Connotative Meaning and the Challenges of International Financial Reporting/Auditing
Standards Convergence: The Case of Taiwan’s Statement of Auditing Standards
Number 33
Chee W. Chow
1849 Caminito Quintero
La Jolla, CA 92037-5722
Tel: (858) 456-9549
Email: [email protected]
Rong-Ruey Duh (Corresponding author)
Department of Accounting
National Taiwan University
No. 1, Section 4, Roosevelt Road
Taipei, TAIWAN 106
[email protected]
Hsiao-Lun Lin
Department of Accounting
National Taipei University
No. 1, Section 4, Roosevelt Road
Taipei, TAIWAN 106
[email protected]
February 15, 2014
1
Connotative Meaning and the Challenges of International Financial Reporting/Auditing
Standards Convergence: The Case of Taiwan’s Statement of Auditing Standards
Number 33
ABSTRACT
Translating international standards into local languages is a big obstacle to the global
convergence of financial reporting and auditing practices. This is because words have both
denotative (i.e., literal) and connotative (i.e., emotion-based) meanings, and unless both
meanings of the English original are captured in translation, the convergence that is achieved
may only be one of appearance rather than substance. This study uses Taiwan’s promulgation
of Statements on Auditing Standards No. 33 to examine an important component of this
challenge: the need for local standard setters to anticipate how domestic constituents would
interpret alternate choices of local terms. Data collected from samples of Taiwanese auditors,
investors and public prosecutors revealed that as compared to the auditors, financial
statement users ascribe different connotative meanings to a Chinese term that was originally
proposed, and one that was chosen as its replacement after public discussion. Further, the
words’ connotative meanings significantly mediated the link between the local term and
judgments about auditor legal liability. Significantly, financial statement users ascribed
connotative meanings to the competing Chinese terms that diverged in a direction opposite to
that apparently anticipated by proponents of the wording change. These findings have a
number of implications for standard setters, the standard setting process, and accounting
firms.
Keywords: international harmonization of accounting and auditing standards; translation;
semantic differential; Taiwan’s auditing standard setting.
2
Connotative Meaning and the Challenges of International Financial Reporting/Auditing
Standards Convergence: The Case of Taiwan’s Statement of Auditing Standards
Number 33
1. Introduction and overview
The globalization of capital markets has increased demands for converging financial
reporting and auditing practices, and increasing numbers of countries are embracing
International Financial Reporting Standards (IFRS) and International Standards of Auditing
(ISA) (Deloitte and Touche 2008; Barth, Landsman, and Lang 2008; IFAC 2009). However,
even if a common set of accounting and auditing standards is accepted globally, how such
standards are translated into local languages can lead to misunderstanding of the original
meaning (Davidson and Chrisman 1994; Taub 2003; Evans 2004; Nobes 1993, 2006;
Mennicken 2008). 1This, in turn, could lead to convergence only in appearance rather than in
substance (Schipper 2005; Larson and Street 2004; Fearnley and Sunder 2006; Sunder
2010).2
This study brings attention to a major component of this challenge, namely, that faced by
local policy makers in assessing how domestic financial statement users would interpret
alternate translations of a given term. The specific case examined is the promulgation of
Taiwan’s Statement of Auditing Standards (SAS) No. 33 (1999). This standard was patterned
after ISA No. 700, under which the role of auditors is to plan and perform the audit to obtain
reasonable “assurance” that the financial statements are free from material misstatement.
1
2
For example, in the 2010 World Standard-setters Conference, participants from South Korea and Turkey
stressed the difficulty in translating financial reporting standards from English into other languages. See
http://www.ifrs.org/NR/rdonlyres/CBEAB38D-3B50-46F6-920F-7EABE90E0850/0/ConferenceDocumentati
on2010.pdf. Accessed January 15, 2011.
Prior studies examining the effect of IFRS adoption on financial reporting quality around the world suggest
that merely adopting a common set of accounting standards cannot improve quality and that institutional and
firm incentive factors are important factors (e.g., Daske, Hail, Leuz, and Verdi 2013; Houque, van Zijl,
Dunstan, and Karim 2012; Isidro and Raonic 2012). An implicit assumption is that the language and therefore
translation issues are not a concern in non-English speaking countries. Yet Jeanjean, Lesage, and Stolowy
(2010) indicate that the language barrier affects the publication of English-language annual reports by firms in
non-English speaking countries. Another implicit assumption is the adoption of a common set of auditing
standards.
3
Initially, Taiwan’s Auditing Standards Committee proposed using the Chinese word
“guarantee (保證),” but this choice was strongly opposed by the Taiwanese accounting
profession at large. They contended that auditors could not, in fact, guarantee the integrity of
financial reports given the inherent limitations of audit procedures. Yet under Taiwan’s Civil
Law, one who “guarantees” the behavior of someone else will be held legally liable if the
other’s behavior is involved in legal or contractual violations. Subsequently, SAS No. 33 was
revised to replace “guarantee” with “confirmation (確信).” We investigate whether the
Taiwanese accounting profession and standard setters were correct in anticipating that users
of audited financial statements would ascribe different meanings to these competing Chinese
terms. More important, since concern about the wording choice was driven by predicted
impacts on auditor legal liability, we further relate the words’ ascribed meanings to judgments
regarding auditor legal liability when recipients of unqualified audit opinions fail.
To place this issue in context, it is useful to recognize that accounting terms and
concepts have both denotative and connotative meanings (Bagranoff, Houghton, and Hronsky
1994). The former is literal and technical, whereas the latter relates to words’ emotional
content. For example, the denotative meaning of the term “profit” is the excess of revenues
over expenses, while the connotative meaning may be good, or valuable (Bagranoff et al.
1994). Extant research indicates that not only the literal definition, but also the connotative
meaning of an accounting concept is important for effective communication, and a study by
Adelberg and Farrelly (1989) even went as far as to assert that connotative meaning is the
most significant aspect of accounting-related communications. After Haried (1972) first used
the semantic differential scale in accounting research, subsequent applications of the scale
have found that an accounting term can be perceived differently by individuals (e.g., Oliver
1974; Houghton 1987, 1988) as well as professions (e.g., Bloor and Dawson 1994; Kirk
4
2006).3 For example, Houghton (1987) found that accountants and shareholders interpret the
phrase “true and fair value” differently. He also found that the views that accountants
believed investors would hold were inconsistent with those that they actually held. Houghton
and Hronsky (1993) compared the cognitive structures of undergraduates, auditors and
accountants relating to 15 major accounting concepts.4 They found that the three groups
were consistent on ten of these concepts but inconsistent on the other five.5 Along the same
vein, studies have shown that a gap exists between what auditors and financial statement
users expect of such statements, and that what matters to auditors may not matter to other
professions, and vice versa (e.g., Humphrey, Moizer, and Turley 1993; McEnroe and Martens
2001; Monroe and Woodliff 1994; Church, Davis, and McCracken 2008). Taken as a whole,
these findings suggest that there can be significant differences among accounting
professionals and financial report users in the connotative meaning that they attach to an
accounting concept. As such, a key issue in translating international reporting and auditing
standards into local languages is assessing the connotative meaning that financial statement
users would attribute to different local words used to translate a given term and in turn, how
this attributed meaning may impact their decisions and actions. In this process, not only may
accountants ascribe different meanings to a given local term as compared to financial
statement users, but they also may misjudge how the latter would interpret that term.
