The effects of red-flag items, unfavorable projection errors, and time pressure on tax preparers' aggressiveness

This paper examines how a red-flag item (RFI), an unfavorable projection error (UPE) and time pressure affect the aggressiveness of tax preparers' recommendations. We hypothesize that a RFI causes preparers to make more conservative recommendations, and UPE and time pressure lead to more aggressive recommendations. The hypotheses were tested on 153 tax practitioners using a hypothetical tax scenario. There was a strong indication that practitioners made more conservative recommendations when a RFI was present. Additionally, the results indicated that the effect of time pressure on tax preparers' recommendations was dependent upon other variables in their decision-making environment.