This study examines the behavioral effects of the existence as well as the precision of an information system on managerial honesty in an internal reporting environment. In order to examine behavioral effects, we do not permit the owner to contract on the system’s output. We propose that a manager’s reporting decisions are affected by his tradeoff of the benefits of appearing honest against the benefits of misrepresentation. An owner’s information system affects the manager’s tradeoff by improving the owner’s ability to make an inference regarding the manager’s level of honesty. Thus, to the extent that the manager perceives benefits from appearing honest, the presence of an information system can increase managerial honesty. As the information system becomes more precise, however, the manager must forego greater benefits of misrepresentation in order to achieve the same appearance of honesty. For managers under a precise system, this will shift the tradeoff decision toward the benefits of misrepresentation and away from the benefits of appearing honest. Notably, in our experiment the only benefit of appearing honest is an intrinsically-motivated desire for social approval. Our experimental results are consistent with the tradeoff notion. We find that, although the existence of an information system increases managerial honesty, honesty is lower under a precise than a less precise information system.