The AICPA has indicated that the use of small monetary incentives might be an effective technique for improving confirmation response rates. A significant body of accounting and nonaccounting research supports the AICPA's position; however, studies in marketing and public opinion polling suggest that the quality of survey‐based responses can either increase or decrease with 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 mailed a total of 7,200 trade accounts receivable confirmations. The experiment employed a three (no misstatement, understatement, and overstatement) by three (no incentive, quarter, and dollar) between‐subjects, full‐factorial design. Consistent with prior research, the use of monetary incentives improved response rates in all misstatement conditions and response quality was higher for overstated, when compared to understated, accounts. However, monetary incentives did not close the quality gap between overstated and understated accounts and, surprisingly, the use of incentives was associated with an overall decrease in response quality.