Showing papers in "European Accounting Review in 2000"
TL;DR: In this article, a series of interviews conducted with leading practitioners and opinion formulators in the social, ethical and environmental audit arena, together with an extensive review of recent literature in the area, is presented.
Abstract: Drawing upon a series of interviews conducted with leading practitioners and opinion formulators in the social, ethical and environmental audit arena, together with an extensive review of recent literature in the area, this paper offers a critical appraisal of current developments in the newly revitalized social audit movement. We particularly question whether in their enthusiasm for bringing social audit into the mainstream of current business thinking its advocates risk compromising the democratic ideals of the founding fathers of the movement. A particular concern raised is that without real change in corporate governance structures, social audit could become monopolized by consultants and/or corporate management and hence amount to little more than a skilfully controlled public relations exercise.
497 citations
TL;DR: In this article, the authors compared the extent of disclosure in the annual reports of French listed companies to some economic determinants and found that voluntary disclosure is significantly related to size, foreign activity and to a proxy for proprietary costs.
Abstract: The aim of this paper is to relate the extent of disclosure in the annual reports of French listed companies to some economic determinants. The sample includes the 1995 annual reports of 102 randomly selected industrial and commercial firms. The extent of disclosure is measured by an index based on financial and non-financial discretionary information. The model of hypothesis explaining voluntary disclosure is defined as the interplay of contradictory forces: inducements deriving principally from agency theory and limitations imposed by information costs. The results reveal that voluntary disclosure is significantly related to size, foreign activity and to a proxy for proprietary costs.
493 citations
TL;DR: In this paper, a trans-European project to investigate the present and potential future links between the environmental management and management accounting functions of a company or business is presented. But the authors focus on the latter the generation, analysis and use of financial and related non-financial information, in order to support management within a company within a business, in integrating corporate environmental and economic policies and building sustainable business.
Abstract: This paper reports and analyses the results of a trans-European project to investigate the present and potential future links between the environmental management and management accounting functions of a company or business. A taxonomy of four broad but distinct approaches to environmental accounting is identified from the literature: external financial reporting; social accountability reporting; energy and materials accounting; and environmental management accounting. This project focuses on the latter the generation, analysis and use of financial and related non-financial information, in order to support management within a company or business, in integrating corporate environmental and economic policies and building sustainable business. The research involved interviews with accountants1 and environmental managers at eighty-four companies in Germany, Italy, The Netherlands and the UK, and detailed case studies of fifteen companies in those four countries. The paper summarizes the findings of the resear...
261 citations
TL;DR: In this paper, the authors analyse the environmental reporting practices found in the annual reports published by companies operating in Spain, as well as to determine the evolution of these practices during the period 1992-4, on the basis of stakeholder theory.
Abstract: The objective of this paper is to analyse the environmental reporting practices found in the annual reports published by companies operating in Spain, as well as to determine the evolution of these practices during the period 1992–4, on the basis of stakeholder theory. In order to carry out this analysis, we have examined the annual reports of seventy large companies operating in industries considered to be sensitive for the environment. The reporting practices have been grouped into a number of categories, as follows: type of environmental reporting provided; sections of the annual report devoted to environmental reporting; corporate environmental policies and projects; natural environment protection activities and achievements; and disclosure of environmental data in the annual accounts. Finally, we have considered whether the fact that a company is quoted on the stock market, or that a parent company is foreign-based, or that it belongs to a regulated sector, are differentiating factors with respect to...
237 citations
TL;DR: In this article, the authors investigate the validity of the criticism as perceived by chief financial officers and other high-ranking officers in large Finnish companies and find that relatively few companies are planning to abandon the annual budget completely.
Abstract: In recent years the traditional, annual budget has been accused of being incapable of meeting the demands of the competitive environment in the information age. Seeing that some of the most ardent critics are management consultants, with a vested interest in trying to persuade companies to change their management models, part of the criticism may perhaps be classified as hyperbole. Be this as it may, the criticism has resulted in more than just talk. Some real action can also be observed –; especially in Sweden, where several large companies have abandoned the traditional budget altogether. To date, academic researchers have shown very little interest in this phenomenon. The present study aims to investigate the validity of the criticism as perceived by chief financial officers and other high-ranking officers in large Finnish companies. The results of a postal survey indicate that relatively few companies are planning to abandon the annual budget completely. Even so, a considerable number of respondents w...
202 citations
TL;DR: In this paper, a study of reporting on ethical issues in the corporate annual reports of the largest UK and German chemical and pharmaceutical companies between 1985 and 1995 is presented, which is both comparative and longitudinal in nature, examining in detail how ethical reporting practices developed differently in two Western nations.
