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Hello, I attached two articles and there are questions that there answer is based on those two articles. Please read and answer them. Please use you own own own words. If you paraphrase something please cite the source. All answers should be from the articles.


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Week 11 Questions
The Intrusion of Bias
What question are the authors attempting to answer?
Why is the selective accessibility of argument significant for individuals who have conflicting (or
potentially conflicting) roles?
What is the author’s first hypothesis?
What is the author’s second hypothesis?
What does experiment 1 evaluate about the “fair values” that are evaluated in the accounting
What do the author’s claim that Experiment 2 demonstrates about individuals ability to move
out of partisan roles and make an objective private judgment?
What was Experiment 3 designed to test?
What effect do the authors claim that facing conflicts of interest will have on attempts to make
objective judgments?
Self-Interest, Automaticity, and the Psychology of Conflict of Interest
What is Moore and Loewenstein’s basic argument?
What are the key differences between automatic and controlled cognitive processes?
What effect does cognitive load seem to have on automatic and controlled processes?
What is Moore and Loewensteins’s central contention?
What is the escalation of commitment?
Why do punishments (fines, etc.) often lack enough motivational strength to change behavior?
Judgment and Decision Making, Vol. 5, No. 1, February 2010, pp. 37–53
Conflict of interest and the intrusion of bias
Don A. Moore∗
Carnegie Mellon University
Lloyd Tanlu
University of Washington
Max H. Bazerman
Harvard University
This paper explores the psychology of conflict of interest by investigating how conflicting interests affect both public
statements and private judgments. The results suggest that judgments are easily influenced by affiliation with interested
partisans, and that this influence extends to judgments made with clear incentives for objectivity. The consistency we
observe between public and private judgments indicates that participants believed their biased assessments. Our results
suggest that the psychology of conflict of interest is at odds with the way economists and policy makers routinely think
about the problem. We conclude by exploring implications of this finding for professional conduct and public policy.
Keywords: conflict of interest, self-serving bias, motivated reasoning.
spectives? In our attempt to answer this question, we explore the psychology of conflict of interest by comparing
alternative explanations for their effects.
After reviewing research on whether and when people
are able to play dual roles, we present findings from three
studies. These studies examine a fairly typical business
situation — a situation in which an advocate must provide
a deliberately partisan valuation of a company and then is
asked to provide an impartial valuation of the same company. We ask whether these advocates can successfully
make impartial, unbiased judgments in situations characterized by such dual roles. We conclude by speculating
about the implications of this psychological finding to issues of professional conduct, public policy, governmental
regulation, and organizational design.
In many situations, professionals are called upon to play
dual roles that require different perspectives. For example, attorneys embroiled in pretrial negotiations may exaggerate their chances of winning in court to extract concessions from the other side. But when it comes time to
advise the client on whether to accept a settlement offer,
the client needs objective advice. Professors, likewise,
have to evaluate the performance of graduate students and
provide them with both encouragement and criticism. But
public criticism is less helpful when faculty serve as their
students’ advocates in the job market. And, although auditors have a legal responsibility to judge the accuracy
of their clients’ financial accounting, the way to win a
client’s business is not by stressing one’s legal obligation
to independence, but by emphasizing the helpfulness and
accommodation one can provide. Traditional economic
models of rationality would assume that people can perform optimally in such situations, making unbiased judgments when it is in their interest to do so, but taking a
partisan stand when this is called for strategically. This
paper asks whether these dual roles are psychologically
feasible; that is, can one person successfully play different roles that require different, and often competing, per-
1.1 Background
F. Scott Fitzgerald wrote that “the test of a first-rate intelligence is the ability to hold two opposed ideas in the
mind at the same time, and still retain the ability to function” (1936). However, evidence suggests that even the
most intelligent find it difficult to sustain opposing beliefs without the two influencing each other.
