Showing papers in "Accounting and Business Research in 1987"
TL;DR: Signalling and agency theories appear in the accounting literature to be competing theories, but as mentioned in this paper showed that they are actually consistent theories, in that one set of sufficient conditions of signalling theory is at least consistent with another set of necessary conditions of agency theory.
Abstract: Signalling and agency theories appear in the accounting literature to be competing theories. This article demonstrates that they are actually consistent theories, in that one set of sufficient conditions of signalling theory is at least consistent with one set of sufficient conditions of agency theory. Indeed, a considerable overlap exists between the two theories: rational behaviour is common to both; information asymmetry in signalling theory is implied by positive monitoring costs in agency theory; ‘quality' in signalling theory can be defined in terms of agency theory variables; and signalling costs are implicit in some bonding devices of agency theory. Examples are given where both theories’ predictions about lobbying, accounting choices, and voluntary auditor selection are added together.
449 citations
TL;DR: The establishment of an Accounting Standards Review Board (ASRB) in Australia followed proposals for greater government and community involvement in the development of accounting rules, and concern about the low level of compliance with the accountancy profession's standards as mentioned in this paper.
Abstract: The establishment of an Accounting Standards Review Board (ASRB) in Australia followed proposals for greater government and community involvement in the development of accounting rules, and concern about the low level of compliance with the accountancy profession's standards The profession had opposed proposals for a review board The Ministerial Council for Companies and Securities overrode these objections, yet avoided giving any formal authority to the ASRB In this environment the way was left open for renewed opposition to arrangements which had reduced the profession's capacity to control the standard-setting process The newly-formed ASRB was vulnerable if it was unproductive—and it encountered delays and difficulties in receiving and processing submissions from the profession The Board lacked the authority (and the will) to enforce its priorities After two years the Board abandoned earlier efforts to secure wider community participation in its activities, and announced ‘fast track’ pro
119 citations
TL;DR: In this article, the authors develop models which explicitly allow for loss-making companies in the non-failed sample, which is a common feature of previous work on failure prediction models of UK companies.
Abstract: A common feature of previous work on failure prediction models of UK companies is that the non-failed samples are restricted to include only sound or healthy companies. This may be considered a major weakness since, as a consequence, the models are biased in statistical design and have unclear relevance to a potential user. The major purpose of this paper is to develop models which explicitly allow for loss-making companies in the non-failed sample. We novelly experiment with rnultilogit analysis; we also report, as joint products of our analysis, some empirical results on the determinants of the going concern qualification, the time lag in reporting annual accounts and the formal type of legal failure.
87 citations
TL;DR: In this article, positive accounting: a review article is presented, where positive accounting is used to evaluate the performance of positive accounting and its application in accounting and business research: Vol. 17, No. 68, pp. 327-336.
Abstract: (1987). Positive Accounting: A Review Article. Accounting and Business Research: Vol. 17, No. 68, pp. 327-336.
81 citations
TL;DR: In this paper, the authors suggest a conceptual framework for conventional accounting measurement practice and suggest that the common assumptions which are made by different user groups concerning the numerical information contained in financial statements are not self-evident.
Abstract: The article suggests a descriptive, axiomatic type of conceptual framework for conventional accounting measurement practice. The disclosure problem in financial accounting is caused by the need to decide what, of all the available numerical and nonnumerical information, to include in a set of financial reports. The measurement problem in financial accounting is chiefly concerned with explaining the nature of the specifically numerical information produced by accounting systems, whether or not it is disclosed in financial statements. The problems of measuring the accounting attribute remain constant even though the resulting numerical information may be disclosed to differing third parties such as management, investors and creditors. The common assumptions which are made by different user groups concerning the numerical information contained in financial statements are arithmetic in character. As soon as these arithmetic properties are questioned, however, it becomes clear that they are not self-evident. The problems raised in interpreting the arithmetic properties of accounting data appear to be due to the accountant's lack of understanding of the attribute which is being measured in financial statements.
78 citations
TL;DR: (1987).
Abstract: (1987). Decision Support and Expert Systems in Auditing: A Review and Research Directions. Accounting and Business Research: Vol. 17, No. 66, pp. 173-185.
64 citations
TL;DR: In this article, the authors assess the current and likely impact of expert systems on the accounting community, including those which model expertise in the sub-domains of auditing, taxation advice, financial planning and business risk assessment.
