Showing papers in "Accounting Organizations and Society in 2004"

The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach

Abstract: This study provides an integrated analysis of the interrelations among (1) environmental disclosure, (2) environmental performance, and (3) economic performance. Based on the argument that management's (unobservable) overall strategy affects each of these corporate responsibilities, we conjecture that prior literature's mixed results describing their interrelations may be attributable to the fact that researchers have not considered these functions to be jointly determined. After endogenizing these corporate functions in simultaneous equations models, we obtain results that suggest “good” environmental performance is significantly associated with “good” economic performance, and also with more extensive quantifiable environmental disclosures of specific pollution measures and occurrences.

Control of inter-organizational relationships: evidence on appropriation concerns and coordination requirements

Abstract: This paper presents a framework of the control of inter-organizational relationships. Building on transaction cost economics and organizational theory, two control problems are identified that arise when firms engage in inter-organizational relationships: the management of appropriation concerns and the coordination of tasks. The control mechanisms used to manage these control problems and their interrelationships with informal (trust-based) mechanisms are discussed. The explanatory power of the framework is assessed by a case study of a strategic alliance between a buyer and a supplier of railway safety equipment.

The effects of the interactive use of management control systems on product innovation

Abstract: Simons' `levers of control' framework indicates that an interactive use of management control systems (MCS) contributes to fostering successful product innovation. However, his work is ambiguous in not specifying whether the relationship between interactive controls and innovation is a mediating or a moderating relationship. This paper examines the relationships among variables embedded in Simons' framework of levers of control, explicitly distinguishing the different types of effects involved and testing their significance. The results of the survey-based research do not support the postulate that an interactive use of MCS favours innovation. They suggest this may be the case only in low-innovating firms, while the effect is in the opposite direction in high-innovating firms. No evidence is found either in favour of an indirect effect of the interactive use of MCS on performance acting through innovation. In contrast, the proposition that the impact of innovation on performance is moderated by the style of use of MCS is supported, with results indicating that the explanatory power of a model that regresses performance on innovation is significantly enhanced by the inclusion of this moderating effect.

Implementing Performance Measurement Innovations: Evidence From Government

Abstract: Using data from a government-wide survey administered by the US General Accounting Office, we examine some of the factors influencing the development, use, and perceived benefits of results-oriented performance measures in government activities. We find that organizational factors such as top management commitment to the use of performance information, decision-making authority, and training in performance measurement techniques have a significant positive influence on measurement system development and use. We also find that technical issues, such as information system problems and difficulties selecting and interpreting appropriate performance metrics in hard-to-measure activities, play an important role in system implementation and use. The extent of performance measurement and accountability are positively associated with greater use of performance information for various purposes. However, we find relatively little evidence that the perceived benefits from recent mandated performance measurement initiatives in the US government increase with greater measurement and accountability. Finally, we provide exploratory evidence that some of the technical and organizational factors interact to influence measurement system implementation and outcomes, often in a complex manner.

Increased stakeholder dialogue and the internet: towards greater corporate accountability or reinforcing capitalist hegemony?

Abstract: Stakeholder dialogue is a cornerstone of many recent developments in corporate social and environmental governance and accountability practices. Two key problems associated with these stakeholder engagement initiatives are: identifying and reaching a wide range of stakeholders; and determining a consensus set of stakeholder expectations from a range of potentially mutually exclusive views held by different stakeholders. This paper addresses both of these issues. It firstly examines the moral consensus building discourse criteria of an ideal speech situation advocated by Jurgen Habermas, and proposes these criteria as a suitable theoretical model for determining a consensus set of social, environmental, economic and ethical responsibilities to be addressed by an organisation. Secondly, it investigates the extent to which the interactivity and wide reach offered by the internet could assist in realising the theoretical potential of an ideal speech situation debate in practice, and thus facilitate democratic debates leading to a greater degree of equity in the determination of corporate social, environmental, economic and ethical responsibilities. This exploration is informed by analysis of Shell's internet based stakeholder dialogue `web forum' against the theoretical consensus building discourse ethics criteria of an ideal speech situation.

