment where audit
managers acted as consultants to other auditors, we examine conditions in which consultants either
recommend estimates that differ substantially from advice-seekers assessments (contrariness) or
recommend narrower reasonable ranges of estimates (precision). Psychology theory argues that
both of these attributes can improve estimates. We examine whether these attributes depend on
consultants' status motives, i.e., the desire to gain respect from or power over others. We find that
active status motives lead consultants with higher specialized knowledge to provide
recommendations that are less contrary, but more precise. However, consultants increase precision
by tightening range bounds in a manner not counter to managements preference and thus unlikely
to prompt the audit team to challenge the estimate. Further, we find that higher consultant decision
authority also constrains precision. Our findings suggest limits to consultations potential
effectiveness in improving estimates. For instance, our findings suggest that firms and standard
setters emphasize consultant scrutiny on the range bound that is most likely to constrain
management opportunism.
1
1. Introduction
Financial reports contain many complex accounting estimates that require significant
auditor judgment and can increase the risk of material misstatements. Auditors often struggle to
maintain the requisite knowledge and questioning mindset necessary to effectively assess these
estimates (PCAOB [2015a; 2015b, 2015c; 2015d]; Griffith et al. [2015]). Due to these difficulties,
auditors routinely engage in consultation with other professionals to improve their own judgments
in these areas (Kennedy et al. [1997]; Salterio and Denham [1997]; AICPA [2002]; IAASB [2005];
Barrows et al. [2010]; Ranzilla et al. [2011] AICPA [2012]). Consultation refers to an auditor
receiving advice from another knowledgeable individual (consultant). Such advice can range
from formal input from a designated expert to informal input from a co-worker or colleague.1
Auditors often rely heavily on input from consultations when evaluating estimates (Griffith et al.
[2015]), and psychology research suggests that this input can be particularly helpful in improving
uncertain estimates (Yaniv [2004]). Yet, little is known about how the efficacy of consultation and
the conditions under which consultants provide advice might improve the audit of estimates.
Consultation in auditing is pervasive and has substantial potential benefits, thus the availability of
In this study, we examine two properties of advice that are likely to help improve auditor
judgment on accounting estimates: contrariness and precision. Contrariness refers to the degree
to which a consultants advice differs from the advice-seekers own opinion. Many of the
presumed benefits of consultation lie in the potential to expose auditors to new information and
alternative opinions (Barrows et al. [2010]; Ranzilla et al. [2011]), and there is ample evidence
1
The consultants advice could be opinions or suggestions for or against an option, about the best process to address
an issue, or additional information about an issue. We use advice-seeker and auditor interchangeably to refer to
the intended recipient of advice.
2
that exposure to contrary opinions improves novice and expert judgment (Tetlock [2005]; Larrick
and Soll [2006]). Precision refers to the narrowness of the range of options presented by a
consultant to an advice seeker, i.e., reducing the range of possible outcomes to be considered.
Because auditing standards explicitly require adjustments only to estimates that fall outside a
reasonable range (AICPA [2006]), recommending narrower ranges for estimates or their inputs
In spite of these potential benefits, the inherent frictions of an audit setting can make
positions of contrariness and precision costly to auditors or an audit firm. Audit engagements face
intense budget pressure as well as scrutiny by both internal quality reviews and external PCAOB
inspections. These conditions may pressure an audit team to prematurely reach an artificial level
of consensus on contentious issues and to focus on confirming evidence (e.g., AICPA [2012]) so
that the audit appears to be efficient and effective. By its nature, contrary advice can inhibit and
delay generating consensus. In addition, audit clients may prefer imprecision that allows leeway
for estimates that reflect managements incentives, rather than underlying fundamentals (Bamber
et al. [2010]; Dechow et al. [2010]), and can use their superior knowledge about their business to
justify this leeway. Thus, increasingly precise recommendations require that consultants possess
the necessary expertise to justify constraining clients discretion over estimates. Such conditions
We argue in this paper that contrariness and precision may increase when consultants are
motivated to signal their own self-confidence, as higher contrariness and precision are both
interpreted as indicators of confidence (Kanodia et al. [1989]; Levy [2004]; Moore and Healy
status motives, i.e., the desire to gain respect from, or power over, others (Griskevicius et al.
3
[2009a; 2009b]; Kenrick et al. [2009]). Status motives are one of a group of specialized decision
rules that evolved to help early humans cope with survival dilemmas they may have confronted
(Cosmides and Tooby [1994]; Kenrick et al. [2003]).2 Status motives can activate in the presence
inactive in the absence of such cues. For example, status motives could activate in the presence of
In an audit consultation, the presence or absence of cues to activate status motives is likely
to vary naturally. For instance, consultations necessarily involve high-profile decisions and clients,
and interactions with high-level personnel such as experts and successful partners. When status
motives are activated, people are likely to derive significant utility from actions that cultivate
prestige or respect in others eyes. One such action is signaling self-confidence (Anderson et al.
[2006]; Radzevik and Moore [2011]. As a result, status motives may stimulate incrementally more
Further, we examine whether the effect of status motives also depends on two key factors
in an auditing context. The first is the tendency of auditors to specialize by subject matter or
industry, which leads auditors to process information differently as their specialized knowledge
increases (Solomon et al. [1999]; Taylor [2000]; Hammersley [2006]). The second is the
consultants decision authority, i.e., the degree to which the advice-seeker is expected to rely on
2
Kenrick et al. [2003; 2009] identify a small number of these specialized sets of decision rules, i.e., evolutionary
motives, specifically, status, self-protection, coalition formation, mate acquisition, mate retention, and kin care, all of
which serve to solve particular survival problems that confronted people in hunter-gatherer times. Status motives
address the dilemma of competing with others for scarce resources. In this framework, preferences and resource
allocations are utility-maximizing functions that depend on which evolved set of decision rules is active. For example,
when the status system is active, people derive utility from actions that increase prestige or dominance, while people
derive utility from actions that increase safety when the self-protection system is active. Note that we are not interested
in how possessing status affects consultant recommendations, but rather in the motivation to gain or maintain status.
4
the advice (e.g., Gold et al. [2012]). These frictions of an audit setting may influence the
We conduct an experiment with 102 audit managers and senior managers from a U.S. Big
Four accounting firm. Following theory that status motives are context-specific adaptations
activated in specific situations, we manipulate status motives by priming auditors with a brief story
prior to the task (Griskevicius et al. [2009b]). Participants then read a case in which they act as a
consultant to another auditor regarding the discount rate a client uses to estimate the fair value of
a securitized asset. The auditor is inclined to allow an aggressive discount rate that is lower than
that of industry leaders and increases reported income. We manipulate decision authority as high
or low and measure participants securitization knowledge as our proxy of specialized knowledge.
Auditors then provide their estimate of the most appropriate discount rate for calculating the
underlying accounting estimate and assess the range of reasonable discount rates that the client
could use. Our measure of contrariness is the signed difference between the consultants discount
rate estimate and the advice-seekers best estimate. Our measure of precision is based on the
decision authority conditional on their status motives. More specifically, we find that when status
motives are active, consultants with higher specialized knowledge are more precise but less
contrary than those with lower knowledge. Consultants willingness to challenge an auditors
depending on which end point is affected by the consultation. However, we find that consultants
5
recommend changes to the end of the range that is further from managements preference, thus
this increased precision is unlikely to influence the evaluation and ultimate quality of the estimate.
