Underreporting of Chargeable Time: The Impact of Gender and Characteristics of Underreporters
Year: 2003
Type: article
Study design: Observational Study
Abstract: While prior research has examined the dysfunctional effects of time pressure and the underreporting of chargeable hours (e.g., Rhode, 1978; Lightner et al., 1982; McDaniel, 1990; Ponemon, 1992, Akers and Eaton, 1999), the purpose of this study is to expand the literature on underreporting chargeable hours. We contribute to the existing literature in two specific ways. First, the impact of gender is examined. Prior research has not examined this issue. Second, a discriminant model, which has never been used before, is used to compare characteristics of those individuals who underreport time with those individuals who do not. Based on the responses of over two hundred practicing accountants we find significant differences between males and females in their perceptions regarding the underreporting of time. Utilizing variables from prior research, we test a model to predict the propensity to underreport time. While the model was statistically significant, it did not predict underreporting any better than chance. This finding suggests that additional research is needed in this area to identify other factors that could be important in explaining an individual's propensity to underreport time. The first section of the paper provides a literature review and the resulting hypotheses. Specifically, research related to time pressure, gender and characteristics or factors that could lead to underreporting are examined. Next, we examined the research methodology and then present and discuss the results. Concluding comments and limitations of the study are presented in the final section. REVIEW OF PRIOR LITERATURE Time Pressure Time pressure is present when the information-processing demands of a decision exceed a decision-maker's information-processing capabilities (Newell and Simon, 1972). Auditors are subjected to substantial time pressure in audit and tax engagements. Such time pressures often impact accountants' behaviors. Budgeted time on an audit/tax engagement is often influenced by the actual time spent during the previous engagement. When accountants underreport time on a current engagement, the amount of time budgeted on that same engagement in the future might not be adequate. If during the future engagement, an accountant feels pressured to perform the task in the budgeted time, he/she will do one of three things: (1) perform the necessary work and report the actual time, thus going over budget and face the consequences, (2) perform the necessary work but not report the actual time, thus underreporting again, or (3) not perform the necessary work but claim he/she did (i.e., a premature sign-aft). There is evidence in the accounting literature that the underreporting of chargeable time is an issue that the profession has struggled with for the past twenty years. Lightner et aL (1983) found that 67% of the accountants responding to their survey admitted to underreporting time. More recent studies show that underreporting continues within public accounting firms. Kelley and Margheim (1990) surveyed staff auditors from a national firm. Their results showed an inverted-U shaped relationship between pressure and underreporting. Ponemon (1992) found that subjects participating in his experiment underreported time an average of more than 12 percent. Smith et aL (1996) found that 89% of the CPA respondents did not report all of their chargeable time while Akers and Eaton (1999) found that 71% of their respondents did not report all chargeable time. As noted above, one of the possible dysfunctional effects of time pressure is substandard audits or tax returns/ planning. Research over the past twenty years illustrates this fact. In 1978 the Cohen Commission reported that time pressure was the most significant cause of substandard audits. Rhode's 1978 survey, commissioned by the American Institute of Certified Public Accountants' (AICPA) to examine the auditing work environment, found over one-half of AICPA members questioned admitted to prematurely signing off on audit procedures due to time pressure. …
Authors: Michael D. Akers, Tim V. Eaton
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W165146647