Forms of contingency fit in management accounting research—a critical review

Abstract: Contingency literature in the accounting control area has for a long time been criticized for being fragmentary and contradictory as a result of methodological limitations. A review of 10 articles in the strategy-MAS area adds to this picture by showing that many different forms of fit have been used, and that very few researchers fully acknowledge the difficulties of relating these forms to each other. As a result, some researchers claim that their findings are contradictory when this is not necessarily the case, while others incorrectly argue that their results are strongly supported by previous studies.

Interorganizational cost management and relational context

Abstract: Many firms today form alliances with their suppliers and customers that do not fit into the classical dichotomy of hierarchies and markets. The emergence of so-called hybrid relational forms makes the make-or-buy decision more complicated than the neo-classical economic perspective indicates. One outcome of these hybrid relational forms appears to be the development of cost management techniques that cross the organizational boundary between buyers and suppliers and whose objective is to reduce costs through collaborative efforts. This paper explores how firms enact interorganizational cost management during product design and the characteristics of the relational contexts associated with them. It also discusses the implications of such developments for the make-or-buy decision.

A hybrid profession—the acquisition of management accounting expertise by medical professionals

Abstract: This paper argues that medical expertise in Finland was “hybridised” in the first half of the 1990s. It examines the willing adoption of management accounting techniques by medical professionals in the context of the New Public Management reforms in Finland. It documents this process of adoption, charts some of its effects for the set of practices and legitimated competencies that make up the domain of medical expertise, and seeks to understand these by reference to the position of management accounting within the Finnish pedagogic and institutional setting. As a counterpoint, it notes the contrast with the UK, where medical professionals have been seen to resist the intrusion of accounting practices into the medical domain.

Dealing with uncertainty in knowledge-intensive firms: the role of management control systems as knowledge integration mechanisms

Abstract: Little research on knowledge-intensive firms has focused specifically on management control issues. This paper aims to consider such issues. Starting from the limitations of the definition of uncertainty, especially when applied to contexts characterised by knowledge intensity, this study investigates the relationship between knowledge complexity and management control systems. This relationship is analysed in the realm of knowledge-intensive firms' teams where it is particularly critical due to the double coordination and knowledge integration role played by management control systems. A field research conducted in three project teams of a software firm supports the relevance of knowledge complexity in explaining the variation of management control systems. The paper concludes with some avenues for future research.

Interfaces of control. Technocratic and socio-ideological control in a global management consultancy firm

Abstract: This paper investigates a variety of forms of management control in a large management consultancy company. The very high level of compliance with corporate objectives among employees is highlighted and singled out as a phenomenon worth exploring. The company exhibits a rich variety of various formal control devices focusing on financial issues as well as human resources. The paper shows that these do not fully work according to intention and that their control effects do not comply that well with the bureaucratic- technocratic logic they rest upon. Technocratic control systems are instead identified as non-obvious sources of socio-ideological control. The paper emphasizes the interface between different forms of control and argues for a more symbolic, meaning-focusing view on bureaucratic and output measurement control.

Accounting and network coordination

Abstract: Accounting and the classical coordination forms of hierarchy and market are closely related concepts. New forms of coordination, including alliances and close cooperation between companies have opened up new challenges to how accounting should be designed and practised. In the first part of this paper the theoretical basis for the connection between coordination forms and the need for information is explored. Two key problems seem to be that the coordination forms are not just alternatives, but can be used in combination, and that relationships between companies can be viewed in different ways. These issues are studied through a case study of an extensive relationship between Ericsson and Telia Mobile. The case demonstrates that all of the three basic coordination forms are used in creating a complex network relating a set of sub-units from the two companies to each other and to other related parties. This means that accounting methods developed earlier can be used in several ways to enhance the development of the relationships and that the latter should not be perceived from one level or considered to be a uniform form. Companies can combine the different forms on one level to achieve a coordination form that is unique at a higher level.

