The effects of small monetary incentives on response quality and rates in the positive confirmation of account receivable balances

The AICPA has indicated that the use of small monetary incentives might be an effective technique for improving confirmation response rates. A signifi cant body of accounting and nonaccounting research supports the AICPA's pos ition; however, studies in marketing and public opinion polling suggest tha t the quality of survey-based responses can either increase or decrease wit h the use of monetary incentives. Existing auditing research has not looked at the potential effect of monetary incentives on response quality in the context of confirming account receivable balances. This study was designed to investigate this important issue. In this field experiment, four large, independent newspaper organizations m ailed a total of 7,200 trade accounts receivable confirmations. The experim ent employed a three (no misstatement, understatement, and overstatement) b y three (no incentive, quarter, and dollar) between-subjects, full-factoria l design. Consistent with prior research, the use of monetary incentives im proved response rates in all misstatement conditions and response quality w as higher for overstated, when compared to understated, accounts. However, monetary incentives did not close the quality gap between overstated and un derstated accounts and, surprisingly, the use of incentives was associated with an overall decrease in response quality.