Second-Partner Review: An Experimental Economics Investigation

Posted: 16 Apr 1998

See all articles by Robert R. Tucker

Robert R. Tucker

Fordham University - Accounting Area

Ella Mae Matsumura

University of Wisconsin-Madison - Department of Accounting and Information Systems

Date Written: May 1996


The analytical model of Matsumura and Tucker (1995) provides a rigorous economic rationale for the value of second-partner reviews. The model examines the review's role in promoting accurate, unbiased decisions by an engagement partner who possesses imperfect information and is subject to economic pressures to bias judgment. The game modeled and tested involves an engagement partner who decides how much costly information to acquire and what opinion to express, and a second partner who must also express an opinion. This experimental economics test of Matsumura and Tucker's analysis and example consists of two phases. Phase one involves only the engagement partner and investigates how the partner's reporting competence and independence are affected by varying 1) economic incentives for bias and 2) the availability of additional sampling information. In phase two, the engagement partner report is subject to a second-partner review. The engagement partner suffers an intrafirm reputation loss if the second partner disagrees with the engagement partner's incorrect report. The primary hypotheses were supported. Engagement partner reporting did exhibit bias when subject to client pressure; this bias was reduced, but not eliminated, by adding second- partner reviews and/or the availability of additional sample information. One unexpected result was that second partners, whose incentive scheme was designed to promote unbiased reporting, exhibited reporting bias, and, in one cell, exhibited more bias than the "biased" engagement partner they were monitoring. When not subject to second-partner reviews, engagement partners were strategic in their reporting, but not so in their sampling decisions. With the introduction of second-partner reviews, the situation reversed. The effects of client pressure became evident in sampling, but were less pronounced in reporting.

JEL Classification: M40, M49, C91, D82

Suggested Citation

Tucker, Robert R. and Matsumura, Ella Mae, Second-Partner Review: An Experimental Economics Investigation (May 1996). Available at SSRN:

Robert R. Tucker (Contact Author)

Fordham University - Accounting Area ( email )

Graduate School of Business
113 W. 60th Street
New York, NY 10023
United States
212-636-6121 (Phone)

Ella Mae Matsumura

University of Wisconsin-Madison - Department of Accounting and Information Systems ( email )

United States

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