Globalization and the coordinating of work in multinational audits

Abstract: This paper examines how the processes of coordinating a multinational audit impacts, and is effected by, the structuration of globalization. Using a detailed field study of an audit involving multiple locations, we argue that the coordination of work in multinational firms links the local and the global in a dialectical manner. In particular, we analyze the relationship between the global and the local through an examination of two key coordinating mechanisms used by audit firms––inter-office instructions and the firm's risk based audit methodology. In so doing, we discuss the local appropriation of global systems, as well as the importance of trust and professional identity in the coordination and management of the multisite audit. Our study suggests two key globalizing tendencies associated with reflexivity in audit––the increased risk of litigation and the commercialization of the audit industry. These changes are intimately linked at the work practice level to changes in documentation, new technologies and methodologies, and a diversification in business advisory services requiring new skills and client relationships. We discuss the implications of these changes for the future of auditing, audit work and large audit firms.

Accounting for God: accounting and accountability practices in the Society of Jesus (Italy, XVI-XVII centuries)

Abstract: It is argued in this paper that the development of accounting and accountability practices within the Society of Jesus from the 16th to the 17th centuries cannot be reduced to an economic explanation that views them merely as tools for measuring and allocating economic resources thereby explaining the formation of hierarchies. Rather, their development and refinement were tightly linked to the absolutist ideology of the Roman Catholic doctrine of the Counter-Reformation, conceived of here as a complex work of compromise among theological, religious, political, institutional, and social instances, of which the hierarchical structure of the Order and its accounting records were only the visible traces.

Reputation costs: the impetus for voluntary derivative financial instrument reporting

Abstract: The purpose of this study is to investigate managers’ responses to derivative financial instrument disclosure requirements proposed by the Australian accounting standard setting bodies and the Australian Society of Corporate Treasurers (ASCT). Confronted with societal pressures to make derivative activities more transparent, managers responded in a manner that can be explained by legitimacy and institutional theories and the maintenance of the managers’ and their firms’ financial reporting reputations. Discretionary reporting is predicted to be positively related to the magnitude of reputation costs confronting managers and firms. While the desire for legitimacy is unobservable, financial reporting reputation is proxied by the following attributes—ASCT, auditor, and Group of 100 (G100) affiliations. With the exception of auditor affiliation, results from the analysis are consistent with the hypotheses. Alternative explanations of the results may be possible. However, the consistency and significance of the results implies that legitimacy and institutional theories provide a plausible explanation as to what impulse prompted managers’ responses. (The plausible explanations provided are morally based [ Louch (1966) . Explanation and human action. Berkeley: University of California Press].) We are grateful to an anonymous referee for this insight into our explanation). Further research to investigate managers’ reporting incentives is recommended.

Power, organization design and managerial behaviour

Abstract: This paper examines empirically the impact of authority structures on the use of accounting information systems (AISs) for decision control and decision management. The model is designed to enable an assessment of the relative impact of formal authority that stems from allocation of decision rights and informal authority that stems from individual power and influence. The study is based on data collected from physician managers in large public teaching hospitals in Italy. The results support the hypotheses and demonstrate the consequences of power on organizational functioning. Our findings indicate that the delegation of formal authority to physician managers not only has a direct impact on the use of accounting for decision control and decision management it also has an important effect on their cost consciousness.

Organizational identity change: managerial regulation and member identification in an accounting firm acquisition

Abstract: This study creates a framework for analysing organizational identity change and examines the process in the context of a global accounting firm's acquisition of a UK mid-market accounting practice. It identifies the parallel processes which facilitate organizational identity change: identity regulation on the part of senior management and de- and re-identification on the part of organizational members. The study explores how changes in organizational identity are inextricably connected to organizational members' changing conceptualisations of professional identity.