Even though prior studies have examined the connotative meaning that individuals or
3
The semantic differential method was developed by Osgood, Suci, and Tannenbaum (1957) for use in
experimental psychology to measure the connotative meaning of a concept. In the semantic differential
method, subjects are required to connect a concept with several adjectival pairs. Bi-polar adjectives (e.g.,
good–bad) are usually presented on a seven-point scale, and subjects are asked to mark one of the spaces to
indicate their perception of the concept and the adjective. More details on the scale are provided in the
methods section.
4
Houghton and Hronsky (1993) tested the meaning of the following accounting concepts: asset, liability,
owners’ equity, revenue, expense, profit, loss, going-concern, matching, historic cost, consistency,
conservatism, periodic, accrual, and realization.
5
The inconsistencies were in regard to the concepts of owners’ equity, matching, going concern, accrual, and
realization.
5
professions may ascribe to a range of accounting terms, the judgments were elicited in
settings where they did not produce real world consequences. In contrast, the Taiwanese
accounting profession’s opposition to the initial choice of Chinese term in SAS No. 33
indicates that they had considered this choice to be an important one and as such, their
position is likely to reflect carefully considered beliefs. Further, prior related research had
mostly stopped with measuring perceptions of meaning, whereas our study takes a step
towards linking connotative meaning to actions or decisions. We also buttress the external
validity of the findings by accessing a participant pool of government prosecutors who, in the
Taiwanese legal system, typically are responsible for bringing suit against auditors for legal
liability. Finally, the Taiwan case involves translating an English term into a language with
totally different linguistic roots, and adds to the store of knowledge about the challenges of
accounting term translation across nations.
The results indicate that members of the Taiwan accounting profession at large do not
ascribe different meanings to the Chinese words “confirmation” and “guarantee,” whereas
members of the two user groups in our study—investors and public prosecutors—do. We also
find that the connotative meanings associated with the translated terms have an effect on
prosecutors’ and investors’ judgments of auditor legal liability, but not those of auditors.
These results suggest that members of the Taiwanese accounting profession had rightly based
their response to the initial wording proposal on how they expected financial statement users
would react to the competing wording choices, rather than presuming that the latter would
have views similar to their own. However, the connotative meaning that financial statement
users ascribed to the suggested replacement term was associated with a higher, rather than
lower, level of ascribed auditor liability. As a result, in successfully seeking a wording change,
members of Taiwan’s accounting profession may have increased rather than reduced their
exposure to liability from audited financial statements. These findings have a number of
6
implications for harmonizing international financial reporting and auditing standards, the
setting of strictly local standards, as well as the operations of accounting firms. We elaborate
on these in the final section.
The remainder of this paper is organized as follows. The next section provides an
overview of auditing standard-setting and the litigation regime in Taiwan, culminating in four
research hypotheses. Then the research method is described, followed by the results. The
final section provides the conclusions and discusses implications for future studies.
2. Institutional background and research hypotheses
2.1. Auditing standard-setting in Taiwan
In Taiwan, the Accounting Research and Development Foundation (ARDF)—a private
institution under the supervision of the Securities and Futures Bureau—sets financial
accounting and auditing standards. Within the ARDF, the Auditing Standards Committee
(ASC) is responsible for setting auditing standards, and consists of 13 members and five
advisors. Group membership is dominated by members of the accounting profession, as four
of the members come from accounting academia (30.7%) and six are from audit firms
(46.2%). The remaining three are from government agencies (23.1%). All of the advisors
come from audit firms. Members and advisors alike participate in the standard-setting process,
which involves a “three readings” procedure.6 After the second reading, a draft is released to
the public for comment, and further revisions are made before standards are issued. In the
case of SAS No. 33, the accounting profession’s opposition to the ASC’s initial choice of
wording for translating the English term “assurance,” which led to the Committee changing
“guarantee” to “confirmation” in the adopted version, was voiced in reaction to the draft
6
By “three readings” it is meant that an initial version goes through three rounds of discussion and revision.
The first draft for a standard is discussed from the first paragraph to the last, and it is then revised as the
second version of the draft. The second version is discussed in the same manner and further revised. Finally,
the third version is discussed and revised until consensus is reached.
7
released after the second reading.
2.2. The trial and prosecution systems in Taiwan
Unlike the US system which employs jury trials, Taiwan follows the continental
“inquisitorial” model, in which judges act as both fact finders and adjudicators in civil and
criminal proceedings. Courts exist at three levels: District Courts, the High Courts, and the
Supreme Court. District Courts are set up in counties or cities and are usually led by one
judge, though major cases may be presided over by a panel of three judges. The High Courts
are established in provinces or special regions; Supreme Court proceedings are final.
The prosecution system in Taiwan also is divided into three different levels: the District
Prosecutor’s Office, the High Prosecutor’s Office, and the Supreme Prosecutor’s Office.
Unlike prosecutors in the US who act purely as government attorneys, prosecutors under
Taiwan’s system are required to act as guardians of justice rather than as government agents.
In this capacity, they not only represent the government to combat crime and prosecute cases,
but also attend to defendants’ interests in these procedures. As an example, if a prosecutor
feels that a verdict is unfair to the defendant’s interests, he/she can appeal on the defendant’s
behalf.
Of particular relevance to the current study is ancillary civil action in criminal trials. It is
common practice in Taiwan for investors to file criminal complaints through prosecutors in
cases involving monetary damage. In cases involving auditors, investors may file a criminal
complaint with prosecutors against auditors for criminal liability due to their association with
fraudulent financial reports, simultaneously suing the auditors for civil liability to seek
compensation for their losses.
Even if investors are only concerned with recouping their losses, they still have several
reasons for bringing criminal proceedings against the auditors. First, prosecutors have the
power of criminal investigation whereas investors do not. Second, investors do not have to
8
pay a fee for the judgment in criminal cases, whereas in civil liability cases they do. Third,
the pressures of criminal investigation and trial can be used as a means to pressure auditors
into settling with the investors because a settlement can help to reduce their criminal liability
and obtaining lighter sentences. Finally, judges often rely heavily on the decision as to the
auditors’ criminal liability, such that auditors who are judged guilty in the criminal courts
generally will also lose their civil cases.
2.3. Research hypotheses
Taken together, the nature of Taiwan’s legal system, the strong opposition to use of the
term “guarantee” by members of Taiwan’s accounting profession at large, and the standard
setters’ acquiescence by changing to “confirmation,” imply that members of Taiwan’s
accounting profession and audit standard-setting body accepted that financial statement users
could interpret audited financial reports differently depending on whether auditors are
represented as confirming or guaranteeing the reports’ content. For example, in discussing the
draft Statement, two senior partners from separate Big-4 accounting firms argued that
“guarantee” has its origin in law, such that using this term would expose auditors to legal
disputes. They stressed in particular that “guarantee” can be associated with being reliable
and responsible but in fact, auditors cannot guarantee the integrity of financial statements due
to the inherent limitations of auditing procedures. But an accounting professor who served on
the Auditing Standards Committee expressed a contrary view. Ma (2000) noted that both
“guarantee” and “confirmation” can be found in the legal literature; but in contrast to the
audit partners, she argued that the latter can have more severe consequences than the former
should auditors be involved in a legal dispute because “confirmation” is more highly
associated with real and certain than is “guarantee”:
“Confirmation can be the abbreviation of certain belief, clear belief, and real
belief, which connote absolute and one hundred percent. Because the belief is
so absolute, it excludes the consideration of audit risk when judging auditor
9
legal liability. As such, confirmation can lead auditors to be exposed to even
higher and undue legal liability.”