Abstract: This paper assesses the current and likely impact of expert systems on the accounting community. The paper begins by briefly reviewing about twenty financially-oriented systems, including those which model expertise in the sub-domains of auditing, taxation advice, financial planning and business risk assessment. The predominantly narrow view taken by some authors in the literature is noted. An attempt is made to broaden this view by ascertaining why particular classes of application might have been chosen in preference to others, and to comment on the significance of this choice. The number and scope of applications are analysed, and some observations are made on their current state of development. Some conclusions are drawn on the suitability of expert systems for traditional accountancy tasks, and an assessment of their current level of success is made. Their likely future impact is considered and the conclusion is drawn that there are still many stumbling blocks in the way of successful implem...
59 citations
TL;DR: In this paper, the authors show that instead of striving to develop increasingly complex systems, a solution to the control problem may be aided by the divestment of ill-fitting activities.
Abstract: Increasing attention has recently been devoted in the accounting literature to the control of divisionalised firms. The general thrust of this literature is to take a uni-directional view of the development of organisations, so that adequate control requires finding an optimal divisionalisation of existing activities. This paper shows that this approach misses an important managerial decision variable. Hence, rather than striving to develop increasingly complex systems, a solution to the control problem may be aided by the divestment of ill-fitting activities. The paper analyses the conditions where divestment may be an appropriate course of action for organisational management.
40 citations
40 citations
TL;DR: In this paper, the efficacy of a two-stage cognitive model of decision making within the context of loan decisions was examined through a covariance structural analysis of the cognitive processes that loan officers and MBA students used to reach loan decisions.
Abstract: This article examines the efficacy of a two-stage cognitive model of decision making within the context of loan decisions. A covariance structural analysis of the cognitive processes that loan officers and MBA students used to reach loan decisions was examined through measures designed to test the proposed two-stage processing model. The results indicated that, during the first stage of cognitive processing, conceptually-driven and data-driven perceptual biases caused different assessments of loan information. The results also indicated that judgments made during the second phase of processing significantly affected decision choice. The well documented conservatism bias was also evident in the results. The result was that experienced loan officers did not out-perform novice students on most of the loan decisions. The relative usefulness of the two-stage model is discussed and general suggestions for future decision making research are offered.
38 citations
TL;DR: This paper reports the views of a group of preparers and users of segment reports on the segmental reporting issue and proposes alternative forms of presentation.
Abstract: Disclosure of financial data disaggregated by business and/or geographic segment is currently being considered by the Accounting Standards Committee. This paper reports the views of a group of preparers and users of segment reports on the segmental reporting issue. Identifying reportable segments is of primary importance if the disaggregated financial data are to have any meaning or value. Yet, the imposition of a rigid and arbitrary set of rules suggesting a single form of presentation is unlikely to gain universal approval. Based on the criteria of the preparers and users interviewed alternative forms of presentation are proposed.
TL;DR: In this article, the authors investigated the impact of the experimental standard, SSAP16 (Current Cost Accounting), on share returns on the London stock market and found that CCA information has a small but significant impact on stock returns in the days up to announcement.
Abstract: This study investigates the impact of the experimental standard, SSAP16 (Current Cost Accounting), on share returns on the London stock market. Approximately 200 companies were examined between 1980–84. The experimental design specifies current cost as a supplementary signal to historical cost and employs two main statistical tools: ordinary least squares regression and the abnormal performance metric. In addition, a number of different CCA measurements are specified in order to assess the sensitivity of the results and to ease comparison with other studies. The results suggest that CCA information has a small but significant impact on stock returns in the days up to announcement. However, CCA does not seem to be the main driving force behind long period returns. Returns in the long run are associated more closely with historical cost information than with that generated by SSAPI6.
TL;DR: In this paper, the authors analyse the affects of these changes and of shifts in market demand on the recent financial positions and cash flows of ten of the most and 10 of the least successful clubs and conclude that collective management policies in the English Football League are contrary to the normal economic objectives of a sporting league.
Abstract: Member clubs in professional sporting leagues can increase joint incomes by adopting measures that equalise playing performance. In the English Football League some degree of performance equalisation has traditionally been achieved by restricting financial competition and through income sharing arrangements. Elite clubs in the League have recently secured changes in these arrangements which will increase their dominance in the industry. This paper analyses the affects of these changes and of shifts in market demand on the recent financial positions and cash flows of ten of the most and ten of the least successful clubs, and concludes that collective management policies in the League are contrary to the normal economic objectives of a sporting league.