These insights are relevant to ongoing debates over standards on estimates and the use of
specialists. Given that experienced, higher knowledge consultants (a reasonable proxy for
valuation specialists) are more prone to increase the precision of a range rather than the
contrariness of a point estimate, firm policies or standards could explicitly advocate precision as a
desired property of recommendations from consultants and specialists. This could include
guidance for consultants to focus scrutiny on the end of the range that is nearest to managements
likely preference, as tightening this end of a range is most likely to influence the audit teams
Moreover, we find that precision decreases with higher decision authority and increases
only when decision authority is lower and status motives are active. This is likely opposite of what
is desired from consultations. Our finding that higher decision authority can have negative audit
quality implications is relevant to audit firm policies, which often vest substantial authority in
consultants, and to the ongoing debate over standards for the use of specialists. In tandem with
findings that auditors rely heavily on specialists who often have little formal authority in practice
(Griffith 2015; Griffith et al. 2015), our findings suggest it may be beneficial to advocate lower
decision authority. Unlike knowledge-driven increases in precision, we do not find that increased
precision under low decision authority involves disproportionately tightening one end of the range
more than another, which suggests heretofore unacknowledged benefits of low decision authority.
judgment (Bell et al. [2005]), then audit quality may also benefit from firms and regulators
6
acknowledging the value of consultation with non-specialist but experienced peers. This could
include explicitly encouraging more informal consultations with peers. We find that this group is
most willing to challenge acquiescent assessments of management estimates, and there is evidence
that experienced professionals exhibit similar judgment quality outside, as opposed to inside their
fraud recognize the benefits of such peer-to-peer consultations (AICPA [2002]). It may be valuable
In sum, our study identifies conditions affecting the degree to which consultant
recommendations are likely to help remedy deficiencies in the audit of estimates. This is an
important step, as prior literature on advice focuses primarily on the advice-seeker and treats the
[2010]; Kadous et al. [2013]). Our findings can inform audit firm policies that require consultation
provide guidance on using consultation to conduct more effective audits of financial statement
estimates. Auditing standards that recommend consultation but provide few specifics and limited
Finally, this is the first study of which we are aware to show that adaptive needs for status
can shape how professionals respond to features of their environment. Consultation fails frequently
in professional settings (Lee [1997]; Missal [2008]), sometimes with catastrophic consequences
(Vaughan [1997]), and our study is a first step towards understanding how the adaptive need for
prestige or respect can affect a consultants tendency to provide useful advice that promotes a
self-critical, point-counterpoint style of thinking that benefits judgment (Tetlock [2005, 21]).
Thus, our contributions potentially extend to other professions beyond auditing and accounting. In
7
general settings like social and consumer psychology, active status motives lead people to show
professional auditing setting that emphasizes consensus, we find limited evidence of this tendency
as high knowledge consultants avoid challenging others and instead show off by increasing
precision. Consultants in other professions that encourage consultation and prize consensus, such
as engineering or medicine, may similarly satisfy status motives through means other than
challenging others.
In the remainder of the paper, Section 2 develops our theory and hypotheses, Section 3
describes our experiment, Section 4 reports results, and Section 5 discusses conclusions and future
directions.
Consultation is integral to an audit firms quality control system (Salterio and Denham
[1997]). Practitioners, scholars, and regulators note the potential for consultation to improve
auditor judgment by exposing auditors to new opinions and information (Barrows et al. [2010];
Ranzilla et al. [2011]; PCAOB [2012]; Glover and Prawitt [2014]).3 Accounting estimates are an
area in which consultation has the potential to be particularly useful because auditors often struggle
estimates (Griffith et al. [2015]). The usefulness of consultation in auditing estimates (Glover and
judgments, especially those that involve estimates (e.g., Yaniv [2004]; Vul and Pashler [2008];
3
There is no standard definition of consultation offered by regulators or practitioners. Our definition of consultation
is relatively broad and encompasses a range of consultative interactions that vary in their degree of formality. In the
conclusions section, we discuss the implications of our definition on our theorys generalizability.
8
Herzog and Hertwig [2009]; also see Bonaccio and Dalal [2006] for a review). As a result,
understanding the conditions that affect a consultants provision of useful advice provides insight
into a necessary condition for improving the audit of estimates. We argue that two attributes of
advice could be particularly important in this context: (1) the direction of the advice (confirming
or it can confirm those attitudes. In many domains, such as medicine and organizational behavior,
advice is considered more decision relevant when it is not contrary (Kray [2000]; Jonas and Frey
(skeptical) mindset (PCAOB AU 230 [2006]; Nelson [2009]; Barrows et al. [2010]; KPMG
[2011]), contrary advice may be more decision relevant to an auditor. Even when evidence
suggests that a clients assertions are reasonable, which is true in many audit contexts, professional
Tetlock [2005] alludes to the value of contrary opinions in an extensive analysis of expert
judgments by concluding that the greatest deficit in expert judgment is the vice of closed-
increasing the contrast between a consultants and an advice-seekers best estimates increases the
chance that the two will bracket the best answer. In such conditions, estimates will improve as
long as the advice-seeker moves their judgment closer to that of the consultant (Larrick and Soll
[2006]; Vul and Pashler [2008]; Herzog and Hertwig [2009]). We refine this logic for an auditing
4
For this project we also conducted multiple informal interviews with senior auditing practitioners with national
office experience. Among other things, these practitioners note that it is important for consultants to be contrary
even towards conclusions that appear to be well-justified and correct, as the costs of not challenging a conclusion
that turns out to be wrong far exceed the costs of challenging a conclusion that turns out to be right.
9
setting, in which estimates are often biased in a direction consistent with managements incentives.
In auditing, contrariness is helpful when it moves the estimate towards the most reasonable value.
At the same time, because estimates and many other consultation situations in auditing
involve subjectivity, increasingly precise advice can reduce the uncertainty surrounding a specific
accounting judgment. By eliminating less justifiable values, a consultant can help the decision
maker to narrow the range of reasonable values under consideration. Narrower ranges generally
reduce the latitude for manager opportunism (Bamber et al. [2010]; Griffin [2014]). This suggests
In brief, both consultant precision and contrariness are consistent with adopting a
questioning mindset towards management assertions and increase the potential for consultation to
improve auditor judgment. Our study examines conditions under which consultants advice will
cases, consultants are motivated to reach the best possible conclusion, but in other cases they may
be motivated to either agree or disagree with the advice-seeker regardless of the underlying best
answer (Jonas et al. [2005]). However, consultants are only likely to pursue directional goals
within the constraints of reason, e.g., if doing so does not threaten their reputation or career, or
In auditing, multiple pressures may motivate the consultant to agree with an advice-seeker,
including motivations to minimize a consultants own responsibility for the decision (e.g., on high
risk engagements), to minimize audit team effort (e.g., when they face a tight deadline), or to
satisfy third parties whose reviews might cause an auditor to emphasize the consistency of
10
documented conclusions (e.g., PCAOB inspectors and internal quality reviewers).5 Consultants
managements discretion in financial reporting (Bamber et al. [2010]) and could strain client
relations for the engagement team. Thus, it is questionable whether consultants really adopt the
questioning mindset to the extent desired by regulators and audit firms. We focus our examination
on one motivation that varies naturally in an auditing (or any professional) context and could
People often achieve status through observable actions that communicate their capabilities
to others. These actions include confronting or challenging others and making choices that are
either costly or distinctive (Griskevicius et al. [2009a; 2009b; 2010]). In auditing, status-motivated
consultants may exhibit a tendency to signal their self-confidence, as confidence is often perceived
as status by observers (Anderson et al. [2006]). In particular, consultants can signal confidence
implicitly signals that the consultant values their own abilities and beliefs more than those of the
advice-seeker (Kanodia et al. [1989]; Levy [2004]). Thus, contrariness acts as a possible signal of
the underlying capability of the consultant. Alternatively, precision is a signal of the consultants
degree of certainty that they know the true state of the world, which is commonly viewed as an
indicator of a persons confidence (Moore and Healy [2008]). Thus, increasing the precision of a
We specifically examine how a consultants status motives, i.e., the desire to gain prestige,
respect, or power over others (Griskevicius et al. [2009b]; Kenrick et al. [2009]), affect the
5
As an example of the pressures to maintain agreement, the AICPAs (2012) standard QC 10.4 requires that the
engagement team document disagreements that arise during consultation and delay the release of the audit report
until the disagreements are resolved.