Regardless of whether one holds one or the other position, both signify acceptance that
the Chinese terms for “guarantee” and “confirmation” could be interpreted differently by the
users of audited financial statements. This belief and the referred literature in the introduction
section are summarized in our first hypothesis for empirical testing:
H1: Taiwanese financial statement users ascribe different connotative meanings to the
Chinese terms for “guarantee” and “confirmation.”
An important point about H1 is that it does not require members of Taiwan’s accounting
profession themselves to believe that the two terms have different meanings. Indeed, prior
research (e.g., Houghton 1987; Houghton and Hronsky 1993) had found that auditors and
financial statement users can have different interpretations of the same accounting term. Even
if members of Taiwan’s accounting profession did not view “guarantee” and “confirmation”
as being different, they still could have preferred one word over the other based on how they
thought financial statement users would interpret them. The content of the SAS No. 33 debate
left unclear whether the Taiwanese auditors personally believed that “guarantee” and
“confirmation” had different meanings, and it is worthwhile to explore whether their personal
beliefs diverged from those that they attributed to Taiwan’s financial statement users. The
following hypothesis provides focus to such an examination:
H2: Taiwanese auditors and financial statement users ascribe different connotative
meanings to the Chinese terms for “guarantee” and “confirmation.”
Turning to the wording choice’s action implications, earlier it was reported that the
Taiwanese accounting profession’s push for replacing “guarantee” with “confirmation” was
based on the expressed belief that they would differentially affect financial statement users’
judgments and decisions, specifically in assigning auditor legal liability. Accounting and
auditing research on the specific issue of translated terms’ judgment and decision
10
implications is sparse. However, psychology research does suggest that how stimuli are
coded in memory may influence subsequent information processing and judgments (Lachman,
Lachman, and Butterfield 1979), and auditing research has documented that how a given
piece of evidence is mentally coded leads to differential cognitive processes and judgments
(Libby and Lipe 1992). Further, Smith and Kida (1991) suggest that as compared to members
of other professions, experienced auditors are less prone to judgmental errors or biases in
accounting-related matters. Consistent with this view, studies have found that auditors are not
influenced by differing ways of framing a going-concern situation (e.g., Asare 1992; Joyce
and Biddle 1981; Trotman and Sng 1989). Continuing to include auditors in the analysis, we
hypothesize:
H3: Taiwanese auditors’ and financial statement users’ judgments of auditor legal liability
vary with whether the auditors’ role is characterized as “guarantee” or “confirmation.”
While H3 taps directly into the debate between “guarantee” and “confirmation,” it leaves
open whether the hypothesized relationship between wording choice and judgments is due to
the words’ connotative or denotative meanings, or both. Even though we had acknowledged
earlier that words can have both denotative and connotative meanings, our discussion thus far
has focused on connotative meaning. This was based on the premise that the two Chinese
words in question have very similar literal—that is, denotative—meanings. In the Google
dictionary, the Chinese term “guarantee” is translated as guarantee, and assurance, and the
Chinese term “confirmation” is translated as confident, and assured. Sina, a popular Chinese
website, translates the Chinese term “guarantee” as guarantee, assure, and ensure, and the
Chinese term “confirmation” as assurance, confident, and be convinced of. Both sets of
English translations consider the two Chinese terms to embody a common meaning:
“assurance.” If the Chinese terms for “guarantee” and “confirmation” do have similar
denotative meanings, then differences in their judgment and decision impacts can be
attributed to differences in their connotative meanings. Connotative meanings ascribed to the
11
competing Chinese terms can be viewed in the spreading activation framework (Collins and
Loftus 1975; Anderson 2005) as different activated nodes in the semantic network. As the
strength of the links from these nodes to others may differ due to differential semantic
closeness, such differences may affect memory search when making judgments. Consistent
with this view, Bagranoff et al. (1994) find significant differences between North American
and Australian auditors in the cognitive structure within the meaning and also different
classification decisions for the accounting concept “extraordinary items.” Hronsky and
Houghton (2001) indicate that the connotative meaning of “extraordinary item” is associated
with the judgment as to which transactions to classify as extraordinary items, and Wine (2006)
suggests that the connotative meaning of “auditor independence” is correlated with the
judgment of the independence of auditors. These findings indicate that the meaning ascribed
to an accounting concept can affect judgments associated with that concept, and the
Taiwanese accounting profession’s concern about the wording choice also suggests that
financial statement users may be affected by the connotative meanings ascribed to different
Chinese translation wording while auditors themselves may not. Nevertheless, this potential
for confounding still merits investigation. Our fourth hypothesis provides focus to such an
examination:
H4: Taiwanese auditors’ and financial statement users’ judgments of auditor legal
liability vary with the connotative meanings that they ascribe to the Chinese terms
“guarantee” and “confirmation.”
3. Research method
3.1. Tasks and procedures
We employed a 2×3 between-subjects factorial design with two Chinese translations for
the word “assurance” (“guarantee” vs. “confirmation”), and three professions (auditors,
investors and prosecutors—the latter two representing financial statement users). All of the
12
experimental materials were in Chinese.7 Each participant was given a booklet containing
three parts. Part one contained semantic differential scales to assess the meaning that
participants associated with either “guarantee” or “confirmation.” Below, we provide an
overview of how the scales were developed in a pilot study to facilitate understanding of how
connotative meaning was measured in the (main) study.
The semantic differential scales were patterned after those abstracted from Haried (1972)
and used in previous studies (e.g., Osgood et al. 1957; Houghton 1987; Houghton and
Hronsky 1993; Bagranoff et al. 1994).8 Since prior research had used these scales for
studying accounting rather than auditing concepts, we conducted a pilot study to develop
scales appropriate to our study. The pilot study participants were ten managers of a Big 4
audit firm and six lawyers in a law firm. The two groups had average working experience of
nine and six years, respectively. We asked half each of the participants to suggest the
adjectives that they could associate with “guarantee” and “confirmation,” respectively, then
presented to them a list of 26 bi-polar adjectives. Of these, 22 had been used in prior
accounting research (Houghton 1987; Bagranoff et al. 1994; Hronsky and Houghton 2001),
and four (credible, responsible, reliable, and doubtless) were based on our judgment of their
potential relevance after consulting an audit partner and a legal scholar. The participants were
asked to rate on a 1-7 scale (1=not at all; 7= high) the difficulty with which each adjective on
the provided list as well as those that they had suggested could be associated with either the
Chinese word for “guarantee” or “confirmation,” depending on which of these words they
were assigned to. Finally, they were asked to determine how many adjectives were
appropriate to adequately contain the meaning of their assigned word (i.e., “guarantee” or
7
The instrument was first developed in English and then translated into Chinese following Brislin’s (1986)
translation-back translation method.