Because professionals are so frequently called upon to
fulfill multiple roles, it is easy to find instances where
their different roles demand that they pursue conflicting
objectives. Although it might seem desirable that multiple aspects of the self inform each other in judgment and
choice, such mutual influence also undermines people’s
ability to play multiple roles. People’s inability to switch
between roles without having them influence each other
can partly explain the corrosive effect of conflicts of interest on professional judgment. The auditor who desperately wants to retain a client’s business may have trouble
∗ The authors gratefully acknowledge the financial support of the
American Accounting Association and the generous assistance of an
anonymous major accounting firm for providing participants in the first
experiment. Helpful comments were received from Linda Babcock,
Daylian Cain, Paul Healy, Mingwei Hsu, Theresa Kelly, Mark Nelson, and from seminar participants at Harvard University and at the
Olin School at Washington University. Thanks to Jeff Crilley, Corey
Fallon, Erin Morgan, Wemi Peters, and Sam Swift for help collecting
the data. Thanks especially to George Loewenstein for his important
role in the early life of this project. Address: Don A. Moore, Carnegie
Mellon University, 5000 Forbes Avenue Pittsburgh, PA 15213. Email:
[email protected].
Judgment and Decision Making, Vol. 5, No. 1, February 2010
adopting the perspective of a dispassionate referee when
it comes time to prepare a formal evaluation of the client’s
accounting practices.
When people become aware that they have behaved in
ways that are inconsistent with the beliefs they have professed, they are motivated to resolve the inconsistency.
The simplest resolution is often to revise their beliefs,
given that their previous behavior cannot be changed
(Festinger & Carlsmith, 1959). In this way, actions taken
or decisions made in a partisan role may directly influence private beliefs because people will bring their beliefs
into line with stances they have previously taken. The alternative is to believe that one is a hypocrite — willing to
say one thing when one’s role demands it and then contradict that same conclusion in a different context.
Selective accessibility
Recent research has demonstrated how the selective accessibility of information in memory produces an anchoring effect (Mussweiler & Strack, 1999; Strack & Mussweiler, 1997). This is because people consider (however
briefly) the hypothesis that the anchor value is the correct answer. Applied to the conflicting interests of dual
roles, this would imply that arguments made in the first
role become more accessible in memory, and that this information will influence subsequent judgments. For example, after arguing that an audit client should retain her
firm because she can help increase the client’s probability
of success, an auditor is likely to be influenced by those
thoughts and those reasons when it comes time to complete a formal audit report regarding the client’s continued viability as a going concern.
In the case of conflicting dual roles, the selective accessibility of arguments on one side of an issue is likely to
be particularly important. Thanks to what Perkins (1989)
called the “myside” bias, people quite naturally think of
arguments that favor the position they have taken or the
outcome they desire. On the other hand, considering the
opposite perspective does not come as naturally (Brenner,
Koehler, & Tversky, 1996). The selective accessibility of
this one-sided evidence is likely to stack the deck in favor of a particular conclusion when the individual then
attempts to take a more dispassionate perspective.
The evidence indicates that these selective attentional
or memorial processes operate largely outside of conscious awareness. People are not aware of the ways
in which exposure to anchors can bias subsequent judgments (Chapman & Johnson, 1999). Indeed, if they were,
then people could consciously counteract the biasing effect of irrelevant or misleading anchors, but they don’t
(Mussweiler, Strack, & Pfeiffer, 2000). Such lack of insight into their own cognitive processes makes it difficult
Conflict of interest and intrusion of bias
for people to purge biasing influences from their judgments even when they desire to do so.
1.3 The studies
The three experiments reported here bring the research
on role-conferred biases to bear on the study of conflict of interest. Experiment 1 presents data from professional auditors to test the hypothesis that their judgments are biased in favor of the firms that have hired
them (Hypothesis 1). The second and third studies examine the causes behind this effect by looking at factors
that could moderate the magnitude of bias and testing the
extent to which the bias can be consciously undone. Both
Experiments 2 and 3 ask participants to take on the roles
of both an advocate and a judge. Both experiments find
support for the hypothesis that people’s roles as advocates
lead to biases in their judgments when they later attempt
to fulfill the role of an objective judge. Participants were
asked to produce two judgments: one public and one private. For the public judgments, participants were given
an explicit incentive to be biased. For the private judgments, they were given an incentive to be unbiased; they
were paid on the basis of how close their judgments came
to those provided by an impartial panel of experts. If participants were properly motivated and fully aware of the
bias in their public reports, they should have been able
to adjust their evaluations to eliminate the bias in their
private judgments. If they were not fully aware of the
bias, as the research on role-conferred bias would suggest, then their private estimates should have been biased
as well (Hypothesis 2).
