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

Abstract

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.