8
The semantic differential scale is commonly used for measuring the connotative meaning of subjects or
concepts. The respondent is asked to choose where his or her position lays on a scale between two bipolar
adjectives pairs that represented the evaluative dimension of meaning. The person’s perception score would
be the sum of the numbers corresponding to the positions checked on the scales (Petty and Cacioppo 1981).
13
“confirmation”).
The audit managers (lawyers) answered that on average four (six) and five (four)
adjectives would be appropriate to fully contain the meaning of “guarantee” and
“confirmation,” respectively. Since there was a slight difference across professions and
groups, we calculated the mean difficulty (in being associated with either “guarantee” or
“confirmation”) across the 16 participants for each adjective, and selected the five adjectives
with the lowest mean difficulty. The bi-polar forms of these adjectives were: real-imaginary,
controllable-uncontrollable, credible-incredible, reliable-unreliable, and highly
responsible-minimally responsible.
Participants in the main study were randomly assigned to one of two versions of the
instrument, where the only difference was whether the Chinese word for “guarantee” or
“confirmation” was used. They were asked to mark one of the seven spaces to indicate the
degree to which they associated “guarantee” with each of the five bi-polar adjectives
provided.9 To reduce the chance of participants misunderstanding the task, we used
“real–imaginary” as an example. Participants were instructed to mark the far left space of the
scale if they thought that “guarantee” meant completely real. If they thought that “guarantee”
meant neither real nor imaginary, they were instructed to mark the space in the middle of the
scale; and if they thought that “guarantee” meant completely imaginary, then they should
mark the far right space. Following prior research, the space farthest right was coded 1, and
the one farthest left was coded 7. The intervening spaces were coded 2 to 6, respectively.10
9
For each pair of adjectives, the adjective that has a positive meaning associated with a translated word is on
the left of the scale and the antonym of that adjective is on the right. Take “guarantee” as an example:
“credible” is positively associated with “guarantee” and is placed on the left. The antonym of
“credible”—non-credible—is placed on the right.
10
While our illustration in the instrument covers only three possible responses (“1”, “4”, and “7”) for brevity,
our participants were not led to confine their responses to these three answers. Among the 125 responses to
the five semantic differential scales by the 25 audit partners in the “guarantee” group, the frequencies of
responses “1” , “4”, and “7” were 1, 10, and 34, respectively, whereas the frequencies of responses “2”, “3”,
“5”, and “6” were 1, 0, 32, and 47. The responses by audit partners in the “confirmation” group and the
prosecutors as well as investors reveal a similar pattern. In total across the 690 responses to the semantic
differential scales by the participants, the frequencies of responses along the 1-7 scale were 4, 4, 17, 99, 148,
237, and 181, respectively.
14
The average of each participant’s answers to the five bi-polar adjectives was considered to
represent the connotative meaning that he/she ascribed to the term “guarantee.” Measures of
participants’ perceived connotative meaning for the term “confirmation” were obtained in the
same manner.
Part two of the booklet contained background information and partial financial
statements of a fictitious company, a standard unqualified audit report on the company’s
financial statements, and an assessment of the firm as a going concern. The going concern
decision is used for our study because auditors are faced with uncertainty when evaluating the
ability of a company to maintain its existence, and litigants tend to blame auditors if they fail
to anticipate audit clients’ subsequent financial problems (Lowe and Reckers 1994; Anderson,
Jennings, Lowe, and Reckers 1997).
Participants were given information on six events that had been considered by the
auditors in making the going concern decision. The case materials describe how, after taking
the six events into account and discussing them with the client’s management and lawyer, the
auditors had decided to issue a standard unqualified report. The company had gone bankrupt
soon thereafter, and a lawsuit was filed against the auditors and their audit firm for having
provided the standard unqualified audit report. Participants were then required to judge, based
on the information in the case material, the legal liability of the defendants on a 1-7 Likert
scale, with 7 representing “full liability” and 1 representing “no liability.” Finally, part three
asked several demographic and debriefing questions. On average, participants took about 20
minutes to complete the entire task.
3.2. Participants
Participants included auditors, prosecutors, and executive MBA students. The auditor
sample targeted audit partners because they are more likely than those at lower ranks to have
experience with broad policy issues. The sample consisted of 50 partners at a Big-4 audit firm,
who completed the task at their offices during sessions specially arranged for this study. Half
15
each of these volunteers were randomly assigned to the “guarantee” and “confirmation”
wording groups. Panel A of Table 1 shows that the average work experience of the auditors in
the two groups were 12.67 and 12.49 years, respectively, with 12 males in the former and 10
in the latter. No significant differences were found between the two groups in the distribution
of audit experience or gender (p-values > 0.10).11
[Please insert Table 1 about here]
Forty-four executive MBA students enrolled at a national university served as proxies
for investors. Again, half each of this sample was randomly assigned to the “guarantee” and
“confirmation” treatments. All of these volunteer participants had taken a financial statement
analysis course and had average work experience of approximately nine years; thus they
should be adequate proxies for investors (Elliott, Hodge, Kennedy, and Ponk 2007). These
participants finished the experiment in the classroom, and all provided completed responses.
Panel B of Table 1 indicates that the average work experience were 8.51 and 9.16 years for
the “guarantee” and “confirmation” groups, respectively. There were 15 males in the
“guarantee” group and 13 in the “confirmation” group. No significant differences exist
between the two translation wording groups in terms of work experience or gender (p-values
> 0.10).
The prosecutor participants were recruited with the help of a prosecutor from the High
Prosecutor’s Office, who helped us to randomly distributed 25 copies of each version of the
instrument to the participants. A total of 22 completed responses were obtained for each
version, and Panel C of Table 1 shows that the average work experience for the two wording
groups were 6.91 and 7.76 years, respectively. About 60 percent of the prosecutors in each
group had investigated financial reporting fraud cases, while more than 68 percent of the
“guarantee” group and 86 percent of the “confirmation” group had investigated business
cases. There were 18 males in the “guarantee” group and 15 in the “confirmation” group. No
11
Throughout the paper, all tests are two-tailed unless otherwise mentioned
16
significant differences exist between the two groups in terms of work experience, gender, and
experience with judging/investigating business or financial reporting fraud cases (p-values >
0.10).
Because the participants’ connotative meanings for either “guarantee” or “confirmation”
were elicited prior to their being asked to pass judgment on auditor legal liability, we looked
into whether this ordering might have affected the participants’ legal liability judgments. We
recruited another group of 30 EMBA students with similar backgrounds to the group in our
main study, and reversed the placements of the liability judgment and connotative meaning
tasks. No significant difference was found between this cohort and their counterpart in the
main study regarding connotative meanings and judgments of auditor legal liability.
Substituting the EMBA student-participants in the main study with this new group also did
not qualitatively affect the hypothesis testing results. While we were not able to extend this
sensitivity test to audit partners and prosecutors, we still can derive some assurance that our
findings were not unduly influenced by the sequencing of tasks in the experiment.
4. Analysis and results
4.1. Preliminary analysis
A factor analysis of the responses to the semantic differential scales showed that both
“guarantee” and “confirmation” yielded one factor with an eigenvalue greater than one (Table
2). All five adjectival items loaded highly on this factor for both wording choices (all
loadings exceed 0.5), and their Cronbach alphas are 0.861 and 0.838, respectively. Based on
these findings, we took the average of each participant’s responses to the five adjectives to
represent his/her perceived connotative meaning of the translated term.
