Human Information Processing Research in Accounting: the State of the Art in 1982

Awareness of the importance of human information processing research to accounting issues has increased dramatically since 1977. As a result, this literature has expanded in volume and addresses a larger spectrum of accounting problems. Further, it incorporates a wider variety of theories and methodologies. This paper draws upon the framework provided by Libby and Lewis (1977) to synthesize and evaluate accounting research conducted since 1977 using the lens model, probablistic judgment, predecisional behavior, and cognitive style approaches. In addition, the impact of the research on practice and some directions for future research are discussed. Along with the recognition that decision making is the focal point of the current practice of accounting, an extensive body of research which analyzes decision making in accounting settings has been developed. This research is usually referred to as human information processing (HIP) or behavioral decision making research. Accountants have shown particular interest in studies which investigate (1) the role of accounting information in user decisions (e.g. in commercial lending) and (2) the complex decisions required in the practice of accounting (e.g. in auditing). The evidence generated by this research serves a dual purpose. First, it may lead to improvements in these accounting decisions. Second, it can add to the basic knowledge of human decision processes. Four years ago, we provided a review of what was then an emerging research program (Libby & Lewis, 1977; LL-77 hereafter). Since this initial review, both the interest and research output in this area have grown at an increasing rate. In response to this activity, we have compiled a second state-of-the-art paper. As testimony to the growth in interest we note that this second review contains more than twice as many studies as did LL-77. As further evidence of the interest in human information processing research in accounting, we can point to the impact which such research has already had on accounting practice. Accepting consensus and consistency as measures of the quality of expert judgment, many audit firms have developed decision aids to increase the consistency of judgments. These notions derive directly from research in behavioral decision theory. Research exposing humans as poor intuitive statisti* The authors gratefully acknowledge the Paton Accounting Center for financial support and Garry Marchant for his assistance.