Abstract: This paper reports on a study of reporting on ethical issues in the corporate annual reports of the largest UK and German chemical and pharmaceutical companies between 1985 and 1995. The study is both comparative and longitudinal in nature, examining in detail how ethical reporting practices developed differently in two Western nations. Despite the similarity in industry affiliations of the companies in the two samples, the study found substantial differences in the nature and patterns of reporting both across time and between the two countries studied. In particular, German companies reported more information and that reporting ‘matured’ to its current level at an earlier date. The paper explores some of the factors which might be thought to have caused this diversity in reporting between the two countries including: industry initiatives; extent of regulations demanding ethical responsibility; and other social and political pressures.
201 citations
TL;DR: It was found that management accountants in the two countries constructed common occupational identities out of their diverse experiences, Echoing the findings of anthropological practice theory, the good practitioner rhetorically reconciled a wide variety of contradictory attributes in their occupational idiom.
Abstract: The existence of management accounting as an unproblematic occupational label is often taken for granted. Prompted by contemporary discussions concerning radical changes in management accounting practice, we sought to examine the extent to which practitioners' accounts of practice demonstrate a coherent occupational identity. Collecting sixty-four occupational autobiographies in seventeen German and twelve British firms we found that management accountants in the two countries constructed common occupational identities out of their diverse experiences. Echoing the findings of anthropological practice theory, the good practitioner rhetorically reconciled a wide variety of contradictory attributes in their occupational idiom.
196 citations
TL;DR: In this paper, the impact of renewable long-term audit mandates on audit quality is analyzed from the viewpoint of the external users of the financial statements, and the authors use a logistic regression model to determine whether perceived threats to auditor independence actually compromise auditor independence.
Abstract: Anglo-American countries like the US and the UK allow companies to switch auditors every year. In contrast, some continental European countries restrict auditor switching by allowing only renewable long-term audit mandates. This paper aims to analyse the impact of renewable long-term audit mandates on audit quality. Audit quality is considered from the viewpoint of the external users of the financial statements. It is questioned whether renewable long-term audit mandates have an impact on the auditor's reporting behaviour and on auditor independence. This research is motivated by the lack of consensus in the literature on the impact of the length of the auditor client relationship on audit quality. Moreover, few empirical studies use publicly available secondary data in order to determine whether perceived threats to auditor independence actually compromise auditor independence. Therefore, our research methodology consists in the development of a logistic regression model in which the explanatory variable...
172 citations
TL;DR: In this paper, the authors focus on the process of harmonization of financial accounting within the European Union and show that there has been greater conformity in recent years in the accounting practices of companies which operate on the international stage.
Abstract: Two different forces are involved in the international harmonization of accounting: institutional endeavours to harmonize accounting internationally by developing common accounting rules and reporting standards, and spontaneous efforts by ‘global players’ to adopt accounting methods that will improve communication with users in other countries. These two developments are proceeding side by side, generally reinforcing one another but occasionally moving independently. This paper is primarily concerned with the process of harmonization of financial accounting within the European Union. The hypothesis we want to test is that, in spite of the obstacles to the harmonization of regulations in the European Union, there has been greater conformity in recent years in the accounting practices of companies which operate on the international stage. If so, the implications for the harmonization strategies of the international bodies are important. In this study, we first carry out a critical analysis of previous resea...
143 citations
Journal Article•
TL;DR: This paper found that although the largest second digits (eight and nine) are fewer than expected, only sixes and sevens are statistically significantly managed upwards in Finland, whereas the largest first digit (six and seven) are significantly higher than expected.
Abstract: Finnish firms are known to manage earnings downwards to avoid income taxes. This study suggests that they simultaneously manage earnings upwards in a smaller scale. The idea behind this behaviour is that humans may perceive a profit of, say, 301 million as abnormally larger than a profit of 298 million. Consequently, firms tend to adjust the second leftmost digit of earnings to exceed nine in order to make the first digit of earnings larger by one. Such corporate behaviour has been previously documented in New Zealand and in the USA. Our study finds a similar phenomenon in Finland. Our results show that although the largest second digits (eight and nine) are fewer than expected, only sixes and sevens are statistically significantly managed upwards.
95 citations
TL;DR: In this article, the authors examine the practice of value-for-money (VFM) audit in Scotland and present a picture of complexity: VFM, as a concept, may be taken for granted, but, in practice, it has been, and continues to be, problematic.
Abstract: This paper examines the practice of value-for-money (VFM) audit in Scotland. The concept of VFM has featured strongly in the policy guidance of successive governments as they have initiated changes in the structure, organization and delivery of public services. The expression VFM is now embedded in everyday language and discussion about the performance of the public sector. However, this study of the practices of an expert group of VFM auditors presents a picture of complexity: VFM, as a concept, may be taken for granted, but, in practice, it has been, and continues to be, problematic.
TL;DR: The authors found that although the largest second digits (eight and nine) are fewer than expected, only sixes and sevens are statistically significantly managed upwards in Finland, whereas the largest first digit (six and seven) are significantly higher than expected.
