Caught in a Cognitive Trap? An Examination of Student Heuristics and Debiasing when Analyzing an Accounting Restatement Case Study

Abstract

ABSTRACT Student evaluations and judgments of the accounting method used in the restatement of financial statements by a public company for channel stuffing are examined. In order to reduce any heuristics and biases that may have affected student judgments, a group brainstorming method was incorporated to supplement individual assessments made by the students. The case study was administered to 206 students in three student groups: non-degree, justice school, and business school students. Between-subjects' assessments of the accounting restatements show that justice school and business school students are more likely than non-degree students to disagree with the assessment that the restatement was appropriate. Similar results were obtained for accounting major students compared to non-accounting major students. Empirical evidence was also found for the presence of social identity bias between business school and justice school students' evaluation of sanctions. Implications on the use of behavioral techniques in accounting and ethics education are discussed.