Section a – Subscriptions

The first part of the case materials was regarding collection of subscriptions (as shown in Figure 6.1). Participants were presented with relevant information, comparable to that which auditors might gather concerning a client‘s receivables, including the total expected amount of subscriptions, the monthly cash receipts and pattern of collection from past two years, as well as replies to email reminders of payment due from students who had registered their interest in joining the club but who had not yet submitted their payments.

6.2.1.1 Case information in relation to subscriptions

Information given in this section (as shown in Figure 6.1 on next page) was designed purposefully for open interpretation. Materials did not include any strong indication of answer to the required judgment. For example, it was given in the case that among the total of 400 students registered to join the club this year, half of them had paid for subscriptions and half had not paid; among those who were sent with a reminder of due payment, half were still willing to join the club / to make payment and half no longer interested in membership / unlikely to pay. The information was constructed so that, on a balanced view, it would tend to signify an even chance of the collectability of the target amount, and in such a way that it could be framed as evidence pertaining to the collectability of amounts or as evidence related to the uncollectability of amounts.

Figure 6.1 Case information presented in respect of the members‘ subscriptions

The club gets students to indicate their interest in joining the club, by signing-up early in the autumn semester, but membership rights are given only when the full subscription amount of £20 per annum is received.

Below is a schedule showing the number of students who have signed-up this year:

September

Total Week 1 Week 2 Week 3 Week 4

Number of Sign-ups 45 147 161 47 400

The following is a schedule showing the monthly pattern of cash receipts for this year and in the two previous years:

The committee has contacted a random sample of 30 students who have signed-up for the club but not yet paid their subscriptions, asking them to confirm their continuing interest in the club and reminding them of the clubs reliance on subscriptions. The following responses were received within a week of the email being sent out:

No.

Confirmed and intend to pay before the next club meeting 11 No longer interested in joining / unable to pay subscription 6 Undecided but intending to attend next meeting and decide soon 4

Not yet replied 9

Total 30

6.2.1.2 Tasks

Estimation of amounts generated from subscriptions

Participants were asked to indicate a range of total amount collected from club members‘

subscriptions for the year (as shown in Figure 6.2 on next page) in the subscriptions section of Experiment 1, 2 and 3.

Referring from the case information, the subscription fee was charged at £20 per head.

With the total number of 400 students signed up to join the club for the year, and 200 of them already submitted payments, participants were instructed to specify the range of possible amount according their assessment. The range is determined by the upper bound and the lower bound of amounts that might be collected, which means participants were to make two estimation judgments in this task.

Figure 6.2 Estimation of amounts generated from subscriptions (in Experiment 1, 2 and 3)

Please fill-in boxes in the grid below to indicate your assessment of the range of amounts that the club can reasonably expect to collect from subscriptions:

Amount collected from members‟ subscriptions

£4,000 £5,000 £6,000 £7,000 £8,000

200 250 300 350 400

Number of members/subscriptions

This required judgment was the same across all three experiments (Experiment 1, 2 and 3).

Likelihood assessment of possibility that specific amount would be generated Participants were also asked to indicate as a percentage the possibility that the specific amount (£6,000) would be generated from membership subscriptions in the subscriptions section (Section a) of the three experiments (Experiment 1, 2 and 3).

Experiment 1 (message matching) asked participants to use a six-point Likert scale to indicate their likelihood assessments (i.e., ―0‖ being ―certainly not‖; ―1‖ being ―highly unlikely‖; ―2‖ being ―fairly unlikely‖; ―3‖ being ―fairly likely‖; ―4‖ being ―highly likely‖;

and, ―5‖ being ―certainly‖) in addition to specifying the probability as a percentage (as shown in Figure 6.3).

Figure 6.3 Likelihood assessment task in Section a – Subscriptions (in Experiment 1) Please indicate how likely it is, in your view, that the club will be able to collect £6,000 or more from members‘ subscriptions this year.

Experiment 2 asked participants to indicate their assessment on the probability of the amounts collected from subscriptions and donations by choosing among nine variations of distribution curves, the one that best fit their judgment (as shown in Figure 6.4 below). The nine variations represented combinations of skewnesses (positive, normal, and negative) and densities (high, moderate and low), as outlined in Figure 6.5 (on next page). With the same median of a normally distributed bell curve, a positive skew demonstrated a distribution with higher probability of collecting greater amounts monthly; whereas a negative skew demonstrated higher probability of collecting smaller amounts monthly.

Figure 6.4 Likelihood assessment task in Section a – Subscriptions (in Experiment 2) Please select the one distribution curve, from the nine shown below, which best fits with your assessment of the possible distribution of amounts likely to be collected from subscriptions in the year. Take the amount that you have already indicated ―most likely‖ to be collected from subscriptions as being indicated by the peak (marked with a vertical line) in each of the distribution curves shown below.

Circle the curve to indicate your assessment.

i) ii) iii)

iv) v) vi)

vii) viii) ix)

Figure 6.5 Distribution curves Nine variations:

i. Positive skew (right-tailed distribution) with high density (μ = 2, = 0.5) ii. Normal distribution with high density (μ = 0, = 0.5)

iii. Negative skew (left-tailed distribution) with high density (μ = -2, = 0.5) iv. Positive skew with moderate density (μ = 2, = 1)

Figure 6.6 Likelihood assessment task in Section a – Subscriptions (in Experiment 3) Please indicate by ticking one box in each column below, how confident you are that and an amount equal to or greater than that indicated will be collected from subscriptions in the year.

Likelihood

Amount collected from members‟ subscriptions in the year (£) equal to or greater than:

4,000 4,250 4,500 4,750 5,000 5,250 5,500 5,750 6,000 6,250 6,500 6,750 7,000 7,250 7,500 7,750 8,000

Confidence rating

All participants in the three experiments rated their confidence in judgment made (as shown in Figure 6.7) after performing likelihood assessment.

Figure 6.7 Confidence rating in Section a – Subscriptions (in Experiment 1, 2 and 3) Please indicate how confident you are in the above judgment:

100% confident 99% - 99.99%

95% - 98.99%

90% - 94.99%

85% - 89.99%

80% - 84.99%

70% - 79.99%

60% - 69.99%

50% - 59.99%

40% - 49.99%

30% - 39.99%

20% - 29.99%

10% - 19.99%

0% - 9.99%