[Please insert Table 2 about here]
Table 3 reports descriptive statistics for the connotative meanings of “guarantee” and
“confirmation,” as well as auditor legal liability as judged by the participants. Panel A
indicates that on our scale from 1 (most negative) to seven (most positive), the auditors
17
perceive “guarantee” to be slightly more positive than “confirmation” in connotative meaning
(5.78 vs. 5.66, p=0.56). Panel B of Table 3 shows that this difference primarily arises from
the adjectival pair “highly responsible-minimally responsible,” with auditors viewing
“guarantee” as signifying a slightly higher level of responsibility than “confirmation” (6.44
vs. 6.02, p=0.07). In contrast, both prosecutors and investors perceive “confirmation” to be
substantially more positive than “guarantee” (5.80 vs. 5.16, 5.98 vs. 5.40, respectively;
p=0.03, 0.03). Panel C indicates that for investors, the more positive connotative meaning
associated with “confirmation” reflects a belief that as compared to “guarantee,” the former
signifies considerably higher levels of credibility, reliability, conformance to reality, and
controllability. For example, the mean connotative meaning of “credible-incredible” that
prosecutors ascribed to “guarantee” is 5.45 as compared to a value of 6.36 for
“confirmation.” Panel D shows a similar pattern for prosecutors.12 Panel E shows that when
assurance is translated as “guarantee,” the average levels of auditor legal liability judged by
auditors, investors and prosecutors are 2.88, 5.18, and 4.77, respectively. When the term used
is “confirmation,” their judgments are 3.00, 4.95, and 4.84. Perhaps consistent with each
group’s self-interests, the auditors judge their legal liability to be lower than do the other two
professions, regardless of whether “assurance” is translated as “guarantee” or “confirmation.”
[Please insert Table 3 about here]
4.2. Hypothesis tests
4.2.1. Results for H1 and H2
Panels A, B, and C of Table 4 show the results of separate Analyses of Variance
(ANOVAs) for investors and prosecutors alone and combined, respectively, in which the
12
Since the debate on SAS No. 33 occurred about a decade before our experiment, there may be a concern that
the connotative meanings of words have changed, so that our results do not map into the substance of the
discussion back then. We believe that the chances of such a mismatch are remote. While the meanings of
words do change over time, such changes tend to be very gradual. Furthermore, the two words in question are
used in much wider circles than SAS alone, and it is extremely unlikely that their ascribed meanings would
have been altered just because they had been invoked in SAS No. 33. A further consideration is that in our
study, the words’ connotative meanings were solicited in a context-free manner prior to introducing the issue
of auditor legal liability. This makes it unlikely that participants’ responses were influenced by the auditing
standard in question.
18
dependent measure is the average semantic score across the five adjectives. The difference
between translation wordings is statistically significant for investors, prosecutors and these
two financial statement user groups combined (p = 0.032, 0.03, and 0.002, respectively).
Thus, H1 is supported: financial statement users do ascribe different connotative meanings to
the Chinese terms for “guarantee” and “confirmation.” Panel D shows that auditors do not
ascribe different connotative meanings to the two terms (p = 0.56). This contrast between
auditors and financial statement users provides support for H2. We further performed an
ANOVA with the entire sample and paired groups using the same dependent measure. The
independent variables were the competing translations of “assurance,” profession (auditors,
prosecutors, and investors), and their interaction. The results (Table 5) were qualitatively
equivalent to those reported above for H1 and H2. In the ANOVA with the whole sample
(Panel A), both translation and the interaction between translation and profession are
significant. In the paired group comparisons, only the interaction term between translation
and profession is significant in the auditor-prosecutor, auditor-investor, and
auditor-prosecutor and investor combined comparisons (Panels B, C and D), whilst only
translation is insignificant in the comparison between prosecutors and investors (Panel E). In
total, these findings are consistent with members of Taiwan’s accounting profession having
pushed for a wording change not because they perceived the competing Chinese terms to
have different meanings, but because they anticipated that financial statement users would
interpret them differently.
[Please insert Tables 4 and 5 about here]
4.2.2. Results for H3
Table 6 shows the results of separate ANOVAs for each group in which the dependent
measure is the judgment of auditor legal liability. Panels A, B and C show that the effect of
translation wording is not significant for either prosecutors or investors or the two user
groups combined (p = 0.539, 0.862, and 0.766, respectively). Panel D reveals that the
19
relationship is similarly non-significant for auditors. Thus H3 is not supported. We also
performed ANOVAs using the entire sample and paired groups. The independent variables
were translation wording (Translation), profession (Profession), and their interaction. The
results (Table 7) are consistent with those reported above. Panel A of this table shows that
Translation does not have a significant association with the judgment of auditor legal liability
(p=0.953), Profession is significant (p<0.001), and the interaction term
Translation*Profession is not significant (p=0.794). Paired comparisons indicate that auditors
differ significantly from prosecutors and investors, but the latter two groups do not differ
from each other (Panels B, C and D). Referring back to Table 3 reveals that investors assign
the highest liability to auditors, followed by prosecutors and then auditors. Both investors and
prosecutors assign a higher level of legal liability to auditors than the auditors themselves,
and this difference is not affected by whether “assurance” is translated as “guarantee” or
“confirmation.”
[Please insert Tables 6 and 7 about here]
4.2.3. Results for H4
H4 goes beyond the translated terms themselves to focus specifically on the terms’
connotative meaning. We tested this hypothesis with an ANOVA where the dependent
measure was the judgment of auditor legal liability. To facilitate interaction analysis, we
followed prior research (e.g., DeZoort 1998; Tan and Kao 1999; Kadous, Kennedy, and
Peecher 2003) in splitting the sample into low and high groups using the median of raw
scores for connotative meaning.13 The independent variables included this dichotomized
measure of connotative meaning (Meaning), profession (Profession), and their interaction.
The results in Panel A through Panel D of Table 8 consistently show that Meaning is
significant. Profession and its interaction with Meaning also are significant in comparisons
13
Splitting the sample by the average score of connotative meaning yielded qualitatively equivalent results, as
did an ANCOVA using the raw score of connotative meaning as the covariate (p<0.001).
20
between auditors and each of the two user groups, but not in the investor- prosecutor
comparison, indicating a difference between auditors and financial statement users in the
above relationships. These results support H4.
