Management Accounting Report: Budgeting and Honesty Analysis

This report provides a comprehensive analysis of a management accounting article focusing on the impact of negative affect intensity and preference for honesty in budgetary reporting. The article examines how these factors influence the effectiveness of budgeting as a management tool, particularly in mitigating the development of slack. The research employs a 1 × 2 experiment with finance students to investigate the relationship between honesty, negative affect intensity, and budget communication methods. Findings indicate that subordinates' preference for honesty increases when they aim to avoid negative feelings, which in turn reduces slack in budgeting. The report critically evaluates the research methodology, including the persuasiveness of the findings and the support provided by the evidence. While acknowledging the strengths of the research, the report also points out potential limitations, such as the sample size and the specificity of the participant pool. The report concludes with an assessment of the article's overall contribution to understanding the drivers of preferences for honesty in budgetary reporting and its implications for business organizations.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
1. Summary Paragraph.....................................................................................................................2
2. Critical Examination Paragraph...................................................................................................3
References........................................................................................................................................5

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1. Summary Paragraph
The main aim of this article is the analysis and evaluation of two crucial aspects in the
process o budgeting; they are negative affect intensity and preference for honesty. Since
budgeting is considered as major management accounting tool, they are prone to developing
slack that restricts the effectiveness of this tool (Douthit and Stevens 2014). However, these
negative impacts become ineffective in the presence of the preference of the subordinates to be
honest towards the development of budgeting. This article undertakes testing the theory that
individual preference for honesty contributes to the avoidance of violation of the social norms.
The article also involves in extending the theory with the inclusion of behavioral factors that
assist in predicting the departure from traditional theory (Blay Douthit and Fulmer III 2019).
The research method of this research includes a 1 × 2 experiment that contributed
towards the manipulation of the mode of budget communication between the subjects. The
participants of this experiment were the students with finance major from the same class at a
university in the United States. The research method consisted of four sets of sessions varying
from 10 to 28 participants; and there were two different sessions in each set of sessions that
occurred in the gap of one week while the duration was ninety minutes (Douthit and Majerczyk
2019). There were two experimental sessions. The first experimental sessions includes negative
affect intensity where consent of the participants were received for measuring Affect Intensity
Measures (AIM) and checking AIM attention as well as distraction task that includes respond of
the participants to a small article. The second experimental session includes the overview of
budgeting tasks and manipulation of budget communication as well as honesty for preference
(Blay Douthit and Fulmer III 2019).

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The findings of the article can be divided into three groups; they are findings of the
preliminary analysis, findings related to the preference for honesty as well negative affect
intensity and preference for honesty as an informal control. According to the findings, the
presence of negative effects can be seen in the subordinates when are departed from a social
norm of honesty that contributes to disutility; and this disutility leads to the increase in intensity
for feeling bad reactions (Luft 2016). It also shows that the desire of the subordinates to comply
with the norms of honesty increase when there is an increase in their desires to avoid the
negative affects; and this whole aspect enhances honesty. This research also shows that the
preference for honesty contributes to the reduction of slack in budgeting. This provides the firms
with the ability of comprehending the factors that contribute to the causes of preferences for
honesty. As per one major finding of this research, subordinates with high NAI have the
tendency of relying on preference for honesty as a control that contributes to the increase in
profitability of the business organizations. It needs to be mentioned that the findings of the
research is helpful in the identification of the employees with effective preference for honesty
(Blay Douthit and Fulmer III 2019).
2. Critical Examination Paragraph
Assessment of the strengths and weaknesses of an article is a crucial task for determining
the overall success of the same and this is also applicable for this article. In order to assess the
strengths and weaknesses of the article, it is required to assess whether the research findings are
persuasive or convincing enough. It can be seen from the article that the researchers have
undertaken extensive research methods for reaching to the findings of the research. It can be seen
that the findings have been able in addressing the research hypothesis that the trait of the
subordinates that is negative affect intensity will lead to the increase in preference honesty. The

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research methods have been able in perfectly addressing this hypothesis which proves the high
persuasiveness of the research findings. However, there are areas where the researchers have
provides certain complex explanation of the findings that are hard to comprehend the users with
less knowledge in the area of statistics (Mayhew and Murphy 2014).
The next aspect that needs to be assessed is that whether explication of evidence has
supported the research findings. It can be seen from the research method of this article that the
researchers have designed this experiment by including the real life experiment with the finance
major students of a university of the United States. They were experimented through different
sessions for assessing AIM, negative affect intensity and preference for honesty; and the
researchers have gathered the required data on these experiments for the purpose of further
analyzing them with the tools like t-test and others. After that, the analyzed data is presented in
the article in tabular format and they are referenced while evaluating the overall findings of the
research (Brunner and Ostermaier 2019). However, the researchers have applied the experiment
on the finance major students of only one class of only one collage; exact and appropriate results
cannot be obtained by only considering the students of only collage. It might be the case that
most of the students of that collage have the same tendency. It would be more appropriate in case
students from more than one or two collages would be considered for the research.

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References
Blay, A., Douthit, J. and Fulmer III, B., 2019. Why don't people lie? Negative affect intensity
and preferences for honesty in budgetary reporting. Management Accounting Research, 42,
pp.56-65.
Brunner, M. and Ostermaier, A., 2019. Sabotage in capital budgeting: The effects of control and
honesty on investment decisions. European Accounting Review, 28(1), pp.71-100.
Douthit, J. and Majerczyk, M., 2019. Subordinate perceptions of the superior and agency costs:
Theory and evidence. Accounting, Organizations and Society.
Douthit, J.D. and Stevens, D.E., 2014. The robustness of honesty effects on budget proposals
when the superior has rejection authority. The Accounting Review, 90(2), pp.467-493.
Luft, J., 2016. Cooperation and competition among employees: Experimental evidence on the
role of management control systems. Management Accounting Research, 31, pp.75-85.
Mayhew, B.W. and Murphy, P.R., 2014. The impact of authority on reporting behavior,
rationalization and affect. Contemporary Accounting Research, 31(2), pp.420-443.