Information search behavior and tax consultants’ recommendation: experimental examination on the role of social norms
Abstract
This study examines the influence of client preference with respect to information search behavior and subsequent tax recommendation. Prior studies have identified that tax consultants exhibit confirmation bias in their information search processes, which is explained by the theory of motivated reasoning (Kunda, 1990). However, that theory does not take into consideration responses of tax consultant that are attributable to the way clients present their preferences. This study fills the gap by proposing a social norm activation model which can help to foster a better understanding of the nature of the confirmatory behavior. To accomplish this purpose, study participants role-played as advisors on a tax compliance task. The experiment used aweb-based instrument that involved 82 tax professionals. Results showed that tax consultants engaged inlower confirmation bias when they received an explicitly preference statement from their client than those who received an implicit statement. Furthermore, the former tax consultants recommended a more conservative tax position than the latter. These findings underscore the importance of social norm in a professional tax work environment. As a practical contribution, these findings suggest that the beliefs and norms of tax professionals influence the way they do their work.
First published online 3 January 2020
Keyword : tax consultant, client preference, confirmation bias, information search, social norm activation, tax recommendation
How to Cite
Misra, F., Sugiri, S., Suwardi, E., & Nahartyo, E. (2020). Information search behavior and tax consultants’ recommendation: experimental examination on the role of social norms. Journal of Business Economics and Management, 21(1), 115-135. https://doi.org/10.3846/jbem.2020.11406
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Bicchieri, C. (2006). The grammar of society: the nature and dynamics of social norms. New York, NY: Cambridge University Press. https://doi.org/10.1017/CBO9780511616037
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Blay, A., Gooden, E., Mellon, M., & Stevens, D. (2018). The usefulness of social norm theory in empirical business ethics research: A review and suggestions for future research. Journal of Business Ethics, 152, 191-206. https://doi.org/10.1007/s10551-016-3286-4
Blay, A. D., Gooden, E. S., Mellon, M. J., & Stevens, D. E. (2019). Can social norm activation improve audit quality? Evidence from an experimental audit market. Journal of Business Ethics, 156, 513-530. https://doi.org/10.1007/s10551-017-3561-z
Bobek, D. D., Hageman, A. M., & Hatfield, R. C. (2010). The role of client advocacy in the development of tax professionals’ advice. The Journal of the American Taxation Association, 32(1), 25-51. https://doi.org/10.2308/jata.2010.32.1.25
Biel, A., & Thogersen, J. (2007). Activation of social norms in social dilemmas: A review of the evidence and reflections on the implications for environmental behavior. Journal of Economic Psychology, 28, 93-112. https://doi.org/10.1016/j.joep.2006.03.003
Boiney, L. G., Kennedy, J., & Nye, P. (1997). Instrumental bias in motivated reasoning: More when more is needed. Organizational Behavior and Human Decision Processes, 72(1), 1-24. https://doi.org/10.1006/obhd.1997.2729
Cloyd, C. B., Spilker, B. C., & Wood, D. A. (2012). The effect of supervisory advises on tax professionals’ information search behavior. Advances in Taxation, 22, 135-158. https://doi.org/10.1108/S1058-7497(2012)0000020008
Cloyd, C. B., & Spilker, B. C. (1999). The influence of client preferences on tax professionals’ search for judicial precedents, subsequent judgments and recommendations. The Accounting Review, 74(3), 299-322. https://doi.org/10.2308/accr.1999.74.3.299
Coleman, J. (1990). Foundations of social theory. Cambridge, MA: Harvard University Press.
Deborah, & Kristiaji, B. B. (2013). Menyoal praktik konsultan pajak di Indonesia. InsideTax, 17, 8-17.
Devos, K. (2012). The impact of tax professional upon the compliance behavior of Australian individual taxpayer. Revenue Law Journal, 22(1), 1-26.
