The Effects of Exposure to Practice Risk on Tax Professionals' Judgments and Recommendations

2000 ◽  
Author(s):  
Kathryn Kadous ◽  
Anne M. Magro
Keyword(s):  
Tax Professionals

The Effects of Decision Aid Design on the Information Search Strategies and Confirmation Bias of Tax Professionals

2008 ◽  
Vol 20 (1) ◽  
pp. 131-145 ◽  
Author(s):  
Patrick R. Wheeler ◽  
Vairam Arunachalam
Keyword(s):  
Information Search ◽  
Decision Aid ◽  
Confirmation Bias ◽  
Search Strategies ◽  
Design Features ◽  
Tax Professionals ◽  
Perceived Importance ◽  
Factor Evaluation ◽  
Tax Research

We report the results of a study involving 142 tax professionals designed to investigate the effects of decision aid design on information search (i.e., tax research) and confirmation bias. Results indicate that the participants exhibited confirmation bias when conducting tax research for clients. That is, participants showed a tendency to preferentially select information in support of their earlier recommendations to the client, even when the recommendation disagreed with the client's subsequent tax position. Results also indicate that while some decision aid features can reduce confirmation bias during tax research, others do not and may even enhance this bias. Specifically, a justification requirement decision aid reduced confirmation bias in terms of both the number and perceived importance of selected confirmatory cases, whereas a factor evaluation checklist decision aid either increased the bias (i.e., increased the perceived importance of cases) or had no effect on the bias (i.e., no effect on the number of cases). We suggest several decision aid design features for reducing confirmation bias in tax research.

The Influence of Biased Tax Research Memoranda on Supervisors' Initial Judgments in the Review Process

2004 ◽  
Vol 26 (1) ◽  
pp. 1-19 ◽  
Author(s):  
John A. Barrick ◽  
C. Bryan Cloyd ◽  
Brian C. Spilker
Keyword(s):  
Review Process ◽  
Confirmation Bias ◽  
Theoretical Framework ◽  
The Other ◽  
Other Hand ◽  
Tax Professionals ◽  
Realistic Possibility ◽  
Client Advocacy ◽  
Tax Research ◽  
Staff Level

This study experimentally investigates the effects of confirmation bias underlying staff-level tax research on supervisors' initial assessments and recommendations made during the review process for tax research memoranda. The theoretical framework underlying our hypotheses posits that tax professionals strive to make recommendations that meet both accuracy and advocacy objectives. Participants in our study addressed a client scenario in which both objectives could not be met because the client-preferred position did not have a “realistic possibility” of being successfully defended on its merits. In this context, we find that supervisors are more persuaded by an unbiased memo correctly concluding that the client-preferred position is not appropriate than by a biased memo reaching the same conclusion. This result suggests that when tax research memoranda are not consistent with the client advocacy objective, professionals are more persuaded by memoranda that fulfill their accuracy objective. On the other hand, we also find that supervisors are more persuaded by a biased memo incorrectly concluding in favor of the client's preferred position than by a biased memo correctly concluding that the client-preferred position is inappropriate. This result suggests that, when neither memorandum meets the accuracy objective, supervisors are more persuaded by memoranda that offer encouragement that their advocacy objective might be met than by those that do not. Finally, results also indicate that supervisors act to correct confirmation bias by requesting more rework of staff who prepare biased memos than of staff who prepare unbiased memos.

Contextual Features of Tax Decision-Making Settings

1999 ◽  
Vol 21 (s-1) ◽  
pp. 63-73 ◽  
Author(s):  
Anne M. Magro
Keyword(s):  
Decision Making ◽  
Information Processing ◽  
Tax Planning ◽  
Judgment And Decision Making ◽  
Contextual Features ◽  
Tax Professionals ◽  
Planning Condition ◽  
Tax Research ◽  
Planning Problems

Prior research in psychology and accounting suggests that features of the decision-making task and context affect information processing, yet the decision-making context is often ignored in tax judgment and decision-making research. Two primary decision contexts in the tax setting are planning and compliance. If these two contexts differ on significant features, the information processing of tax professionals in the settings also is likely to differ. An analysis of the characteristics of tax planning and compliance contexts suggests that planning problems are generally characterized by greater complexity, ambiguity, and justifiability demands than are compliance problems. Experienced tax professionals' knowledge of these differences in complexity, ambiguity, and justifiability demands of problems in the planning and compliance contexts was tested in an experiment in which decision-making context was manipulated. Each participant rated the complexity, ambiguity, and justifiability demands of six research cases. As predicted, participants in the planning condition rated the cases as higher in complexity, ambiguity, and justifiability demands than did participants in the compliance condition. Behavioral implications of these differences were demonstrated in that managers in the planning context budgeted significantly more time for staff to complete tax research than did those in the compliance context.

Tax Professional Decision Biases: The Effects of Initial Beliefs and Client Preference

2004 ◽  
Vol 26 (s-1) ◽  
pp. 1-29 ◽  
Author(s):  
Jennifer B. Kahle ◽  
Richard A. White
Keyword(s):  
Repeated Measures ◽  
Confirmation Bias ◽  
Substantial Effect ◽  
Repeated Measures Design ◽  
Initial Belief ◽  
Client Preference ◽  
Tax Professionals ◽  
Psychology Literature ◽  
Disconfirming Evidence ◽  
Professional Judgments

While many studies have inferred confirmation bias in a tax decision-making context, the tax professional's initial belief has usually been the same as the client-preferred position. The objective of this study was to disentangle the effects of evidence direction (confirming or disconfirming evidence) and client preference on tax professionals' belief revisions following the examination of additional evidence. In a repeated-measures design, participants recorded an initial belief and a revised belief in response to two independent fact scenarios. Consistent with research related to auditors, but inconsistent with the psychology literature, the results of this study indicate that tax professionals react in a manner opposite to the predictions of confirmation bias, particularly when the evidence reviewed is counter to the client's wishes. Further examination reveals that the client preference has a more substantial effect on tax professional judgments when the evidence being reviewed confirms the professionals' initial beliefs than when it disconfirms their initial beliefs.

Interrogating the Relationship between “Legally Defensible” Tax Planning and Social Justice

2019 ◽  
pp. 347-366
Author(s):  
Daniel Shaviro
Keyword(s):  
Social Justice ◽  
Tax Planning ◽  
Corporate Tax ◽  
Tax Professionals ◽  
The Relationship

This chapter assesses where the ethical lines should be drawn around what constitutes “legally defensible tax planning,” given social justice imperatives. Because tax minimization by wealthy individuals and profitable corporations does not involve blatant fraud, one cannot simply call for “good corporate tax behavior” and criticize the ethics of those tax professionals who aid and abet the fraud. The tax-reducing strategies of super-rich individuals and highly profitable corporations commonly qualify as what will be called “legally defensible.” This term, however, covers tax planning that may vary across a range in at least three important dimensions: likelihood of legal correctness; consistency with legislative or regulatory intent; and ordinary course of business versus carefully contrived.

An examination of tax professionals' judgments: The role of experience, client condition and reciprocal obligation

1993 ◽  
Vol 7 (3) ◽  
pp. 341-357 ◽  
Author(s):  
D. Jordan Lowe ◽  
Philip M. J. Reckers ◽  
Robert W. Wyndelts
Keyword(s):  
Tax Professionals
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