11
contrariness and precision of recommendations. We draw the concept of status motives from
evolutionary theory, which argues that status motives are among a small group of specialized
problem solving systems, each of which evolved to cope with a particular survival dilemma that
confronted early humans (Cosmides and Tooby [1994]; Kenrick et al. [2003]). In this framework,
a persons preferences and resource allocations are based on a combination of specialized sets of
decision rules, rather than a single rational decision system (Gintis et al. [2001]; Kenrick et al.
[2009]; Griskevicius and Kenrick [2013]). Status motives relate to the survival dilemma of
obtaining desirable resources while competing with others for those resources (Kenrick et al.
[2003]). Consequently, when status motives are active, people derive utility from actions that
increase prestige or power. Note that status motives do not refer to the possession of status or to a
personality trait that values status, but rather to a temporary motivation to attain status that can
Status motives are likely to activate in the presence of situational cues of dominance,
people (Griskevicius and Kenrick [2013], 378). Because auditors routinely confront ill-structured
information that is rich with evidential, task, economic, and social cues (Bell et al. [2005]; Ranzilla
et al. [2011]), cues that activate status motives are likely to arise and vary naturally in an audit
setting. Such cues tend to represent either potential threats to ones status or opportunities to gain
status. In an auditing setting, possible examples include the presence on an engagement of either
a competitor or highly successful coworker; thinking about or receiving praise for ones
accomplishments (or seeing someone else praised); working on a prestigious client; or witnessing
formal or informal rewards such as promotions, raises, desirable job assignments, and training
12
important decision makers or peers, and can impact a professionals career progression, it is
As discussed above, features of the auditing setting may constrain increased contrariness
or increased precision such that either action is potentially costly to the consultant. As a result,
consultants with active status motives may be constrained in their ability to satisfy status motives
through these actions. While active status motives may increase the consultants willingness to
incur the costs of increased contrariness or precision, these motives alone may not be sufficient to
influence a consultants behavior. Rather, we expect that consultants with active status motives are
likely to increase contrariness or precision only in conditions when such actions seem reasonable,
i.e., when their position is consistent with their self-image as an objective, responsible professional
(Kunda [1990]; Kadous et al. [2003]). What a consultant deems reasonable depends on their level
of knowledge and the constraints placed on their decision making by the audit process and
environment. In the following sections, we focus on two conditions that are likely to influence how
a consultants status motives impact their willingness to be contrary or precise: (1) the consultants
level of specialized knowledge and (2) the consultants level of decision authority.
2.2.2 Hypotheses 1a and 1b: The Consultants Status Motives and Specialized Knowledge
Auditors begin specializing early in their careers, often by industry (Solomon et al. [1999])
but also by functional area (Boritz et al. [2015]). Within their specialization, they integrate
information differently and better distinguish between relevant and irrelevant information (Taylor
[2000]; Low [2004]; Hammersley [2006]). Auditors with greater specialized knowledge have well-
developed mental models for detecting misstatements and dismissing non-misstatements (Kaplan
and Reckers [1989]; Kaplan et al. [1992]; Bedard and Biggs [1991]; Biggs et al. [1993]).
Specialized knowledge enables auditors to develop and evaluate a larger number of plausible
13
hypotheses for a questionable account balance fluctuation or estimate (Wright and Wright [1997];
Solomon et al. [1999]). As a result, if status motives lead consultants to want to signal self-
on the issue.
training, which is why they are in a consultative position. However, their degree of knowledge on
an issue can vary based on factors such as the task (e.g., program planning versus substantive
evidence evaluation) or the direct experience a consultant could have with a specific issue (e.g.,
an unusual type of transaction or estimate for which no precedents exist) (DeZoort and Stanley
[2006]; Meservy et al. [2006]). Thus, consultants are often experienced and knowledgeable, but
In general, we expect that precision is the preferred way to signal confidence and thereby
to satisfy status motives. An individuals ability to increase the precision of their responses directly
depends on the knowledge they have available to justify their advice. While contrariness can signal
self-confidence, organizations often discourage conflicting opinions and reward yes men even
when they claim to prefer independent thought (Prendergast [1993]). Moreover, advice-seekers in
auditing are likely to expect consultants to justify their recommendations (Kadous et al. [2013]).
As a result, consultants may feel accountable to the advice-seeker and feel pressure to match their
recommendations to the preferences of the advice-seeker (Peecher [1996]). These factors suggest
that an expert can better achieve their status motives using precision rather than contrariness. An
expert is likely to possess the knowledge necessary to suggest a narrower range of options in a
given decision situation. This knowledge may also enable the consultant to more effectively help
14
the engagement team challenge a clients preference for less precision in accounting estimates.
In contrast, as consultants expertise on an issue decreases, they are less likely to believe
that they possess the necessary knowledge to reasonably justify increased precision. Moreover,
those with less knowledge on an issue are increasingly likely to use effort-reducing heuristics
(Kadous et al. [2013]). Because an evolved response to status motives is to appear distinctive or
argumentative (Grisckevicius [2009a; 2009b]), consultants with less expertise are likely to adopt
a position of contrariness in response to status motives, knowing that they may lack the expertise
in a given context to defend an increase in precision. That is, a less knowledgeable consultant will
offer contrary recommendations that reflect a devils advocate position, rather than the more
Thus, we expect active status motives to increase precision among consultants with high
specialized knowledge, but not among those with low specialized knowledge. That is, precision
will be highest among consultants with both active status motives and high levels of specialized
knowledge. Further, we expect active status motives to increase contrariness among consultants
with low specialized knowledge, but not among those with high specialized knowledge. That is,
contrariness will be highest among consultants with both active status motives and low levels of
H1a: Active status motives increase contrariness when evaluating accounting estimates
among consultants with lower specialized knowledge, but not among those with higher
specialized knowledge.
H1b: Active status motives increase precision when evaluating accounting estimates
among consultants with higher specialized knowledge, but not among those with lower
specialized knowledge.
