The Influence of Biased Tax Research Memoranda on Supervisors' Initial Judgments in the Review Process

This study experimentally investigates the effects of confirmation bias underlying staff‐level tax research on supervisors' initial assessments and recommendations made during the review process for tax research memoranda. The theoretical framework underlying our hypotheses posits that tax professionals strive to make recommendations that meet both accuracy and advocacy objectives. Participants in our study addressed a client scenario in which both objectives could not be met because the client‐preferred position did not have a “realistic possibility” of being successfully defended on its merits. In this context, we find that supervisors are more persuaded by an unbiased memo correctly concluding that the client‐preferred position is not appropriate than by a biased memo reaching the same conclusion. This result suggests that when tax research memoranda are not consistent with the client advocacy objective, professionals are more persuaded by memoranda that fulfill their accuracy objective. On the other h...