[Please insert Table 8 about here]
We performed two further tests to more sharply isolate the effect of connotative
meaning. First, we added Translation as another independent variable to perform a three-way
ANOVA. The results using the entire sample (Panel A) indicate that both Meaning and
Profession are significant (p<0.01). More importantly, the interaction term
Meaning*Profession is also significant (p=0.004), but the three-way interaction is not
significant (p=0.458). Pairwise comparisons between auditors and investors, auditors and
prosecutors yield qualitatively identical results (Panels B and C). Consistent with the results
reported above, when investors and prosecutors are compared (Panel D), the interaction term
Meaning*Profession is insignificant (p=0.401); but Translation is significant (p=0.045).14
Together with the finding that the Chinese terms for “guarantee” and “confirmation” have
overlapping definitions in dictionaries, these results strengthen the interpretation that the
wording choice’s effects are driven by the words’ connotative rather than denotative
meaning. Second, we used the Sobel test (Sobel 1982) because it provides significance levels
of indirect effects (Preacher and Hayes 2004). The test in this case relies on the regression
coefficients for the path between translation and connotative meaning and that between
connotative meaning and judgment of auditor legal liability, together with their respective
standard errors.15 The results (Table 9) indicate a significant indirect effect from connotative
14
15
Using Translation as the covariate to conduct a two-way ANOVA show that Meaning is significant
(p<0.001), Profession is significant (p<0.001), the interaction term Meaning*Profession also is significant
(p=0.007), but Translation is not significant (p=0.222)
In the regression analysis for the translation-connotative meaning path, the independent variables are
translation (represented by one dummy variable) and profession (represented by two dummy variables), and
the dependent variable is connotative meaning (using raw scores). In the regression analysis for the
connotative meaning-judgment of auditor legal liability path, the independent variables are connotative
meaning and profession, and the dependent variable is the judgment of auditor legal liability. The Sobel test
21
meaning for investors and prosecutors but not auditors (p values = 0.071, 0.047, and 0.608,
respectively). In conjunction with the findings for H3, these results suggest that while
translation per se does not have a direct effect on the judgment of auditor legal liability, it
may affect this judgment indirectly through the mediation of connotative meaning.
[Please insert Tables 9 and 10 about here]
5. Summary and conclusion
As more and more countries are adopting International Financial Reporting Standards
and International Standards of Auditing, the need has increased for translating such standards
from the English original into other languages. In this process, finding foreign words to
faithfully convey the meanings of the original English terms has posed major obstacles to
achieving convergence in substance. This is because words do not just have denotative (i.e.,
literal and technical) meanings; they also have connotative (i.e., emotion-based) meanings
that may not transfer well across languages.
This study brings attention to an important component of the translation challenge,
namely, the need for local standard setters to assess or anticipate the connotative meanings
that various domestic constituents would attribute to alternate translations of terms from their
English original. To give this issue specificity, the study focuses on Taiwan’s promulgation of
Statements on Auditing Standards No. 33, which was explicitly patterned after ISA No. 700.
We find that Taiwanese auditors do not ascribe significantly different connotative meanings
to the two competing Chinese terms (“guarantee” and “confirmation”) for translating the
English term “assurance,” whereas investors and public prosecutors do. The auditors’
judgment of auditor legal liability also has no correlation with either translation wording or
statistic =
where a = regression coefficient for the translation-connotative
meaning path; b = regression coefficient for the connotative meaning-judgment of auditor legal liability path;
sa = standard error of a; sb = standard error of b.
22
the words’ connotative meanings, but there is a significant relation between investors’ and
prosecutors’ judgment of auditor legal liability and the connotative meanings that they
attributed to the competing Chinese terms. We also find that whilst there was no significant
direct link between the specific Chinese term used and the financial statement users’
judgment of auditor legal liability, the chosen term’s connotative meaning significantly
mediated the translation-legal liability link. Again, this effect was not significant for auditors
but significant for investors and prosecutors. These findings provide further support for prior
research that the preparers and users of audited financial statements may ascribe different
meanings to the same accounting terms and concepts, which in turn could affect their
judgments and decisions relating to these statements. In the specific case of SAS No. 33,
members of Taiwan’s accounting profession seem to have rightly opposed the initial wording
choice based on how they thought financial statement users would interpret the competing
Chinese terms, rather than presuming that the latter would hold views similar to their own.
While this is to their credit, it is noteworthy that the connotative meanings that financial
statement users ascribed to the competing Chinese terms diverged in such a way that the
replacement term was associated with a higher, rather than lower, level of ascribed auditor
liability. In other words, in successfully pushing for a wording change, members of Taiwan’s
accounting profession may have increased, rather than reduced, their exposure to liability
from audited financial statements.
These findings have a number of important implications for standard setters and
standard setting, both in adopting foreign or international accounting/auditing standards and
in developing strictly local standards. First is that there is a need to go beyond words’
denotative meanings to also consider their connotative meanings. Because the former is
literal and technical, it is perhaps easier to ascertain and also more likely to converge across
individuals. But the latter is emotion-based and as such, more likely to diverge across people.
23
Compounding this consideration is that members of different professions—such as financial
report preparers and users—often ascribe rather different connotative meanings to the same
term, and our findings suggest that it may be difficult to correctly anticipate the nature of
these ascribed meanings. Thus, whether one is choosing words for translating a foreign
standard or for a strictly local standard, tit is important to assure that different constituents
possess a common understanding of the standard’s intent. Attaining such convergence is
likely to require both extensive communication and educational efforts to gain consensus on
chosen words’ meaning. Considering that most accounting and auditing standard setting
bodies tend to be dominated by members of the accounting profession, an implication is that
both standard setting bodies and the standard setting process need to be made much more
inclusive of other constituencies. In the case of Taiwan’s SAS No. 33, the standard-setting
body may have proposed the Chinese term “guarantee” because there was little distinction
between its definition and that of its primary alternative: “confirmation,” and because auditor
members of the body did not view the two terms as having different connotative meanings. It
was only through public discussion that the potential difference between the two words was
brought to the fore. For accounting firms—especially those with diverse international
operations—there may be a need to translate materials (e.g., training manuals, knowledge
bases, policies) into non-English languages. In the process, it is important to guard against the
translated materials being ascribed connotative meanings that diverge from those intended by
the English original.
The potential importance of these implications supports the need for further research in
this area. Relating to refining various aspects of our study, it is useful to remember that we
have only studied a single wording choice. While focusing on a specific real world event
helps to reveal the participants’ true beliefs and preferences, the effects may not transfer
directly to other wording choices. Perhaps what is transferable is the lesson learned: that there
24
is potential divergence across auditors’ and users’ interpretations of a given wording choice
which in turn may affect decisions and judgments. Future research can explore potential
commonalities across wording choices of different natures, such as ones related to specific
objects (e.g., assets, liabilities) rather than descriptions of the auditor’s role. It also should be
acknowledged that our empirical investigation had omitted direct measures of the competing
words’ denotative meanings. While we had made a case for the two words having similar
denotative meanings, it remains desirable to explicitly bring both types of meaning into the
study. Doing so can also open up new research possibilities. For example, one could compare
terms whose denotative meanings approximate the original term to different degrees, and
examine whether terms that are closer in meaning to the original term also have greater
consensus amongst groups in their connotative meanings.
It also is desirable to explore more broadly how ascribed meanings affect actions and
decisions. Using our study as an example, instead of asking participants to judge auditor legal
liability, future research could ask participants to provide interpretations of financial reports
represented as having been guaranteed or confirmed, or use such reports to make resource
allocation decisions (e.g., investments). Finally, our findings are confined to the specific
attributes of the Taiwan setting, such as the role of public prosecutors in legal cases against
auditors. Our sample also is limited both in size and potential representativeness (e.g., the
audit partners were obtained from only one Big4 firm). Efforts to relax these limitations
could increase the results’ generalizability.
25
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Table 1. Demographic characteristics of study participants
Panel A: Auditors
“Guarantee” (n=25)
“Confirmation” (n=25)
Mean S.D. Med
Mean S.D.
Med
Experience
12.67 3.31
12
12.49 3.49
12
Gender
0.48 0.51
0
0.40 0.50
0
t-value a
0.18
2
0.325
Panel B: Investors
Experience
Gender
“Guarantee” (n=22)
Mean S.D. Med
8.51 3.45 7.8
0.68 0.48
1
“Confirmation” (n=22)
Mean S.D.