Disembedding the supply chain: institutionalized reflexivity and inter-firm accounting

Abstract: Pro-active supply chain practices in manufacturing have been affected by general features of institutionalized reflexivity whereby production activities are disembedded by firms whose actions have been enabled by abstract systems such as accounting and quality management. A new consciousness of the centrality of the supply chain creates increased tensions between the trust constructed through abstract systems and the risk associated with the increased reflexivity of supply chain actors. Eschewing traditional distinctions in accounting between the inside and outside of the organization, a structuration approach shows how inter-firm transactions and accounting may be analysed through the duality of structure. The theory is explored through a case of a supply chain initiative in UK electronics manufacturing. The case company set up the cost management group (CMG) which evolved into a semi-autonomous team dominated by accountants. Drawing on the wider institutionalization of supply chain practices involving outsourcing and partnering projects, the CMG became a locus of institutionalized reflexivity. As an important source of financial and cost information in supply chains, the accounting practices espoused by the CMG contributed to both dis- and re-embedding processes.

The adoption of “Western” management accounting/controls in China's state-owned enterprises during economic transition

Abstract: This study explores the influences on the adoption of ‘‘Western’’ management accounting/control practices by China’s state-owned enterprises (SOEs). This topic is important given the potential for such practices to affect SOE operations in the midst of China’s continued privatization programme, and the continued opening of its markets to competition. In-depth interviews were conducted with managers at four SOEs and two of their joint ventures. These interviews indicated increased use of a range of Western management accounting/controls in the SOEs. They also shed light on the factors that influenced the level of adoption. These findings were used to refine a survey instrument for data collection from 82 other SOEs. The survey indicated significant and predicted influences from use of limited-term employment contracts, joint venture experience, stock exchange listing, and the availability of training. # 2003 Elsevier Ltd. All rights reserved.

An empirical investigation of the relation between the use of strategic human capital and the design of the management control system

Abstract: This study integrates transaction cost economics and contingency theory to investigate how differences in the use of strategic human capital are associated with the design of a firm's management control system (MCS). The use of strategic human capital is hypothesized to positively influence the use of personnel and nontraditional controls while negatively influencing the use of traditional controls. Using survey data from 107 respondents, this study finds that the data do not support the hypothesized structural equation model. An alternative model is proposed that suggests only that the use of strategic human capital positively influences the use of personnel and nontraditional controls. This model is supported by the data.

The genesis of professional organisation in English accountancy

Abstract: The organisation of accountants in Liverpool, London, Manchester and Sheffield during the 1870s has not been subject to exhaustive historical investigation. This paper analyses the first organisations of accountants in England in the context of theories of jurisdictional boundaries, occupational conflict, the creation of labour market shelters and social closure. It is shown that the Bankruptcy Act, 1869 disturbed the division of labour between accountants and lawyers and threatened the status of established accountants by encouraging competition from lesser practitioners. The study illustrates that the organisation of accountants in Liverpool was instigated by lawyers anxious to establish a medium for negotiating the boundaries of bankruptcy work with local accountants. In London, Manchester and Sheffield (and partly in Liverpool) organisation concerned the protection of established accountants from interlopers and was actualised by erecting market shelters and the imposition of exclusionary closure. Organisation was a device for the institutionalisation of occupational difference and protecting market advantage. During the 1870s the occupation of accountant was bifurcated into professional practitioners, marked by the badge of organisational membership, and less reputable individuals who were denied it. It is also contended that inter and intra professional conflict are pervasive themes in professional organisation and that individual actors were significant to engineering formation processes.

Accounting and management–labour relations: the politics of production in the ‘factory with a problem’

Abstract: This paper examines the role of accounting in management–labour relations within the context of contemporary moves to re-conceptualise and reorganise manufacturing processes. We explore how new manufacturing and accounting discourses are received by employees, and how their (more or less accommodating) responses to such initiatives shape the trajectory of their introduction. So doing we show why a more adequate understanding of accounting's presence and significance in the workplace does not simply require a little more attention to the politics of the production process but, rather, its positioning at the centre of analysis. We develop our argument by drawing on material collected from an intensive and longitudinal case study of a manufacturing plant of a large multinational company based upon participant observation and extensive interviews. We show how, following shifts in market conditions and company ownership, pressures to enhance productivity and improve profits led to several attempts by senior management at the plant to introduce change initiatives in production methods, management style, and accounting techniques. We demonstrate how shopfloor workers interpreted these initiatives as intensifying labour by reducing head count, leading them to resist these initiatives over a period of 13 years. We argue that during this period the rhetoric of corporate governance was mediated by workers’ ability to create a space through which their own interests were defined, articulated and brought to bear on the discourses and rationalities advanced by senior management in support of ‘new’ accounting (and management) techniques. By appreciating the presence and significance of labour in the politics of production, additional ways of accounting for the rise and demise of ‘new’ or ‘excellent’ accounting techniques are contemplated.