Ditto, P. H., & Lopez, D. F. (1992). Motivated scepticism: use of differential decision criteria for the preferred and nonpreferred conclusion. Journal of Personality and Social Psychology, 63, 568-584. https://doi.org/10.1037/0022-3514.63.4.568
Ditto, P. H., Munro, G. D., Apanovitch, A. M., Scepansky, J. A., & Lockhart, L. K. (2003). Spontaneous skepticism: the interplay of motivation and expectation in responses to favorable and unfavorable medical diagnoses. Personality and Social Psychology Bulletin, 29, 1120-1132. https://doi.org/10.1177/0146167203254536
Erdelyi, M. H. (1974). A new look at the new look: Perceptual defence and vigilance. Psychological Review, 81(1), 1-25. https://doi.org/10.1037/h0035852
Feldman, N., Goldin, J., & Homonoff, T. (2018). Raising the stakes: Experimental evidence of the endogeneity of taxpayers mistakes. National Tax Journal, 17(2), 201-230. https://doi.org/10.17310/ntj.2018.2.01
Festinger, L. (1957). A theory of cognitive dissonance. Stanford, CA: Stanford University Press.
Hales, J. W. (2002). Understanding bias and dispersion in forecasts: The role of motivated reasoning (Working paper). Cornell University. https://doi.org/10.2139/ssrn.360980
Hansen, V. J., & White, R. A. (2012). An investigation of the impact of tax preparer penalty provision on taxpayers aggressiveness. The Journal of American Taxation Association, 34(1), 137-165. https://doi.org/10.2308/atax-10183
Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. https://doi.org/10.1037/10628-000
Jiwo, P., & Zulaikha. (2016). Analisis faktor-faktor individual dalam pengambilan keputusan etis oleh konsultan pajak. Paper presented at the Proceeding of The XVI National Accounting Symsposium, Bandar Lampung.
Kadous, K., & Magro, A. M. (2001). The effects of exposure to practice risk on tax professionals’ judgments and recommendations. Contemporary Accounting Research, 18(3), 451-475. https://doi.org/10.1506/TF76-653L-R36N-13YP
Kadous, K., Magro, A., & Spilker, B. (2008). Do the effects of client preference on accounting professionals’ information search persist with high practice risk? The Accounting Review, 83(1), 133-156. https://doi.org/10.2308/accr.2008.83.1.133
Kahle, J. B., & White, R. A. (2004). Tax professional decision biases: The effects of initial beliefs and client preference. The Journal of the American Taxation Association, 26 (s-1), 1-29. https://doi.org/10.2308/jata.2004.26.s-1.1
Kaklauskas, A., Zavadskas, E. K., & Budzevičienė, R. (2009). Web-based model of multiple criteria ethical decision making for the ethical behavior of students. Journal of Business Economics and Management, 10(1), 71-84. https://doi.org/10.3846/1611-1699.2009.10.71-84
Kerr, N. L. (1995). Norms in social dilemmas. In D. Schroeder (Ed.), Social dilemmas: Social psychological perspectives (pp. 31-47). New York: Pergamon Press.
Koch, C., & Salterio, S. E. (2015). Effects of client pressure and audit firm management control systems on auditor judgments (Working paper). https://doi.org/10.2139/ssrn.2572486
Koch, C., & Salterio, S. E. (2017). The effect of auditor affinity for the client and perceived client pressure on auditor proposed adjustment. Accounting Review, 92(5), 117-142. https://doi.org/10.2308/accr-51703
Kunda, Z. (1990). The case for motivated reasoning. Psychological Bulletin, 108(3), 480-498. https://doi.org/10.1037//0033-2909.108.3.480
Lee, S. Y. (2015). Factors affecting audit revenues. Advanced Science and Technology Letters, 102, 6-9. https://doi.org/10.14257/astl.2015.102.02
Libby, R., Bloomfield, R., & Nelson, M. W. (2002). Experimental research in financial accounting. Accounting, Organizations and Society, 27, 775-811. https://doi.org/10.1016/S0361-3682(01)00011-3
Miller, D. T., & Ross, M. (1975). Self-serving biases in attribution of causality: Fact or fiction? Psychological Bulletin, 82, 213-225. https://doi.org/10.1037/h0076486
Nelson, M. W. (2003). Behavioral evidence on the effects of principles- and rules-based standards. Accounting Horizons, 17(1), 91-104. https://doi.org/10.2308/acch.2003.17.1.91
Nickerson, R. S. (1998). Confirmation bias: A ubiquitous phenomenon in many guises. Review of General Psychology, 2(2), 175-220. https://doi.org/10.1037/1089-2680.2.2.175
Nisbett, R., & Ross, L. (1980). Human inference: strategies and shortcomings of social judgment. New Jersey: Prentice Hall.