Med
9.16
3.27
10
0.59
0.50
1
t-value a
0.64
“Guarantee” (n=22)
Mean S.D. Med
6.91 4.91
6
0.68 0.48
1
0.59 0.50
1
“Confirmation” (n=22)
Mean S.D.
Med
7.76 4.45
6.4
0.86 0.35
1
0.59 0.50
1
t-value a
0.62
2
0.384
Panel C: Prosecutors
Experience
Business case
Financial reporting
fraud case
Gender
0.82
0.39
1
0.68
a
1.
2.
3.
4.
0.48
1
2
2.07
0.00
1.09
t-tests and  2 tests are for testing differences between the two treatment groups. The t-value is for a
two-tailed test.
Variable definitions:
1. Experience is the participants’ years of working experience.
2. Gender: male=1, and female=0.
3. Business case: Participant has experience with business cases=1, and 0 otherwise.
4. Financial reporting fraud case: Participant has investigated financial reporting fraud=1, and 0 otherwise.
29
Table 2. Results of factor analysis for the competing Chinese terms
Panel A: Eigenvalues of the correlation matrix
Factor
1
2
3
4
5
“Guarantee” Group
(N=69)
Eigenvalue Cumulative %
3.3324
0.6649
0.7778
0.8205
0.5242
0.9253
0.2075
0.9668
0.1660
1
“Confirmation” group
(N=69)
Eigenvalue Cumulative %
3.2097
0.6419
0.7707
0.7961
0.6940
0.9349
0.2001
0.9749
0.1255
1
“Guarantee” Group
(n=69)
0.908
0.911
“Confirmation” Group
(n=69)
0.917
0.912
0.574
0.913
0.574
0.907
0.713
0.620
0.861
0.838
Panel B: Factor loadings
1. Credible–incredible
2. Reliable–unreliable
3. Highly responsible–
minimally responsible
4. 4. Real–imaginary
5. Controllable–
uncontrollable
Cronbach alpha
30
Table 3. Descriptive statistics
Panel A : Connotative meaning (N=138) a
Auditors
Prosecutors
Investors
“Guarantee” Group
Mean S. D. Med
5.78
0.73
5.8
5.16
1.00
5.1
5.40
0.98
5.5
“Confirmation” Group
Mean S. D. Med
5.66
0.78
5.8
5.80
0.87
6
5.98
0.74
5.9
Mean
5.72
5.48
5.69
Total
S. D.
0.75
0.98
0.91
Med
5.8
5.8
5.8
T-value b
p-value
0.58
-2.22
(0.56)
(0.03)
(0.03)
-2.25
Total
5.46
0.93
5.6
5.81
Panel B : Breakdown of connotative meaning perceived by auditors (N=50)
0.79
5.8
5.64
0.88
5.8
-2.33
(0.02)
Credible–incredible
Reliable–unreliable
Highly responsible–minimally
responsible
Real–imaginary
5.92
5.76
0.81
0.93
6
6
5.88
5.68
1.01
1.07
6
6
5.90
5.72
0.91
0.99
6
6
0.15
0.28
(0.88)
(0.78)
6.44
0.65
7
6.02
0.94
6
6.23
0.83
6
1.84
(0.07)
5.88
0.93
6
5.68
1.03
6
5.78
0.97
6
0.72
(0.47)
Controllable–uncontrollable
4.92
1.35
5
5.04
0.98
5
4.98
1.17
5
-0.36
(0.72)
0.66
0.78
6
6
5.91
5.93
1.05
1.07
6
6
-3.15
-2.50
(0.01)
(0.02)
0.95
6
6.07
0.95
6
0.79
(0.43)
1.02
1.39
6
5
5.64
4.91
1.18
1.52
6
5
-2.12
-1.61
(0.04)
(0.11)
Panel C: Breakdown of connotative meaning perceived by investors (N=44)
Credible–incredible
5.45
1.18
5.5
6.36
Reliable–unreliable
5.55
1.22
6
6.32
Highly responsible–minimally
6.18
0.96
6
5.95
responsible
Real–imaginary
5.27
1.24
5
6.00
Controllable–uncontrollable
4.55
1.59
5
5.27
31
Panel D: Breakdown of connotative meaning perceived by prosecutors (N=44)
5.36
1.14
5
5.95
Credible–incredible
5.14
1.21
5
5.95
Reliable–unreliable
Highly responsible–minimally
responsible
Real–imaginary
Controllable–uncontrollable
0.90
0.95
6
6
5.66
5.54
1.06
1.15
6
6
-1.91
-2.50
(0.06)
(0.02)
5.91
1.02
6
5.82
1.26
6
5.86
1.13
6
0.26.
(0.79)
5.00
4.41
1.31
1.40
5
4.5
5.91
5.36
0.97
1.18
6
6
5.45
4.88
1.23
1.37
6
5
-2.62
-2.45
(0.01)
(0.02)
2
5
5
5
3.00
4.95
4.84
4.21
1.38
1.21
1.08
1.53
3
5
5
5
2.94
5.07
4.81
4.21
1.39
1.21
1.28
1.61
3
5
5
5
-0.30
0.62
-0.17
0.03
(0.76)
(0.54)
(0.86)
(0.98)
Panel E: Judgments of auditor legal liability (N=138)
Auditors
2.88
1.42
Investors
5.18
1.22
Prosecutors
4.77
1.48
Total
4.22
1.71
a
The response is represented by a number from 1 to 7 depending on the distance between the marked space and the two extremes. The average over the five scales represents the
connotative meaning measured for a given participant.
b
t-tests are for testing differences between participants in the two treatment groups.
32
Table 4. The effects of translation wording on connotative meaninga
Panel A: The effects of translation wording on connotative meaning for investors(N=44)
SSE
Df
F-value
p-value
Translation
3.723
1
4.93
0.032 **
Error
31.753
42
Total
35.476
43
Panel B: The effects of translation wording on connotative meaning for prosecutors(N=44)
Translation
4.455
1
5.08
0.030 **
Error
36.851
42
Total
41.305
43
Panel C: The effects of translation wording on connotative meaning for investors and
prosecutors (N=88)
Translation
8.162
1
10.09
0.002 ***
Error
69.582
86
Total
77.744
87
Panel D: The effects of translation wording on connotative meaning for auditors (N=50)
Translation
0.192
1
0.34
0.56
Error
27.394
48
Total
27.586
49
a: Translation: “guarantee” vs. “confirmation;”
**, and *** indicate significance at the 5% and 1% levels for a two-tailed test.
33
Table 5: The effects of translation wording and profession on connotative meaninga
Panel A: Full sample (N=138)
Df
1
2
2
132
137
F-value
6.29
1.06
2.96
Panel B: Auditors and prosecutors (N=94)
Translation
1.536
Profession
1.350
Translation*Profession
3.383
Error
64.245
Total
70.241
1
1
1
90
93
2.15
1.89
4.74
0.146
0.173
0.032 **
Panel C: Auditors and investors (N=94)
Translation
1.226
Profession
0.023
Translation*Profession
2.915
Error
59.146
Total
63.085
1
1
1
90
93
1.87
0.03
4.44
0.175
0.853
0.038 **
2.59
0.81
5.92
0.109
0.370
0.016 ***
9.99
1.18
0.02
0.002 ***
0.281
0.888
Translation
Profession
Translation*Profession
Error
Total
SSE
4.573
1.548
4.300
95.997
105.916
Panel D: Auditor and other two professions (N=138)
Translation
1.876
1
Profession
0.587
1
Translation*Profession
4.284
1
Error
100.297
134
Total
105.916
137
Panel E: Prosecutors and Investors (N=88)
Translation
8.162
Profession
0.962
Translation*Profession
0.016
Error
68.604
Total
77.744
1
1
1
84
87
*, **, and *** indicate significance at the 10%, 5% and 1% levels for a two-tailed test.