The impact of an ethical environment on managers' project evaluation judgments under agency problem conditions

Abstract: This paper proposes that a strong ethical environment will be effective in reducing the tendency for managers to continue failing projects in both the presence and absence of agency problems. The findings support these propositions, with a strong ethical environment found to significantly reduce managers' tendency to continue failing projects. Also, while agency problem effects were still present under a strong ethical environment, their impact was similar to the case of a weak ethical environment in the absence of agency problems. These findings suggest that creating a strong ethical environment may be a highly desirable control option for organizations generally.

Determinants of the use of various control mechanisms in US–Chinese joint ventures

Abstract: This study of US–Chinese joint ventures examined the effects of relative partner knowledge and specific asset investments on the usage of various types of control mechanisms. These controls included expatriate staffing, socialisation practices, delegated decision-making responsibilities, parent company communications and manager performance incentives. Based on field visits and survey data, we found that partner knowledge and specific asset investments influenced a broad set of controls. Whilst the US joint venture partners considered controls to be particularly useful for the selective transmission and protection of their knowledge, the Chinese partners viewed these same controls as a means to selectively share and protect their specific asset investments in the ventures.

Institutional reality, financial reporting and the rules of the game

Abstract: In this paper, I review the major arguments in John Searle's 1995 book, The Construction of Social Reality, and use them as the basis for exploring the relationship between economic reality and financial accounting numbers. In this book, Searle provides the tools to analyze factual type representations in terms of objective and subjective with respect to both their ontological status and their epistemological status. Using these tools, I demonstrate that many financial accounting representations may be properly characterized as epistemologically objective facts, even though they have an ontologically subjective mode of existence. Other financial accounting representations, however, only come into existence in accordance with a set of rules, financial accounting rules, that have no objective basis in either physical or institutional reality. The financial accounting rules for aggregating the monetary amount of total assets, for calculating net assets, net income and earnings per share are more akin to the rules for a game such as football. Once the rules have been established, certain representations based on those rules may be said to be epistemologically objective with respect to those rules, even though there is no objective basis for the rules themselves. This does not, however, render financial accounting representations useless. In fact, I argue that representations of net income and owners equity are useful because, like economic price indices and other such indicators, they are fuzzy indicators of wealth and changes in wealth. As such, they are not foolproof representations. Depending upon the rules, such indicators may be constructed in ways that are more or less reliable, or more or less misleading with respect to the objectives of users. Indeed, from this perspective, the job of standard-setting bodies, such as the FASB, can be characterized in terms of continually amending the rules in an effort to keep “the game” within the bounds of acceptable perceptions of reality.

Auditor human capital and audit firm survival - The Dutch audit industry in 1930-1992

Abstract: This paper studies the relationship between auditor human capital and audit firm survival. Specifically, the effects are investigated of the human capital of auditors on the survival chances of newly established audit firms. Human capital is analyzed both at the time of entry of a new audit firm and during the lifetime of an audit firm. The data set contains 1693 firms that entered into the Dutch audit market in the period 1930–1992. To analyze the data, the technique of event history analysis is applied. There are two key results of the study. First, a higher level of education of the firm's auditors, both at founding and during the lifetime of an audit firm, generally increases audit firm performance. Second, the effects of experience at founding and experience during the lifetime of an audit firm vary considerably. Higher levels of experience at founding have a positive influence on audit firm performance. However, higher levels of experience during the lifetime of an audit firm, i.e., the aging of the firm's auditors, have a negative effect on firm performance.