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2.2.3 Hypotheses 2a and 2b: The Consultants Status Motives and Decision Authority
consultants advice, whereas high decision authority suggests advice-seekers have limited
discretion. In formalized consultation policies, a consultants decision authority can vary from
situation to situation, even within the same firm (Gold et al. [2012]). To be sure, low consultant
decision authority does not necessarily mean that advice-seekers will ignore the consultant, though
there are noteworthy instances in which an engagement team has ignored expert consultant
recommendations (e.g., Missal [2008], 474 476). In auditing, the consultation process is more of
a give and take process through which consensus emerges. The value of consultation lies in
challenging the advice-seeker to justify their conclusions, and the process of doing so could
involve either the consultant or advice-seeker converging towards the others opinion.
As a consultants decision authority increases, the consultant may feel more responsible
for the decision and believe that subsequent problems with an audit conclusion may be attributed
to the consultant. In turn, consultants likely experience greater internal dissonance in formulating
a recommendation when they have high decision authority. We argue that higher decision authority
likely influences the consultants regulatory focus, i.e., the mindset consultants adopt in processing
information that leads them to more strongly focus either on improving a situation or on not making
it worse (Higgins [1997]). High decision authority may cause the consultant to adopt a more
defensive mindset to process information and make recommendations in manner that avoids bad
outcomes that could be attributed to their advice (Polman [2012b]).6 That is, they focus on not
6
Regulatory focus can be more defensive (prevention focused), which emphasizes safety and responsibilities, or
positive (promotion focused), which emphasizes hopes and improvements. In a representative study that contrasts
prevention and promotion foci, Crowe and Higgins ([1997]) examine the effects of rewarding decisions makers for
performing well on a variety of tasks, as opposed to rewarding them for not performing poorly (instantiating a
16
being the cause of less justifiable conclusions. Conversely, as decision authority decreases, a
consultant may adopt a more positive mindset that is less concerned with avoiding bad outcomes
There is evidence that differences in regulatory focus affect expert, highly confident, and
experienced decision makers, as well as novices. For example, physicians recommend different
treatments to patients than they would select to treat themselves, and recommend different patient
treatment plans to other physicians than they would select if they made the final treatment decision
themselves (Ubel et al. [2011]; Rocke et al. [2014]). Similarly, Jaskiewicz and Luchak [2013] rely
on regulatory focus to reason that a CEO leading a family firm is more focused on preventing
losses or damage to the familys financial interests if he or she is a member of the family, rather
than an outsider. Consistent with this logic, family-owned firms are less successful in rapidly
changing environments when led by a family-member CEO, rather than a non-family CEO.
All else equal, when decision authority is higher, a consultant is likely to be more
concerned with not worsening an audit conclusion or undermining the process of reaching that
conclusion. As discussed above, while contrariness and precision can both improve audit
conclusions, either behavior can also lead to negative side effects such as delayed audit reports,
budget overruns, worsened client relations, or heightened litigation risk. As a result, the consultant
is likely to adopt a defensive mindset to avoid potential negative outcomes by being less contrary
promotion or prevention focus, respectively). They find that, relative to promotion-focused people, those who are
prevention-focused tend to perform worse after failure on a difficult task and generate fewer decision alternatives.
This concept differs from the concept of accountability. Whereas accountability relates to external pressures to defend
ones views, this theory relates to internal pressures to perform well and/or avoid mistakes. Due to the myriad
accountability pressures that auditors face (Gibbins and Newton [1994]; Peecher et al. [2013]), we expect
accountability to be quite high regardless of decision authority.
17
Accordingly, we argue that the defensive mindset generated by high decision authority is
Increased contrariness or precision differentiates the consultants position from that of the advice
seeker and increases the chances of a mistake attributable to the consultant. As noted above, active
status motives lead consultants to signal confidence through the means that are most reasonable to
them. If consultants with higher decision authority have a defensive mindset that emphasizes
avoiding potential negative outcomes, then they will be less willing to increase contrariness or
precision to satisfy status motives. Thus, decision authority is likely to weaken the effects of status
3. Method
3.1 PARTICIPANTS
The participants were 102 senior managers and managers from a Big Four accounting firm
in the United States who were asked to participate in the experiment during training sessions
sponsored by their firm. All training session attendees received an email from the firm that asked
them to complete the experiment. The email included a link to the experiment and a brief message
that indicated the firms support for the research. Mean (standard deviation) auditing experience
of the participants was 9.72 (3.18) years and ranged from 5 to 19 years, and 71% of participants
indicated that they had served in a consultative role at some point during their career.
18
Procedures
The experimental case (adapted from Peecher et al. [2010] and Kadous et al. [2013])
instructed participants to assume they were consulting with a colleague at the same rank but on a
different engagement on a valuation issue arising during the audit of Retail Credit Incorporated
(RCI), a client that securitizes credit card receivables. The case provided extensive background on
the securitization in question, evidence collected by the colleague, and industry benchmarks for
comparison. The audit evidence was ambiguous and left open the possibility of intentional
overstatement of gains on securitization. The advice-seekers conclusion was that a discount rate
lower than the rates used by industry leaders would be appropriate, resulting in a higher estimated
fair value and larger gain on securitization. Participants, serving as consultants, recommended the
appropriate discount rate they thought would apply to the case and assessed their confidence in
that recommendation. Participants also indicated the range of reasonable discount rates that could
be used for the estimate. Finally, they answered a series of post-test and demographic questions.
Our first independent variable was active versus non-active status motives. Prior to reading
the securitization case, all auditors read a 600 word story that we manipulated between-
participants. In the active status motive condition, participants read a story (adopted from
Griskevicius et al. [2009b; 2010]) that asked them to assume that they had just explored the job
market and accepted a new job at a prestigious firm. The story described observing the luxury cars
in the parking lot, visiting the opulent office building, and the prospect of competing with two co-
7
We activate status motives with a validated priming manipulation unrelated to the judgment task in order to ensure
the internal validity of our experiment (Griffith et al. [2016]). Otherwise, manipulating status motives by varying some
aspect of the task or context would risk confounding status motives with another source of motivation, e.g., incentives,
task familiarity or knowledge, etc. We are grateful to Vlad Griskevicius for generously sharing his materials.
19
In the non-active status motive condition, the 600 word story was neutral with respect to
status and other evolutionary motives. This story asked participants to imagine that they are
searching for lost concert tickets, the panic of having lost them, and then the exhilaration after
finding them and going to a long-awaited show. To ensure that participants believed that the story
in the priming manipulation was unrelated to the audit judgment case, the initial experimental
instructions asked participants to assume that they were two separate tasks. The instructions
described the story as similar to a memory task and stated that there would be questions about the
story at the end of the experiment. We included three memory questions in the post-test materials.
The second independent variable was decision authority. In the introduction to the audit
case, we varied the instructions that the engagement partner gave to the hypothetical advice-seeker
in this consultation. In the low authority condition, participants were told that [t]he partner
suggested that your colleague should pick your brain on the issue but the colleague is expected
to resolve the issue on his or her own. In the high authority condition, participants were told that
[t]he partner has directed your colleague to solicit your input and to take and document actions
classified participants whose knowledge was above the sample median as having high
specialized knowledge, and those below the median as having low specialized knowledge.8
8
An alternative measure of specialized knowledge is specialization in industries in which securitizations are most
common, such as financial services, insurance, and banking. In our sample, 29 auditors were specialists in these
industries, and 73 were specialists in other industries. However, securitizations are increasingly common in many
industries, and several participants did not list financial industry specializations but assessed relatively high
securitization knowledge. For example, one participant was a health care specialist who reported securitization
knowledge of 90 out of 100, as this participant had a functional specialization in receivables, which are commonly
securitized. Thus, we do not believe that industry is the best proxy for specialized knowledge for our task. Nonetheless,
we run our analyses using industry specialization, and our results do not differ substantively from those using self-
reported knowledge.