Variable definitions:
Translation: guarantee vs. confirmation.
Profession: auditors, prosecutors, and investors.
34
p-value
0.013 **
0.348
0.056 *
Table 6. The effects of translation wording on the judgment of auditor legal liabilitya
Panel A: The effects of translation wording on connotative meaning for investors (N=44)
SSE
Df
F-value
p-value
Translation
0.568
1
0.38
0.539
Error
62.227
42
Total
62.795
43
Panel B: The effects of translation wording on connotative meaning for prosecutors (N=44)
Translation
0.051
1
0.03
0.862
Error
70.557
42
Total
70.608
43
Panel C: The effects of translation wording on connotative meaning for investors and
prosecutors (N=88)
Translation
0.139
1
0.09
0.766
Error
134.767
86
Total
134.906
87
Panel D: The effects of translation wording on connotative meaning for auditors (N=50)
Translation
0.180
1
0.09
0.764
Error
94.640
48
Total
94.820
49
a: Translation: “guarantee” vs. “confirmation;”
35
Table 7. The effects of translation wording and profession on the judgment of auditor legal
liabilitya
Panel A: Full sample (N=138)
Translation
Profession
Translation*Profession
Error
Total
SSE
0.006
128.72
0.798
227.424
356.944
Panel B: Auditors vs. investors (N=94)
Translation
0.067
Profession
106.00
Translation*Profession
0.706
Error
156.867
Total
263.617
Panel C: Auditors vs. prosecutors (N=94)
Translation
0.207
Profession
81.564
Translation*Profession
0.016
Error
165.197
Total
246.991
Panel D: Prosecutors vs. investors (N=88)
Translation
0.139
Profession
1.503
Translation*Profession
0.480
Error
132.784
Total
134.906
Df
1
2
2
132
137
F-value
0.001
37.36
0.23
p-value
0.953
0.001 ***
0.794
1
1
1
90
93
0.04
60.82
0.40
0.845
0.001 ***
0.526
1
1
1
90
93
0.11
44.44
0.01
0.737
0.001 ***
0.927
1
1
1
84
87
0.09
0.95
0.30
0.767
0.332
0.583
*** indicates significance at the 1% level for a two-tailed test.
a: Translation: “guarantee” vs. “confirmation;” Profession: auditors, investors, or prosecutors.
36
Table 8. The effects of connotative meaning and profession on the judgment of auditor legal
liabilitya
Panel A: Full sample (N=138)
SSE
df
F-value
p-value
Meaning
19.158
1
12.83
0.005 ***
Profession
124.75
2
42.59
0.001 ***
Meaning*Profession
13.729
2
4.60
0.012 **
Error
197.155
132
Total
356.944
137
Panel B: Auditors vs. investors (N=94)
Meaning
8.400
Profession
102.629
Meaning*Profession
11.944
Error
138.476
Total
263.617
1
1
1
90
93
5.46
66.70
7.76
0.022 **
0.001 ***
0.007 ***
Panel C: Auditors vs. prosecutors (N=94)
Meaning
5.019
Profession
79.161
Meaning*Profession
7.830
Error
153.333
Total
246.992
1
1
1
90
93
2.95
46.46
4.60
0.090 *
0.001 ***
0.035 **
Panel D: Prosecutors vs. investors (N=88)
Meaning
30.496
Profession
1.430
Meaning*Profession
0.407
Error
102.501
Total
134.906
1
1
1
84
87
24.99
1.17
0.33
0.001 ***
0.282
0.565
*, **, and *** indicate significance at the 10%, 5% and 1% levels for a two-tailed test.
a: Meaning: if the average score of connotative meaning is above the median, then Meaning=1, otherwise
Meaning=0; other variables are described in Table 6
37
Table 9. The effects of translation, connotative meaning and profession on the judgment of
auditor legal liabilitya
Panel A: Full sample (N=138)
Meaning
Profession
Translation
Meaning*Profession
Meaning*Translation
Translation*Profession
Meaning*Profession*Translation
Error
Total
SSE
23.142
120.249
2.868
16.985
0.296
3.747
2.350
188.176
256.944
df
1
2
1
2
1
2
2
132
137
F-value
15.50
40.26
1.92
5.69
0.20
1.25
0.79
p-value
0.001 ***
0.001 ***
0.168
0.004 ***
0.657
0.289
0.458
Panel B: Auditors vs. investors (N=94)
Meaning
Profession
Translation
Meaning*Profession
Meaning*Translation
Translation*Profession
Meaning*Profession*Translation
Error
Total
11.267
95.342
2.113
15.195
1.374
3.744
0.763
130.782
263.617
1
1
1
1
1
1
1
86
93
7.41
66.70
1.39
9.99
0.90
2.46
0.50
0.008 ***
0.001 ***
0.242
0.002 ***
0.345
0.120
0.481
Panel C: Auditors vs. prosecutors (N=94)
Meaning
Profession
Translation
Meaning*Profession
Meaning*Translation
Translation*Profession
Meaning*Profession*Translation
Error
Total
5.659
77.205
0.176
8.528
0.280
0.812
2.298
149.497
246.992
1
1
1
1
1
1
1
86
93
3.26
44.41
0.10
4.91
0.16
0.47
1.32
0.075 *
0.001 ***
0.751
0.029 **
0.689
0.496
0.253
Panel D: Prosecutors vs. investors (N=88)
Meaning
35.254
Profession
0.855
Translation
4.962
Meaning*Profession
0.855
Meaning*Translation
0.106
Translation*Profession
0.956
Meaning*Profession*Translation
0.369
Error
96.074
Total
134.906
1
1
1
1
1
1
1
80
87
29.36
0.71
4.13
0.71
0.09
0.80
0.31
0.001 ***
0.401
0.045 **
0.401
0.768
0.375
0.581
*, **, and *** indicate significance at the 10%, 5% and 1% levels for a two-tailed test.
38
Table 10: Sobel test results for the indirect effect of connotative meaning on the judgment of
auditor legal liability
Panel A: Auditors (N=50)
The effects of translation on
connotative meaning
Coefficient
Standard error
0.124
0.214
Panel B: Investors (N=44)
Coefficient
Standard error
-0.582
0.262
Panel C: Prosecutors (N=44)
Coefficient
Standard error
-0.636
0.284
The effects of connotative meaning on
the judgment of auditor legal liability
Coefficient
Standard error
test statistic p-value
0.289
0.264
0.512
0.608
Coefficient
0.573
Standard error
0.185
-1.804
0.071
Coefficient
0.714
Standard error
0.169
-1.988
0.047
39