Identity, appropriateness and the construction of regulatory space: the formation of the Public Accountant's Council of Ontario

Abstract: Practice rights legislation in Canada continues to be contested 50 years after its first enactment. In Ontario, one of the earliest provinces to enact restrictive legislation, the challenges have focused on how the legislation has been implemented rather than on whether or not public accounting should be regulated. To better understand the contested issues in this field, we examine the process undertaken by the Public Accountants Council of Ontario to implement the Public Accountancy Act of 1950. Our analysis is based on the first 15 years of the minutes of the meetings of the Public Accountants Council for Ontario, augmented by other archival sources such as court cases, newspaper clippings, correspondence and reports. Our intent is to document the process and “logic of appropriateness” used by the Council to construct its identity and stake out its “regulatory space” in the face of the ambiguity of the law and pressure from interest groups. We also identify the contradictions that were institutionalized in this field resulting in repeated challenges to the Council. We conclude by relating the historical insights from this analysis to the continuing challenges to practice rights legislation in Ontario.

On accounting classification and the international harmonisation debate

Abstract: In an earlier issue of this journal, d'Arcy presents a classification of accounting systems that shows the UK and the US in separate groups and Australia as an outlier. It is suggested here that the classification is unsound because the data were unsuitable in nature and contained errors.

Accounting Representation and the Road to Commercial Salvation

Abstract: The paper examines the contribution of inscriptions, in particular new accounting measures, to a process of transforming the ethos and operations of ‘Britech', a high-tech division of a major British manufacturer. Focusing upon the increased and changing use of inscriptions at this site, we interpret them as moves to signify and facilitate an increasingly “commercial” orientation towards activities. We describe how new writings, particularly new management accounting measures, were deployed to create spaces of representation in which traditional views and practices were problematized in a strategic effort to constitute a new organisational reality for Britech employees. The new systems of inscription, we argue, were a key resource in the translation of established practices. This translation was facilitated by writings that expressed and promoted conditions of accelerating change that were prompted by pressures to avoid closure or divestment of the Britech assembly site. Analysis of the inscriptions is thus of significance for understanding how a human agency deemed capable of enacting the new commercial agenda at ‘Britech' is constituted and reproduced.

The politics of tax accounting in the United States: evidence from the Taxpayer Relief Act of 1997

Abstract: The purpose of this study is to utilize prior research in US Congressional politics, the accounting/state relationship, and corporate political activity to analyze corporations' political activities during the development and passage of the United States' Taxpayer Relief Act of 1997. Our study provides evidence consistent with the notion that large corporations exercise considerable political power during the state's formulation of new tax accounting laws. These findings lead us to question the applicability of a strict pluralist model in accounting policy research and have implications for future research in corporate political activity, corporate tax accounting, and the political economy of accounting.

An empirical reanalysis of the selection–socialization hypothesis: a research note

Abstract: Ponemon [Ponemon, L. (1988). A cognitive–developmental approach to the analysis of Certified Public Accountants’ ethical judgments . PhD dissertation, Union College of Union University; Accounting, Organizations and Society 17 (1992) 239] contends that a selection–socialization process exists in which (1) senior-level public accountants in the United States have less capacity to comprehend and resolve basic ethical problems than do accountants in subordinate ranks, and (2) the senior-level accountants perpetuate their ranks by promoting persons of low moral reasoning capacity. Using large, national random samples from 1995 and 2001, and correcting for inherent problems in the key study supporting this hypothesis, the current study yields results that materially contradict that earlier research. The sample sizes provide ample statistical power to conclude that, in the United States, capacity for moral judgment does not differ across rank (position) and this is not a factor in promotion in the public accounting profession as a whole. The study examines both political conservatism and gender as potential confounding variables, but finds that they do not drive the results. A sample of attorneys also gives no hint of selection–socialization. Instead, differences in moral cognition seem to be most relevant when people are making a choice of profession and less so after entering a particular profession.