20
3.3 DEPENDENT MEASURES
and the hypothetical colleagues estimate.9 To measure precision, we use the difference between
the highest and lowest values specified in the participants range of reasonable discount rates.
Because precision is presumed to decrease as the size of the range increases, we construct a
measure in which higher values indicate greater precision to facilitate the exposition of our results.
To do so, we subtract the highest range size value in our sample from each auditors range size,
and take the absolute value. Thus, higher values indicate greater precision. For supplemental tests,
we construct a measure of the degree to which advice is likely to affect audit quality.
4. Results
Regarding the manipulation check for status motives, we asked participants to rate their
feelings after reading the story. On a nine point Likert scale with anchors of 1 = Not at all and 9
= Very much, participants rated the extent to which they felt competitive, which is our
manipulation check for the status prime. Relative to the non-active status motive prime, the status
prime led to significantly higher competitiveness (6.54 versus 2.97, t(84) = -5.60, p < 0.001). As
intended, the primes did not lead to different levels of positive and negative arousal that could
excitement, anger, and frustration (all p 0.248). The active status prime did lead to higher self-
assessed nervousness than the non-active status motive prime (5.50 versus 4.20, t(81) = -1.97, p =
9
We use the signed difference because auditors beliefs are likely influenced by management (Griffith et al. [2015]),
which is likely to be biased in a manner that is consistent with managements incentives (e.g., Dechow et al. [2010]).
Thus, it is reasonable to assume that greater contrariness translates into more effective auditor performance by
recommending greater belief revision away from managements incentives. We note that eight of our 102
participants recommended a rate lower (i.e., less conservative) than the advice-seekers best estimate. Our findings
are identical when we either exclude these eight participants from our analysis or use the absolute difference
between the recommendation and the advice-seekers best estimate as our dependent measure.
21
0.052).10 These responses indicate that the status prime was successful in arousing the motivation
Regarding our manipulation of decision authority, we ask participants to rate their private
confidence on a 9 point scale with the same anchors as the status manipulation check. This
measures the degree to which the manipulation made them feel more internal pressure about the
recommendation. We also ask participants to rate the extent to which they feel accountable for
their recommendations to ensure that our decision authority manipulation does not also vary
accountability. The results indicate that, relative to the low decision authority condition,
consultants in the high decision authority condition rated their confidence as lower (53.77 versus
64.77, t(95)= 2.64, p = 0.010) while their accountability did not differ (66.95 versus 66.49, t(96)
= 0.10, p = 0.922). We conclude that our manipulation of decision authority manipulates internal
As the foundation for our analyses, we run a three-way ANOVA for each of our primary
dependent measures (contrariness and precision). Specifically, we first run a 2 (Motive: status
active, status not active) X 2 (Specialized knowledge: higher, lower) X 2 (Decision authority: high,
low) ANOVA with contrariness as the dependent measure. Second, we run a similar ANOVA with
precision as the dependent measure. See Table 2, Panels A and B for ANOVA results for the
contrariness and precision measures, respectively. To ensure that our hypothesis tests are based on
the most efficient partitioning of the error variance, we test our hypotheses with F-test contrasts
from these ANOVA models. See Table 3 for hypothesis tests. We note that the main effect of
10
Our degrees of freedom vary slightly by measure, as some participants did not complete all of the measures. The
pattern of non-responses appears to be random across measures.
22
status motives is not significant for either of our dependent measures. This is consistent with our
predictions that status motives interact with specialized knowledge and decision authority.
H1a (H1b) predicts that active status motives increase consultants contrariness (precision)
only when consultants knowledge is lower (higher). Consistent with our prediction of a status
motives by specialized knowledge interaction, there are significant interactions for both the
contrariness measure (F1,94 =7.72, p = 0.007, Table 2, Panel A) and the precision measure (F1,94 =
7.75, p = 0.006, Table 2, Panel B). We use linear contrasts to formally test H1a and H1b as each
hypothesis predicts an ordinal interaction (Buckless and Ravenscroft [1990]). For H1a, we assign
a weight of +3 for the active status motive, lower knowledge condition and -1 for each of the
remaining status motive and knowledge conditions. For H1b, we assign a weight of +3 for the
active status motive, higher knowledge condition and -1 for each of the remaining conditions. As
shown in Table 3, the contrasts are significant both for contrariness (F1,94 = 9.09, p = 0.003) and
Thus, our results support both H1a and H1b, i.e., consultants respond to active status
motives by increasing the precision of their recommendations when their knowledge is higher, and
by increasing their contrariness when their knowledge is lower. The significant contrasts are
consistent with descriptive statistics in Table 1, Panels A and B and partial effects analyses in
Table 3, Panel A. Partial effects reveal that the general evolved response to active status motives,
i.e., to challenge others, only manifests in audit consultation when consultants have lower
11
We report one-tailed p-values for the partial effects, as these predictions are directional. All other reported p-
values are two-tailed.
23
knowledge (2.19 versus 1.08, F1,94 = 8.53, p = 0.002). More knowledgeable consultants respond
by increasing precision as a means to signal confidence (4.50 versus 3.34, F1,94 = 8.71, p = 0.002).
These results suggest that the institutional features of auditing, which often constrain
disagreement, moderate the evolved response to status motives. That is, the decision rules to
enhance status operate differently in audit consultations depending on the level of the consultants
knowledge. This suggests that professional settings change, but do not undo, the effects of
evolutionary motives. To the extent that contrariness is desired by regulators and firms, these
findings are not encouraging as the auditing setting constrains a natural motivation to exhibit
contrariness under conditions in which contrariness would have the most potential to improve
auditor judgment, i.e., when auditors consult with highly knowledgeable consultants.
H2a and H2b predict that active status motives increase both contrariness and precision
when decision authority is low. As shown in Table 2, Panels A and B, neither of the status motive
by decision authority disordinal interaction terms are significant (both p 0.199). There is a main
effect of decision authority on precision (F1,94 = 4.53, p = 0.036, Table 2 Panel B) such that
consultants are, on-average, less willing to provide precise recommendations when they have high
decision authority. We use linear contrasts to formally test H2a and H2b (Buckless and
For H2a, we assign a weight of +3 for the active status motive, low decision authority
condition and -1 for each of the remaining status motive and decision authority conditions. While
this contrast is insignificant for contrariness (F1,94 = 2.15, p = 0.146), Thus, the data do not support
H2a. Recall that we theorize that active status motives increase contrariness among low knowledge
24
consultants, whereas high knowledge consultants seek to avoid contrariness when possible.