Because monetary incentives are a common source of
conflicting interest between roles, Experiment 2 specifically tests the consequences of financial incentives on
bias. Experiment 2 tests the hypothesis that the greater
one’s financial interest in a particular outcome, the more
biased one will be in the direction of that outcome
(Hypothesis 3).
Material interests are not the only factors that can introduce conflicts of interest. Personal affiliations can have a
similar effect. The third experiment varies the closeness
of the relationship between the agent and the client. Prior
evidence suggests that personal affiliations, in the absence of any monetary incentive, are likely to be sufficient
to produce bias in judgment (Hastorf & Cantril, 1954;
Thompson, 1995). Naturally, this tendency is strengthened only when people feel accountable to a partisan
(Lerner & Tetlock, 1999; Tetlock, 1992). Both close personal affiliations and accountability strengthen the biasing effect of the advocate role and are therefore likely to
make it more difficult to eradicate biasing influence when
it comes time to play the role of neutral judge. Experi-
Judgment and Decision Making, Vol. 5, No. 1, February 2010
ment 3 tests the hypothesis that the closer one’s personal
relationship with a particular individual, the more biased
one will be in that person’s favor (Hypothesis 4).
Experiment 1: Role-conferred biases
Professional auditing is full of ambiguous situations that
require auditors to exercise professional judgment. For
example US Generally Accepted Accounting Principles
(GAAP) require accountants to estimate “fair values” for
assets that lack observable prices. This is especially true
for so-called “Level 3” assets that do not trade frequently,
and whose valuations must be based on assumptions or
expectations. It is rare, however, that auditors have to
come up with an independent valuation. Instead, the audit client proposes an accounting and the auditor’s only
job is to decide whether to bless the client’s approach as
consistent with GAAP. Psychologically, this arrangement
raises the concern that people are less bound by objectivity when they need only acquiesce to someone else’s
biased and self-serving judgments than when they are
called on to make an independent evaluation (Dana, Weber, & Kuang, 2007; Diekmann, Samuels, Ross, & Bazerman, 1997). In order to explore this issue, we vary the
question order in this experiment. Some participants first
decide whether to approve the client’s accounting; others
must make their own valuations first.
Participants were 139 professional auditors employed
full-time by one of the Big Four accounting firms in the
United States. Their ages ranged from 23 to 55, with a
mean of 29 years (SD = 6.2). Fifty-six percent of the
participants were male. They had a mean of five years
(SD = 5.7) working as an auditor. After handing in their
questionnaires, nine participants requested that their responses be excluded from subsequent data analyses.
Each participant read five different auditing vignettes
and came to a judgment regarding the proper auditing
in each case. The problems were intentionally chosen
to be somewhat difficult accounting problems for which
GAAP did not provide an unambiguous solution. Each
of the vignettes depicts a situation in which the accounting issues are not clearly addressed by current rule-based
accounting standards. The issues addressed include the
recognition of intangible assets (in particular, goodwill)
on the financial statements (vignette 1), the restructuring
of debt with dilutive securities (vignette 2), the recognition vs. deferral of revenues (vignette 3), capitalization
vs. expensing of expenditures (vignette 4), and the treat-
Conflict of interest and intrusion of bias
ment of research and development costs on the financial
statements (vignette 5). Participants were told that these
cases were independent of each other and hypothetical,
although intended to be realistic. All participants saw all
five vignettes in the same order. The five vignettes are
listed in Appendix A.