Pennington, R., Schafer, J. K., & Pinsker, R. (2017). Do auditor advocacy attitues impede audit objectivity? Journal of Accounting, Auditing & Finance, 32(1), 136-151. https://doi.org/10.1177/0148558X16641862
Rose, J. M., & Wolfe, C. J. (2000). The effects of system design alternatives on the acquisition of tax knowledge from a computerized tax decision aid. Accounting. Organization and Society, 25, 285306. https://doi.org/10.1016/S0361-3682(99)00048-3
The Republic of Indonesia. (2014). Minister of Finance Decree No. 111/2014 concerning tax consultants. Retrieved from https://www.ikpi.or.id/sites/default/files/peraturan_pajak/pmk111214.pdf
Saee, J. (2005). Societal ethics and legal system facing contemporary marketing strategies: an Australian insight. Journal of Business Economics and Management, 6(4), 189-197. https://doi.org/10.3846/16111699.2005.9636108
Saputra, K. E., & Adam, H. (2016). Pemahaman pegawai Direktorat Jenderal Pajak dan konsultan pajak tentang perilaku wajib pajak: sebuah studi fenomenologi. Paper presented at the Proceeding of the XVI National Accounting Symposium, Bandar Lampung.
Schwartz, S. H. (1977). Normative in fluences on altruism. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 10, pp. 221-279). New York: Academic Press. https://doi.org/10.1016/S0065-2601(08)60358-5
Simone, L. D., Sansing, R. C., & Seidman, J. K. (2008). When is enhanced relationship tax compliance program mutually beneficial? The Accounting Review, 88(6), 1971-1991. https://doi.org/10.2308/accr-50525
Stephenson, T. (2010). Measuring taxpayers’ motivation to hire tax preparers: the development of a for-construct scale. Advances in Taxation, 19, 95-121. https://doi.org/10.1108/S1058-7497(2010)0000019006
Suddaby, R., Gendron, Y., & Lam, H. (2009). The organizational context of professionalism in accounting. Accounting, Organizations & Society, 34(3/4), 409-427. https://doi.org/10.1016/j.aos.2009.01.007
Wason, P. C. (1960). On the failure to eliminate hypotheses in a conceptual task. Quarterly Journal of Experimental Psychology, 12, 129-140. https://doi.org/10.1080/17470216008416717
Wenzel, M. (2004). An analysis of norm processes in tax compliance. Journal of Economic Psychology, 25, 213-228. https://doi.org/10.1016/S0167-4870(02)00168-X
Wheeler, P. R., & Arunachalam, V. (2008). The effects of decision aid design on the information search strategies and confirmation bias of tax professionals. Behavioral Research in Accounting, 20(1), 131-145. https://doi.org/10.2308/bria.2008.20.1.131
American Institute of Certified Public Accountants. (2008). AICPA Professional Standards. New York, NY: AICPA.
Andre, S. M. (2008). Confirmatory behaviors in tax: exploring how advisors search for and evaluate information. https://doi.org/10.2139/ssrn.1093370
Bicchieri, C. (2006). The grammar of society: the nature and dynamics of social norms. New York, NY: Cambridge University Press. https://doi.org/10.1017/CBO9780511616037
Big4. (2015). An analysis of the 2014 financial performance of the world’s largest accounting firms. Retrieved from https://www.scribd.com/document/307356545/The-2014-Big-Four-Firms-Performance-Analysis-Big4-Com-Jan-2015
Blay, A., Gooden, E., Mellon, M., & Stevens, D. (2018). The usefulness of social norm theory in empirical business ethics research: A review and suggestions for future research. Journal of Business Ethics, 152, 191-206. https://doi.org/10.1007/s10551-016-3286-4
Blay, A. D., Gooden, E. S., Mellon, M. J., & Stevens, D. E. (2019). Can social norm activation improve audit quality? Evidence from an experimental audit market. Journal of Business Ethics, 156, 513-530. https://doi.org/10.1007/s10551-017-3561-z
Bobek, D. D., Hageman, A. M., & Hatfield, R. C. (2010). The role of client advocacy in the development of tax professionals’ advice. The Journal of the American Taxation Association, 32(1), 25-51. https://doi.org/10.2308/jata.2010.32.1.25
Biel, A., & Thogersen, J. (2007). Activation of social norms in social dilemmas: A review of the evidence and reflections on the implications for environmental behavior. Journal of Economic Psychology, 28, 93-112. https://doi.org/10.1016/j.joep.2006.03.003
Boiney, L. G., Kennedy, J., & Nye, P. (1997). Instrumental bias in motivated reasoning: More when more is needed. Organizational Behavior and Human Decision Processes, 72(1), 1-24. https://doi.org/10.1006/obhd.1997.2729
Cloyd, C. B., Spilker, B. C., & Wood, D. A. (2012). The effect of supervisory advises on tax professionals’ information search behavior. Advances in Taxation, 22, 135-158. https://doi.org/10.1108/S1058-7497(2012)0000020008
Cloyd, C. B., & Spilker, B. C. (1999). The influence of client preferences on tax professionals’ search for judicial precedents, subsequent judgments and recommendations. The Accounting Review, 74(3), 299-322. https://doi.org/10.2308/accr.1999.74.3.299
Coleman, J. (1990). Foundations of social theory. Cambridge, MA: Harvard University Press.