Consequently, it is possible that high decision authority may attenuate the effect of active status
motives on contrariness when knowledge is high, as these consultants are most motivated to avoid
contrariness. That is, the effect hypothesized in H2a may manifest only for high knowledge
consultants. In support of this reasoning, the predicted linear contrast is marginally significant
when specialized knowledge is higher (F1,94 = 2.87, p = 0.094, untabulated) but is insignificant
when specialized knowledge is lower (F1,94 = 0.02, p = 0.887, untabulated). This is a discouraging
possibility, as decision authority may constrain contrariness when it is most potentially beneficial,
For H2b, we assign a weight of +3 for the active status motive, low decision authority
condition and -1 for each of the remaining conditions. This contrast is significant for the precision
measure (F1,94 = 4.73, p = 0.032, Table 3).12 Thus, H2b is supported, i.e., consultants are likely to
increase precision in response to active status motives when decision authority is low, but not when
it is high. This is consistent with the idea that high decision authority increases consultants
avoidance mentality, which reduces their willingness to formulate more precise recommendations.
In sum, our evidence suggests that high decision authority constrains precision on-average,
and weakens the effect of active status motives on precision. We also find some evidence that high
decision authority makes higher knowledge consultants even less willing to be contrary in response
to active status motives. Thus, decision authority constrains each property of consultant
12
As shown in Table 3, Panel A, two of the three partial effects implied by this contrast are significant, but precision
does not differ between the two low authority conditions, i.e., active, as opposed to non-active status motives, given
low authority (p = 0.233). We do not believe that this insignificant partial effect threatens the validity of our
inferences, as there are no differences between the three conditions with -1 a priori contrast weights (see Table 3)
and we are aware of no compelling alternative theory that is both consistent with our findings but contrary to the
logic of our theory. Reasoning ex post, it is possible that high decision authority in itself is sufficient to decrease
precision and that support for our prediction reflects active status motives amplifying this main effect, at least in our
decision context.
25
recommendations under certain conditions. On balance, these results suggest granting a high level
quality control.
effectiveness. Because managements estimates are likely to be consistent with their incentives
and to influence an advice-seekers opinions (Hackenbrack and Nelson [1996]; Kadous et al.
[2003]; Dechow et al. [2010]), consultation can influence audit effectiveness by encouraging
estimates that better reflect underlying fundamentals rather than managements incentives. The
degree to which the audit teams conclusion about a client estimate actually improves after
receiving a consultants advice depends on the relationship of that advice to the prior beliefs of
the audit team and the extent to which the consultants advice is utilized. Nonetheless, we believe
our findings have a generalizable and straightforward link to audit quality of interest to regulators,
Auditing standards state there may be a range of reasonable values for a given estimate or
valuation (e.g., AICPA AU 312 [2006]). If an estimate falls outside this range, then an auditor
can accept a valuation at the extreme end of the range closest to the estimate. Our experimental
setting strongly implies that managements incentives are to overstate fair value. Thus, the lower
bound of reasonable discount rates will be the most likely estimate because it results in the highest
valuation that is acceptable to the auditor. To recommend an estimate less likely to be biased by
management, a consultant could recommend increasing the lower bound of the acceptable range
of discount rates, which provides less latitude for management to overstate earnings. The upper
26
bound is less likely to influence the ultimate estimate because managements initial position is
In our previous tests, we find that status-motivated, highly knowledgeable consultants did
not take a contrary position but did provide more precise recommendations. In our setting, less
contrary recommendations are, by construction, less conservative and more consistent with
be contraryeven when status motives are activeaudit quality may not benefit in situations in
which an auditor would hope to obtain the most benefit from consultation, i.e., with a high
knowledge consultant.
what about their willingness to be more precise? More precise advice from a consultant could help
limit a clients latitude to report estimates opportunistically (Bamber et al. [2010]; Dechow et al.
[2010]). However, increased precision in our experiment is most likely to do so if the increased
precision is due to an increase in the lower bound of the range of reasonable discount rates. If the
increased precision is due to a decrease in the upper bound, then the underlying valuation is less
likely to be influenced by the consultants advice, because negotiation between the client and audit
and decision authority as independent variables and the lower bound as the dependent measure is
insignificant (p = 0.539), suggesting increased precision does not lead to recommendations that
substantively decrease the latitude for client opportunism.13 This implies that changes in precision
13
We also conduct one-sample t-tests to examine whether consultants lower bounds statistically differ from the
advice-seekers opinion in any of our conditions. There is a significant difference between the lower bound and the
27
due to active status motives are most likely driven by differences in the upper bounds. A visual
inspection of Figure 3, which depicts the mean upper and lower recommended bounds, confirms
this trend. We also run an untabulated ANOVA with status motives, specialized knowledge, and
decision authority as independent variables and the upper bound of the range of discount rates as
the dependent measure. There is a significant status motive by specialized knowledge interaction
(F1,94 = 6.29, p = 0.014, untabulated), which is driven by high knowledge consultants decreasing
the upper bounds (17.43 versus 16.13, F1,94 = 7.73, p = 0.007, untabulated).
involve misstatements (Solomon et al. [1999]). As a result, consultants with higher specialized
knowledge have superior ability to explain why specific evidence does not suggest a misstatement.
In our experiment, consultants with higher specialized knowledge satisfy status motives with
increased precision. However, this is unlikely to lead the audit team to conclude that the valuation
is misstated, which could increase audit quality but also create frictions between the audit team
and the client if the audit team felt they needed to act on that advice. This would require consultants
to recommend increasing the lower bounds. Rather, these consultants react to status motives by
reducing the upper bound of the reasonable range. This reaction is unlikely to affect audit quality
but does allow the consultant to satisfy status motives in a manner that does not cause friction with
the client or audit team. If the consultants goal is to signal self-confidence through incrementally
precise recommendations, then tightening the upper bound is the least adversarial way to do so.
Thus, increased precision does not necessarily enhance audit effectiveness in the setting where the
advice-seekers opinion in only one conditionspecifically, lower knowledge consultants with active status motives
(13.96 versus 13.20, t(23) = 2.22, p = 0.037). This is consistent with the rationale of H1a that lower knowledge
consultants with active status motives are most likely to be contrary.
28
5. Conclusions and Future Research Directions
such as accounting estimates in which consultation is pervasive, the receipt of useful advice is
often critical for improving auditor judgments. Contrariness and precision are both attributes of
consultant recommendations that have the potential to improve the audit of estimates. Yet, the
literature provides little guidance about the motivations or judgments of consultants, let alone the
conditions that influence the nature of their recommendations. In an experiment, we examine the
effects of status motives on the contrariness and precision of consultant recommendations, and
whether the effects a consultants degree of specialized knowledge and decision authority are
Our findings suggest that audit consultations may not be as helpful or useful as generally
expected. Evolutionary psychology predicts that contrariness is a natural response to active status
motives, but we find that higher specialized knowledge constrains this effect. We also find some
evidence that high decision authority further constrains the willingness of high knowledge
consultants to be contrary. We find that contrariness is most likely among lower knowledge
consultants, which raises the possibility that contrariness in audit consultations may manifest as
devils advocate positions, which may or may not be taken seriously. While status motives
would generally be expected to increase both contrariness and precision in consultants, we find
that this effect is constrained by features of an audit setting, i.e., when the consultant is highly
It is noteworthy that high decision authority has significant main and interactive effects
that constrain precision. Low decision authority for consultants is likely warranted if the goal is to
elicit the most useful advice from consultants. However, more complex tradeoffs are possible, and
29
firms, regulators, and scholars must consider the goals of a given consultation in order to best
structure decision authority. Gold et al. [2012] find that auditors are more willing to consult when
they expect consultants to have high decision authority, as auditors try to reduce their own
responsibility for consequential decisions. Thus, higher decision authority has the benefit of
encouraging more frequent consultation, as the mere act of consultation makes complex decisions
more defensible to others even when advice is not followed (Kennedy et al. [1997]). However, we
find conditions in which consultants with high decision authority provide less useful advice,
suggesting that responsibility may be shared for conclusions that arent necessarily better. This
raises the possibility that, under some circumstances in the audit of estimates, higher consultant
decision authority could contribute to an illusion of audit quality, i.e., a tenuous balance of more
frequent consultations producing judgments that are not substantively higher quality, but
nonetheless appear better because auditors are more confident in them and can more easily defend
them to others. Granted, consultation may actually improve judgments, but our findings with
tradeoff between greater frequency and greater quality of consultation, as well as boundary
conditions on this potential tradeoff, deserves attention from scholars, firms, and regulators.