TL;DR: This article examined the accounting content of British legal cases decided in the fifty year period before the 1889 Court of Appeal decision in Lee v. Neuchatel Asphalte Company, which dealt with such important topics as periodicity, uniformity, matching and realisation.
Abstract: This paper examines the accounting content of British legal cases decided in the fifty year period before the 1889 Court of Appeal decision in Lee v. Neuchatel Asphalte Company. Before the birth of what might be described as an ‘accounting literature’, these early cases dealt with such important topics as periodicity, uniformity, matching and realisation. Although consistent concepts of asset valuation and income determination are not evident, the discussions by the courts are among the earliest expositions on a variety of accounting topics, especially those relating to the development of accrual accounting.
TL;DR: In this article, the author sets out three guiding principles that urge the researcher to adopt a mode of doing research that is consistent with his psychological orientation, recognise the unattainables and imperfections of real-life research, and pursue interesting themes as a means to publication.
Abstract: The newcomer to management accounting research is faced with the multiple uncertainties of a subject that lacks well-defined boundaries, agreement on desirable methodologies and indicators of potential punishability. In order to assist the uninitiated in conducting research in such an apparently inimical environment the paper sets out three guiding principles that urge the researcher to (a) adopt a mode of doing research that is consistent with his psychological orientation, (b) recognise the unattainables and imperfections of real-life research, and (c) pursue ‘interesting’ themes as a means to publication.
TL;DR: In this paper, the authors examined the effect of auditors' anticipation of finding a particular error type in substantive tests and the frequency of occurrence of the error-type on audit plans.
Abstract: The process of audit planning continues throughout an audit engagement. Preliminary audit plans are developed in the early phases of an engagement, and are revised in light of information received in subsequent phases, such as the results of substantive tests. This study examines the effects of (1) auditors' anticipation of finding a particular error-type in substantive tests and (2) the frequency of occurrence of the error-type on auditors' revision of preliminary audit plans. An experiment was conducted with practising auditors as subjects. Three error-types were manipulated as part of eighteen sets of exceptions from accounts receivable confirmations that each auditor reviewed. We found that auditors who do not anticipate finding an error-type in substantive tests are more likely to increase the amount of planned audit work. No effect of frequency of an error-type within a sample was found.
TL;DR: A set of thirteen studies principally dealing with industrial practice relating to cost behaviour analysis and transfer pricing, but covering a number of related issues are compiled, outlining the methodology adopted and concentrates on three key areas of analysis.
Abstract: As a result of a pilot study, it was concluded that valuable insight into the industrial application of management accounting principles would be gained by an in depth development of case studies. These would assist in understanding the compilation of knowledge within industrial practice; in return they might condition the future presentation of this knowledge and serve as a pointer to further research and its dissemination. Strong support for the development of case studies has been expressed recently by a number of prominent researchers who emphasise that, for certain purposes, suitably designed studies of this nature are a major means of making progress. The authors have compiled a set of thirteen studies principally dealing with industrial practice relating to cost behaviour analysis and transfer pricing, but covering a number of related issues. The paper outlines the methodology adopted and concentrates on three key areas of analysis: capture and creation of information, managed costs, and i...
TL;DR: In this paper, an alternative approach to the problem whereby divisions are treated as lessees of fixed assets owned by head office is proposed, which is compatible with the NPV decision rule and does not require the company to adopt asset valuation practices which depart from those normally used for financial reporting.
Abstract: The paper examines some of the methods suggested in the literature for the evaluation of divisional performance, and proposes an alternative approach to the problem whereby divisions are treated as lessees of fixed assets owned by head office. It is suggested that this method is compatible with the NPV decision rule, yet does not require the company to adopt asset valuation practices which depart from those normally used for financial reporting; furthermore, the method actively considers both the ‘abandonment’ decision and whether or not ‘life expired’ assets should be disposed of. It is also claimed that the method is less open to manipulation than some other proposed performance measures.
TL;DR: In this article, the authors explore the topic of revaluation in accruals accounting under the assumption that an important purpose of financial statements is to report 011 management's financial performance.