The experiment had a 2 (role: hired by target firm or
by outside investor) X 2 (question order: make accounting valuation first vs. assess others’ accounting first)
between-participants factorial design. The role manipulation varied whom participants were told they were working for. Half the participants’ materials told them that
they had been hired as the external auditor for the firm
in question. Obviously, the firm in question would prefer
a more positive audit opinion. The other half of participants read that they were working for an outside investor
considering investing money in the firm. An outside investor is likely to want to know the true state of the firm’s
finances when deciding whether to invest.
The question order manipulation counterbalanced the
order of the questions that followed every vignette. Those
in the assessment-first condition were first presented with
(1) the firm’s unaudited accounting, and were asked
whether they would accept it as complying with GAAP;
and (2) what the right accounting would be. Those in the
valuation-first condition got these two questions in the reverse order.
2.2 Results
Neither age nor years of auditing experience affected the
dependent measures reported below. Therefore, we do
not report them in the subsequent analyses.
We hypothesized that participants would be more
likely to conclude that the accounting behind a firm’s financial reports complied with GAAP if they were working for the firm than for an outside investor (Hypothesis 1). To test this hypothesis, we averaged the rate of
approval for each participant over the five vignettes and
submitted it to a 2 (role: hired by target firm or by outside investor) X 2 (question order: make accounting valuation first vs. assess other’s accounting first) ANOVA.
The main effect of role emerges as significant. Consistent with Hypothesis 1, those working as external auditor
for a firm were significantly more likely to approve the
firm’s accounting (Mean rate of approval = 29%, SD =
24%) than were those who represented outside investors
(M = 21%, SD = 19%), F (1,126) = 4.45, p = .037. Neither the main effect of question order nor its interaction
with role is significant (F < 1). We also expected that, in addition to being more willing to endorse the firm’s own accounting, participants would be more likely to come to valuation decisions that Judgment and Decision Making, Vol. 5, No. 1, February 2010 were favorable to the target firm when considering the problem from the perspective of an outside auditor than when taking the perspective of a potential investor. To test this prediction, we first generated standardized scores for each item by computing a z-score of the valuation for each vignette and reverse-scoring as appropriate so that higher scores indicated valuations more favorable to the target firm. We then computed an average valuation for each participant and submitted these valuations to a 2 (role: hired by target firm or by outside investor) X 2 (question order: make accounting valuation first vs. assess other’s accounting first) ANOVA. Those serving the firm as outside auditors came to more favorable valuations (M = .07, SD = .56) than did those working for a potential investor (M = –.10, SD = .49), but this effect does not attain statistical significance, F(1,125) = 4.07, p = .081. Neither the main effect of question order nor its interaction with role attained statistical significance. 2.3 Discussion The results of Experiment 1 are broadly consistent with research on accountability showing that people tend to be proactively responsive to those to whom they expect to be accountable. When people are accountable to others with known preferences, their judgments tend to assimilate to those preferences (Tetlock, 1983). An auditor who feels accountable to the client is more likely to issue a favorable audit report than one who feels accountable to others within his or her own firm (Buchman, Tetlock, & Reed, 1996). However, it is worth noting that the role manipulation used in Experiment 1 was weak compared with the standard accountability manipulations in which people are led to believe that they will actually be meeting with a real person to whom they will need to justify their decisions. In Experiment 1, no mention was made of such accountability and participants were not required to justify their opinions. Nevertheless, this weak manipulation had an effect. We speculate that one reason for its effectiveness may be that the participants were familiar with the role of auditor and were able to easily put themselves in the role of being employed by, and accountable to, the client firm. One notable feature of the results of Experiment 1 is the low levels of endorsement. Nearly three quarters of the time, participants rejected the accounting proposed in the vignette as not complying with GAAP. This stands in contrast to the fact that the vast majority of audit reports are unqualified endorsements of the client’s accounting (Craswell, Stokes, & Laughton, 2002). Two facts can explain the low endorsement rates in Experiment 1. First, the proposed accounting we ... Purchase answer to see full attachment

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