We believe our theory generalizes to a wide range of settings, and the multi-dimensional
nature of the consultation construct represents many opportunities for future research. For
example, advice can take the form not only of recommendations for a course of action, but also
provision of additional information about a problem (Dalal and Bonaccio [2010]). It is worthwhile
to examine drivers of the types of advice that auditors seek on estimates and whether or not the
type of advice interacts with our independent variables. For example, it is possible that status-
30
motivated consultants are more willing to be contrary when asked to bring unconsidered
information to the auditors attention, as opposed to when they are asked to make an explicit
knowledge, and the latter type of knowledge truly differentiates top performing managers (e.g.,
Tan and Libby 1997). It is therefore possible that consultants are more willing to show off and
Our study is subject to limitations that may open avenues of future research. First, we note
that regulators and the auditing profession frequently invoke consultation but do not offer a formal,
consistent definition. We draw on insights from auditing and psychology to offer a scalable
definition of consultation that encompasses a range of formal and informal settings, as we believe
our findings generalize broadly. It is possible that the generality of our results depends on how one
defines consultation, and our theory is least likely to generalize to definitions or settings that
involve extreme degrees of decision authority (high or low). For example, one conception of
consultation is one in which executive-level partners substantively impose their will on the
engagement team. Our theory is silent on this narrow, albeit important set of highly formal
consultations.
Similarly, we believe that our high knowledge participants are reasonable proxies for
specialists, and that our inferences thus shed light on the use of specialists. However, we concede
that the degree to which our findings extend to this area may depend on how one defines a
specialist. For instance, is a specialist someone whose expertise lies outside auditing or
accounting, as regulators propose (PCAOB 2015e), or any person who is highly experienced and
specialists are CPAs or have audit experience. Definitional issues are consequential only insofar
31
as they give rise to factors that would interact with our independent variables. If experience and
formal training in valuation (determinants of knowledge) do not substantively differ between non-
auditor valuation specialists and auditors who are highly knowledgeable about valuation, then our
results for specialized knowledge likely generalize broadly. Even if differences exist and auditors
would ultimately consult with non-auditor specialists on this type of issue, prior literature (e.g.,
Gibbins and Emby [1985]) suggests that auditors would seek formal or informal input from
knowledgeable other auditors prior to undertaking a costly additional procedure, such as engaging
a non-auditor specialist. As a result, our findings would still be relevant to auditors beliefs about
an issue when deciding to consult a specialist. This could affect the nature of the consultation or
Also, our task focuses on intra-firm consultation, and auditors sometimes hire specialists
from other firms. It is possible that differences in judgment may arise due to policy or cultural
differences between the auditors and specialists firms. These issues warrant future examination.
Further, our study focuses on consultation related to accounting estimates, but this is only
one area in which consultation is common and valuable. Other likely areas include revenue
recognition, impairments, and assessing the risk of fraud. While we can think of no a priori reason
why our inferences would not generalize to these settings, future research is warranted to examine
the potential for differences across audit issues. For instance, estimates involve a continuum of
possible outcomes, whereas issues like fraud assessments and revenue recognition often involve
discrete outcomes. When outcomes are discrete, it is possible that consultants motivations to be
contrary or precise differ or that auditors willingness to seek or use advice differs.
Also, in our study, the advice-seeker and the consultant have access to the same evidence
set. However, it is possible that the advice-seeker may stylize the information that they provide to
32
the consultant, especially if the advice-seeker is committed to their opinion and simply seeks
corroboration from the consultant. Future research could examine the conditions under which
advice-seekers motivations for consulting differ, the conditions under which stylization is more
In sum, this is the first study in auditing to examine status motives and to apply an
evolutionary psychology framework. It is likely that other evolutionary motives besides status
routinely activate in audit settings, e.g., coalition formation or self-protection motives might
influence auditor judgment. We believe that it is potentially fruitful to develop a more complete
understanding of the full range of auditor motivations, as such as an understanding facilitates the
development of mechanisms to improve auditor judgment. Other professional fields could also
benefit from the evolutionary psychology framework. We find limited evidence that status motives
have the same effects in professional settings as they do in general or consumer settings, which we
attribute to the consensus pressures in auditing and the specialized nature of professional
judgments. These pressures exist in other professions and even differ within branches of a
profession (e.g., general medicine has consensus norms whereas surgeons have individualistic
norms, see Lee [1997]). Research could examine whether active status motives reliably increase
examining whether consultants facing strong consensus pressures use means in addition to
33
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Appendix
Variable Descriptions
Dependent Variables:
Contrariness is the signed difference between participants recommended rate and the rate of the
advice-seeker. Higher values indicate more contrariness.
Precision is the absolute difference between the size of each participants range of reasonable
discount rates and the largest range size in our sample. That is, each participant assessed an
upper bound and a lower bound for the reasonable rates. We calculate the range size for each
participant as the difference between these two values. We then we subtract the largest range size
(7.00 points) in our sample from each observation and use the absolute value as our measure of
precision. Thus, the largest range size has precision of 0. Higher values indicate more precision.
Independent Variables:
Status Motives are manipulated with a 600 word prime prior to the task that either describes
looking for and finding lost concert tickets (Not Active) or starting a prestigious new job and
competing with co-workers (Active).
Decision Authority is manipulated by telling participants that the advice-seeker has been directed
to either document and take actions on the basis of the auditors recommendation (High decision
authority) or to simply seek the auditors opinion and make their own decision (Low decision
authority).
39
Table 1
Descriptive Statistics
Table 1 reports descriptive statistics for the dependent variables contrariness and precision.
Contrariness is the signed difference between participants recommended rate and the rate of the
advice-seeker. Higher values indicate more contrariness. Precision is the absolute difference
between the size of each participants range of reasonable discount rates and the largest range
size in our sample. Higher values indicate more precision.
Panel A reports contrariness descriptive statistics partitioned by the independent variables status
motives and specialized knowledge. The Status Motives variable is manipulated with a 600 word
prime prior to the task that either describes looking for and finding lost concert tickets (Not
Active) or starting a prestigious new job and competing with co-workers (Active). The
Specialized Knowledge variable is an indicator that equals one if the participants self-reported
securitization knowledge is above the sample median (Higher knowledge), and zero if it is below
the median (Lower Knowledge).
Panel B reports precision descriptive statistics partitioned by the independent variables status
motives and decision authority. Status Motives are described above. The Decision Authority
variable is manipulated by telling participants that the advice-seeker has been directed to either
document and take actions on the basis of the auditors recommendation (High decision
authority) or to simply seek the auditors opinion and make their own decision (Low decision
authority).