Abstract: The paper explores the topic of revaluation in accruals accounting under the assumption that an important purpose of financial statements is to report 011 management's financial performance. Having differentiated valuation and matching based approaches, the paper proceeds to indicate some reasons for revaluation in the latter by reference to the literature of management accounting and logical argument. It identifies exit value (net realisable value) as the most appropriate basis for valuation for the postulated purpose, but argues that revaluation should not occur annually but by reference to the expiration of ‘planning periods’ or to other specified events which may occur earlier. Therefore its arguments and proposals differ from those previously associated with advocates of exit value. The article concludes by discussing some of the practical issues arising from its suggestions.
TL;DR: In this article, the authors compared four prior probability assessment techniques (PPAT) in auditing: cumulative distribution function (CDF), probability density function (PDF), equivalent prior sample information (EPS), and hypothetical future samples (HFS).
Abstract: Interest in the use of the Bayesian statistical method in auditing has been increasing over the past few years. To use this method, however, appropriate prior probability assessment techniques (PPAT) need to be identified. This study uses three evaluation criteria, acceptability, accuracy and concordance, to compare four PPATs in auditing. The four PPATs compared are cumulative distribution function (CDF), probability density function (PDF), equivalent prior sample information (EPS), and hypothetical future samples (HFS). Seventy-three practising auditors were trained to use these four PPATs in their task of compliance error quantification in an audit case study. Results indicate that PDF is the most appropriate PPAT and EPS the least appropriate PPAT for use in practical audit situations. CDF and HFS were in the middle with no clear difference between them. Implications for audit practice and research are discussed.
TL;DR: In this article, the significance of administrative expenses incurred by a comprehensive sample of firms obtaining quotation on the Unlisted Securities Market and Official List in the 1980s was analysed, and the extent to which barriers to entry in the new issue market arising from the existence of high fixed costs of obtaining a quotation established in previous research was reduced as a result of the introduction of the USM.
Abstract: This paper analyses the significance of administrative expenses incurred by a comprehensive sample of firms obtaining quotation on the Unlisted Securities Market and Official List in the 1980s. It is concerned with the extent to which barriers to entry in the new issue market arising from the existence of high fixed costs of obtaining a quotation established in previous research have been reduced as a result of the introduction of the USM. A comparative analysis is undertaken, examining the relative costs of new issues in the USM and the Official List, together with a study of whether total expenses are affected by the route chosen for ultimate progression to the Official List. The research examines the extent to which cost variation can be attributed to differences in characteristics of the issue and of the firms themselves so as to generate continuing and significant economies of scale. Finally, the paper considers briefly whether competition in the new issue market has been associated with a r...
TL;DR: The burden of corporation tax in project appraisal is defined here to be the ratio of the net present value (NPV) of the tax cash flows to the pre-tax project NPV.
Abstract: The burden of corporation tax in project appraisal is defined here to be the ratio of the net present value (NPV) of the tax cash flows to the pre-tax project NPV. This burden, under careful stated conditions, is shown to be a heperbolic function of the pre-tax profitability index. It may be well in excess of 100% for projects with marginal pre-tax profitability and it falls asymptotically with increasing pre-tax profitability to less than the nominal 35% rate of corporation tax. It falls more heavily upon long rather than short term projects, and the effects of inflation are capricions. These results are contrasted with the corresponding results for the fiscal arrangements which applied prior to the 1984 Finance Act.
TL;DR: The Reform of Personal Taxation: A Review Article as discussed by the authors, is a review article of the reform of personal taxation in 1987, and it is published in Accounting and Business Research: Vol. 17, No. 66, pp. 117-124.
Abstract: (1987). The Reform of Personal Taxation: A Review Article. Accounting and Business Research: Vol. 17, No. 66, pp. 117-124.
Journal Article•
TL;DR: In 1986, 6,200 students entered into training contracts under the aegis of the Institute of Chartered Accountants in England & Wales, of whom nine out of ten were graduates, making the profession by far the largest single recruiter of graduates in the UK as mentioned in this paper.
Abstract: In 1986 6,200 students entered into training contracts under the aegis of the Institute of Chartered Accountants in England & Wales, of whom nine out of ten were graduates, making the profession by far the largest single recruiter of graduates in the UK; and this voracious appetite may well increase. Most firms expend considerable resources on recruitment to get it right; yet Institute statistics demonstrate that up to 40 per cent of graduate recruits ultimately fail to qualify. Perhaps at best one fifth of the original entrants will still be with their original firm three years after qualification. A large proportion must be viewed as recruitment failures.