Golemme Chair of Accounting
Arnie Wright |
As an alumnus, you likely heard the phrase, “Behavioral Accounting Research,” and wondered what that means. We sat down with Professor Arnold Wright, Golemme Chair of Accounting and asked him to talk more about what Northeastern is doing.
Q. Professor Wright, what is behavioral accounting research?
A. Behavioral accounting research is the study of how accounting information influences decisions of individuals, groups, and organizations, such as managers, auditors, investors, audit committees, etc.
The field draws on Psychology, Social Psychology, Sociology, and Organizational Behavior and explicitly recognizes that people have limitations. They are subject to emotions, pressures, fears, and cognitive limitations and do not make perfect economic decisions as assumed in classical economic theory.
Q. Why is Northeastern considered one of the national leaders?
A. Northeastern's accounting group has ten faculty dedicated to behavioral accounting research. This is one of the largest number of researchers at a university in this research field and the largest proportionally in the U.S. and in the world. The faculty conducts behavioral accounting research in auditing, tax, managerial accounting, and financial accounting. As a department we have recognized behavioral accounting research as our niche.
Q. Could you please share with us an example of the type of research that is done in this field?
A. One example is how auditors apply conduct “analytical procedures”, a test as to whether items in the financial statements appear to be reasonable. This test helps the auditor focus on areas of risk of fraud or error. Behavioral accounting research has shown that the overwhelming majority of auditors determine this by doing a prior year to current year comparison and focus on large changes. However, many prior fraud cases indicate that companies who have “cooked the books” have accomplished this by deliberately manipulating financial data to reflect change in a linear faction such as showing steady growth even when the industry is experiencing a decline. Based on these findings behavioral accounting researchers recommended changing directives to auditors to form independent expectations based on industry trends instead of based on prior year; these recommendations were later adopted in practice through authoritative auditing standards.
Q. What type of value or "practical use" could the accounting field extract from the research done in this area?
A. Behavior accounting research, as noted, focuses on how people use accounting information to take actions. By doing this, we can see how successful decisions and bad decisions are made. The overall objective is to help improve decision making on all levels.
Q. What are the next steps for Northeastern and Behavioral Accounting Research and how can the alumni population help?
A. The department is looking to build on its successes and continue to attract and support faculty. We hope our alumni recognize our strengths and spread the word - be proud of what we are doing. Also, alumni can help by participating in research, helping collect data, assisting in the design of research plans and materials, identifying important issues, or even sponsoring research.