Deborah, & Kristiaji, B. B. (2013). Menyoal praktik konsultan pajak di Indonesia. InsideTax, 17, 8-17.
Devos, K. (2012). The impact of tax professional upon the compliance behavior of Australian individual taxpayer. Revenue Law Journal, 22(1), 1-26.
Ditto, P. H., & Lopez, D. F. (1992). Motivated scepticism: use of differential decision criteria for the preferred and nonpreferred conclusion. Journal of Personality and Social Psychology, 63, 568-584. https://doi.org/10.1037/0022-3514.63.4.568
Ditto, P. H., Munro, G. D., Apanovitch, A. M., Scepansky, J. A., & Lockhart, L. K. (2003). Spontaneous skepticism: the interplay of motivation and expectation in responses to favorable and unfavorable medical diagnoses. Personality and Social Psychology Bulletin, 29, 1120-1132. https://doi.org/10.1177/0146167203254536
Erdelyi, M. H. (1974). A new look at the new look: Perceptual defence and vigilance. Psychological Review, 81(1), 1-25. https://doi.org/10.1037/h0035852
Feldman, N., Goldin, J., & Homonoff, T. (2018). Raising the stakes: Experimental evidence of the endogeneity of taxpayers mistakes. National Tax Journal, 17(2), 201-230. https://doi.org/10.17310/ntj.2018.2.01
Festinger, L. (1957). A theory of cognitive dissonance. Stanford, CA: Stanford University Press.
Hales, J. W. (2002). Understanding bias and dispersion in forecasts: The role of motivated reasoning (Working paper). Cornell University. https://doi.org/10.2139/ssrn.360980
Hansen, V. J., & White, R. A. (2012). An investigation of the impact of tax preparer penalty provision on taxpayers aggressiveness. The Journal of American Taxation Association, 34(1), 137-165. https://doi.org/10.2308/atax-10183
Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. https://doi.org/10.1037/10628-000
Jiwo, P., & Zulaikha. (2016). Analisis faktor-faktor individual dalam pengambilan keputusan etis oleh konsultan pajak. Paper presented at the Proceeding of The XVI National Accounting Symsposium, Bandar Lampung.
Kadous, K., & Magro, A. M. (2001). The effects of exposure to practice risk on tax professionals’ judgments and recommendations. Contemporary Accounting Research, 18(3), 451-475. https://doi.org/10.1506/TF76-653L-R36N-13YP
Kadous, K., Magro, A., & Spilker, B. (2008). Do the effects of client preference on accounting professionals’ information search persist with high practice risk? The Accounting Review, 83(1), 133-156. https://doi.org/10.2308/accr.2008.83.1.133
Kahle, J. B., & White, R. A. (2004). Tax professional decision biases: The effects of initial beliefs and client preference. The Journal of the American Taxation Association, 26 (s-1), 1-29. https://doi.org/10.2308/jata.2004.26.s-1.1
Kaklauskas, A., Zavadskas, E. K., & Budzevičienė, R. (2009). Web-based model of multiple criteria ethical decision making for the ethical behavior of students. Journal of Business Economics and Management, 10(1), 71-84. https://doi.org/10.3846/1611-1699.2009.10.71-84
Kerr, N. L. (1995). Norms in social dilemmas. In D. Schroeder (Ed.), Social dilemmas: Social psychological perspectives (pp. 31-47). New York: Pergamon Press.