40
Table 1 (continued)
Descriptive Statistics
Panel A: Status Motives by Specialized Knowledge- Means, (Standard Deviations), Cell Counts
Contrariness Precision
Not Active Active Not Active Active
Status Motives Status Motives Status Motives Status Motives
Lower 1.08 2.19 3.91 3.51
knowledge (0.88) (1.78) (1.36) (1.07)
N = 27 N = 24 N = 27 N = 24
41
Table 2
ANOVA Results
Table 2 reports the results of 2 (Motive: status active, status not active) X 2 (Specialized
knowledge: higher, lower) X 2 (Decision authority: high, low) between-participants ANOVA
tests, and the significance of related simple effects tests. The dependent measure in Panel A is
contrariness, which is the signed difference between participants recommended rate and the rate
of the advice-seeker. The dependent measure in Panel B is precision, which is the absolute
difference between the size of each participants range of reasonable discount rates and the
largest range size in our sample. All p values are two tailed.
The Status Motives variable is manipulated with a 600 word prime prior to the task that either
describes looking for and finding lost concert tickets (Not Active) or starting a prestigious new
job and competing with co-workers (Active). The Specialized Knowledge variable is an indicator
that equals one if the participants self-reported securitization knowledge is above the sample
median (Higher knowledge), and zero if it is below the median (Lower Knowledge). The
Decision Authority variable is manipulated by telling participants that the advice-seeker has been
directed to either document and take actions on the basis of the auditors recommendation (High
decision authority) or to simply seek the auditors opinion and make their own decision (Low
decision authority).
42
Table 2 (continued)
ANOVA Results
43
Table 3
Hypothesis Tests
This table reports our hypothesis tests and related simple effect. The dependent measure for the
tests in the left column is contrariness, which is the signed difference between participants
recommended rate and the rate of the advice-seeker. The dependent measure for the tests in the
right column is precision, which is the absolute difference between the size of each participants
range of reasonable discount rates and the largest range size in our sample.
The Status Motives variable is manipulated with a 600 word prime prior to the task that either
describes looking for and finding lost concert tickets (Not Active) or starting a prestigious new
job and competing with co-workers (Active). The Specialized Knowledge variable is an indicator
that equals one if the participants self-reported securitization knowledge is above the sample
median (Higher knowledge), and zero if it is below the median (Lower Knowledge). The
Decision Authority variable is manipulated by telling participants that the advice-seeker has been
directed to either document and take actions on the basis of the auditors recommendation (High
decision authority) or to simply seek the auditors opinion and make their own decision (Low
decision authority).
Panel A reports the linear contrasts used to test our hypotheses and the partial effects implicitly
tested by the contrast. Full support for H1a, H1b, H2a, and H2b is indicated by significance for
the indicated linear contrast and for related partial effects. The F statistics for all hypothesis tests
for contrariness and precision are calculated by dividing the indicated mean squares by the error
mean squares from the ANOVA models in Table 2, Panel A and Panel B, respectively. The p-
values for our linear contrasts are two-tailed. The p-values for the partial effect tests are one-
tailed because directional predictions are made.
For completeness, Panel B reports simple effect tests for contrariness and precision that are not
tested by our linear contrasts. All p-values for these simple effects in Panel B are two-tailed.
44
Table 3 (continued)
Hypothesis Tests
Panel A: Hypothesis Tests
Contrariness Precision
Hypothesis 1
Linear Contrasts for Status Motive by Specialized Knowledge Interaction
H1a H1b
+3 for Active Status Motives, Lower Specialized +3 for Active Status Motives, Higher
Knowledge, -1 otherwise Specialized Knowledge, -1 otherwise
MS F 1,94 p MS F 1,94 P
14.92 9.09 0.003 18.98 9.70 0.002
Hypothesis 2
Linear Contrasts for Status Motive by Decision Authority Interaction
H2a H2b
+3 for Active Status Motives, Low Decision Authority, - +3 for Active Status Motives, Low Decision
1 otherwise Authority, -1 otherwise
MS F 1,94 P MS F 1,94 P
3.52 2.15 0.146 9.26 4.73 0.032
45
Panel B: Simple Effects Not Tested By Hypotheses
46
Figure 1
Contrariness and Precision by Status Motives and Specialization
This figure depicts graphed cell means for the contrariness and precision measures. The
dependent measure in Panel A is contrariness, which is the signed difference between
participants recommended rate and the rate of the advice-seeker. Higher values indicate more
contrariness. The dependent measure in Panel B is precision, which is the absolute difference
between the size of each participants range of reasonable discount rates and the largest range
size in our sample. Higher values indicate more precision. The Status Motives variable is
manipulated with a 600 word prime prior to the task that either describes looking for and finding
lost concert tickets (Not Active) or starting a prestigious new job and competing with co-workers
(Active). The Specialized Knowledge variable is an indicator that equals one if the participants
self-reported securitization knowledge is above the sample median (Higher knowledge), and zero
if it is below the median (Lower Knowledge).
47
Figure 1 (continued)
Contrariness and Precision by Status Motives and Specialization
(Collapsed Across Decision Authority)
Panel A: Contrariness
2.19
Contrariness
Panel B: Precision
4.50
Precision
48
Figure 2
Contrariness and Precision by Status Motives and Decision Authority
(Collapsed Across Specialized Knowledge)
This figure depicts graphed cell means for the contrariness and precision measures. The
dependent measure in Panel A is contrariness, which is the signed difference between
participants recommended rate and the rate of the advice-seeker. Higher values indicate more
contrariness. The dependent measure in Panel B is precision, which is the absolute difference
between the size of each participants range of reasonable discount rates and the largest range
size in our sample. Higher values indicate more precision. The Status Motives variable is
manipulated with a 600 word prime prior to the task that either describes looking for and finding
lost concert tickets (Not Active) or starting a prestigious new job and competing with co-workers
(Active). The Decision Authority variable is manipulated by telling participants that the advice-
seeker has been directed to either document and take actions on the basis of the auditors
recommendation (High decision authority) or to simply seek the auditors opinion and make their
own decision (Low decision authority).
49
Figure 2 (continued)
Contrariness and Precision by Status Motives and Decision Authority
(Collapsed Across Specialized Knowledge)
Panel A: Contrariness
1.90
Contrariness
Low decision
1.43 1.44 authority
High decision
1.14 authority
Panel B: Precision
4.36
Precision
3.37
50
Figure 3
Range of Reasonable Discount Rates
(Collapsed Across Decision Authority)
This figure depicts the range of reasonable discount rates that participants recommended to
advice-seekers. The mean recommended upper bound and mean recommended lower bound of
reasonable discount rates are consultants recommendations of the highest and lowest reasonable
rates, respectively. Higher rates result in lower valuations, smaller gains, and are thus more
conservative. The Status Motives variable is manipulated with a 600 word prime prior to the task
that either describes looking for and finding lost concert tickets (Not Active) or starting a
prestigious new job and competing with co-workers (Active). The Specialized Knowledge
variable is an indicator that equals one if the participants self-reported securitization knowledge
is above the sample median (Higher specialized knowledge), and zero if it is below the median
(Lower specialized knowledge).
17.50
17.00
16.50 Recommended upper
Discount Rate
51