Koch, C., & Salterio, S. E. (2015). Effects of client pressure and audit firm management control systems on auditor judgments (Working paper). https://doi.org/10.2139/ssrn.2572486
Koch, C., & Salterio, S. E. (2017). The effect of auditor affinity for the client and perceived client pressure on auditor proposed adjustment. Accounting Review, 92(5), 117-142. https://doi.org/10.2308/accr-51703
Kunda, Z. (1990). The case for motivated reasoning. Psychological Bulletin, 108(3), 480-498. https://doi.org/10.1037//0033-2909.108.3.480
Lee, S. Y. (2015). Factors affecting audit revenues. Advanced Science and Technology Letters, 102, 6-9. https://doi.org/10.14257/astl.2015.102.02
Libby, R., Bloomfield, R., & Nelson, M. W. (2002). Experimental research in financial accounting. Accounting, Organizations and Society, 27, 775-811. https://doi.org/10.1016/S0361-3682(01)00011-3
Miller, D. T., & Ross, M. (1975). Self-serving biases in attribution of causality: Fact or fiction? Psychological Bulletin, 82, 213-225. https://doi.org/10.1037/h0076486
Nelson, M. W. (2003). Behavioral evidence on the effects of principles- and rules-based standards. Accounting Horizons, 17(1), 91-104. https://doi.org/10.2308/acch.2003.17.1.91
Nickerson, R. S. (1998). Confirmation bias: A ubiquitous phenomenon in many guises. Review of General Psychology, 2(2), 175-220. https://doi.org/10.1037/1089-2680.2.2.175
Nisbett, R., & Ross, L. (1980). Human inference: strategies and shortcomings of social judgment. New Jersey: Prentice Hall.
Pennington, R., Schafer, J. K., & Pinsker, R. (2017). Do auditor advocacy attitues impede audit objectivity? Journal of Accounting, Auditing & Finance, 32(1), 136-151. https://doi.org/10.1177/0148558X16641862
Rose, J. M., & Wolfe, C. J. (2000). The effects of system design alternatives on the acquisition of tax knowledge from a computerized tax decision aid. Accounting. Organization and Society, 25, 285306. https://doi.org/10.1016/S0361-3682(99)00048-3
The Republic of Indonesia. (2014). Minister of Finance Decree No. 111/2014 concerning tax consultants. Retrieved from https://www.ikpi.or.id/sites/default/files/peraturan_pajak/pmk111214.pdf
Saee, J. (2005). Societal ethics and legal system facing contemporary marketing strategies: an Australian insight. Journal of Business Economics and Management, 6(4), 189-197. https://doi.org/10.3846/16111699.2005.9636108
Saputra, K. E., & Adam, H. (2016). Pemahaman pegawai Direktorat Jenderal Pajak dan konsultan pajak tentang perilaku wajib pajak: sebuah studi fenomenologi. Paper presented at the Proceeding of the XVI National Accounting Symposium, Bandar Lampung.
Schwartz, S. H. (1977). Normative in fluences on altruism. In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 10, pp. 221-279). New York: Academic Press. https://doi.org/10.1016/S0065-2601(08)60358-5
Simone, L. D., Sansing, R. C., & Seidman, J. K. (2008). When is enhanced relationship tax compliance program mutually beneficial? The Accounting Review, 88(6), 1971-1991. https://doi.org/10.2308/accr-50525
Stephenson, T. (2010). Measuring taxpayers’ motivation to hire tax preparers: the development of a for-construct scale. Advances in Taxation, 19, 95-121. https://doi.org/10.1108/S1058-7497(2010)0000019006
Suddaby, R., Gendron, Y., & Lam, H. (2009). The organizational context of professionalism in accounting. Accounting, Organizations & Society, 34(3/4), 409-427. https://doi.org/10.1016/j.aos.2009.01.007
Wason, P. C. (1960). On the failure to eliminate hypotheses in a conceptual task. Quarterly Journal of Experimental Psychology, 12, 129-140. https://doi.org/10.1080/17470216008416717
Wenzel, M. (2004). An analysis of norm processes in tax compliance. Journal of Economic Psychology, 25, 213-228. https://doi.org/10.1016/S0167-4870(02)00168-X
Wheeler, P. R., & Arunachalam, V. (2008). The effects of decision aid design on the information search strategies and confirmation bias of tax professionals. Behavioral Research in Accounting, 20(1), 131-145. https://doi.org/10.2308/bria.2008.20.1.131