Abstract: Finnish firms are known to manage earnings downwards to avoid income taxes. This study suggests that they simultaneously manage earnings upwards in a smaller scale. The idea behind this behaviour is that humans may perceive a profit of, say, 301 million as abnormally larger than a profit of 298 million. Consequently, firms tend to adjust the second leftmost digit of earnings to exceed nine in order to make the first digit of earnings larger by one. Such corporate behaviour has been previously documented in New Zealand and in the USA. Our study finds a similar phenomenon in Finland. Our results show that although the largest second digits (eight and nine) are fewer than expected, only sixes and sevens are statistically significantly managed upwards.
TL;DR: In this article, a historical investigation attempts to gain insight into some of the socioeconomic factors surrounding the development and functioning of cost allocation practices in Britain, focusing on the emergence of uniform costing systems, government contracting in wartime, and the effects of collective trade agreements.
Abstract: This historical investigation attempts to gain insight into some of the socioeconomic factors surrounding the development and functioning of cost allocation practices in Britain. These factors are conceived in this study as isolated neither from the nature and structure of human behaviour, nor from the dynamic changing world in which individuals, firms and other constituent elements of society exist, act and interact. The institutional approach taken in this paper is contrasted with the transaction cost economics and labour process approaches. The historical analysis focuses on the emergence of uniform costing systems, government contracting in wartime, and the effects of collective trade agreements, and it reveals some of the wider economic, organizational, legal and political contexts in which cost allocations evolved and developed over the years. In addition, it demonstrates the complex and changing framework of norms, working rules and institutional arrangements within which cost allocation systems ca...
TL;DR: In this article, the authors examine the private mechanisms used to safeguard quality in auditing, with a view to defining rules capable of facilitating the performance of market forces, and the role of public regulation is then situated in the context defined by the presence of these safeguard mechanisms.
Abstract: This article examines the private mechanisms used to safeguard quality in auditing, with a view to defining rules capable of facilitating the performance of market forces. An outline is given of a general theory of private quality assurance in auditing, based on the use of quasi-rents to self-enforce quality dimensions. Particular attention is paid to the role of fee income diversification as the key ingredient of private incentives for audit quality. The role of public regulation is then situated in the context defined by the presence of these safeguard mechanisms. This helps in defining the content of rules and the function of regulatory bodies in facilitating and strengthening the protective operation of the market. By making sense of the interaction between regulation, quality attributes and private safeguards, the analysis helps to evaluate the relative merits of different regulatory options.
TL;DR: The authors analyzed the information content of dual disclosures of IAS (International Accounting Standards) and LAS (Local Accounting Standards), and concluded that restating local GAAP earnings according to the IAS helps to meet foreign investors' information needs, but is of limited use to domestic investors.
Abstract: Using a sample from the Helsinki Stock Exchange, this paper analyses the information content of dual disclosures of IAS (International Accounting Standards) and LAS (Local Accounting Standards) earnings. Their information content to foreign and domestic shareholders can be distinguished from each other as the unrestricted shares (available to foreign and domestic investors) and the restricted shares (available to domestic investors only) of the same set of companies were listed separately during 198492. The information content is tested with regressions using market-adjusted stock returns measured from the fifty-week period ending in the week of financial statements release. The overall findings suggest that restating local GAAP earnings according to the IAS helps to meet foreign investors' information needs, but is of limited use to domestic investors.
TL;DR: In this article, the authors present the data gathered from a large research project (see Kamp-Roelands and Bouma, 1998) which has a practical focus on how environmental management information systems could be designed such that they better satisfy the needs of those using the information which emerges from these systems.
Abstract: This paper emanates from a larger research project (see Kamp-Roelands and Bouma, 1998) which has a practical focus. This research project seeks to start the process of exploring how environmental management information systems could be designed such that they better satisfy the needs of those using the information which emerges from these systems. In order to develop this work it was necessary to first generate some information about the internal and external stakeholder needs with respect to environmental information. This task has been tackled in the context of a single site of a multinational company. For this site a range of stakeholders were identified and questioned in some detail about, inter alia, their expectations of what an environmental management system (hereafter EMS) could achieve, their motives for using environmental information, how important they viewed various pieces of information to be and their views on quality of information issues. This paper presents the data gathered from this p...
TL;DR: In this paper, the authors investigated the relevance of reported earnings in the context of an institutional environment, i.e., Switzerland, in which investors focus on dividends, and found that Swiss managers do engage in dividend-based earnings management, that earnings quality signals are used by managers to voluntarily constrain their accounting choices and that the value relevance of ea...
Abstract: This study investigates the relevance of reported earnings in the context of an institutional environment, i.e., Switzerland, in which investors focus on dividends. In conjunction with a dividend focus, the financial reporting environment faced by Swiss firms provides their managers with more accounting discretion than managers of Anglo-Saxon firms typically have. From a contractual perspective, dividendbased earnings management is expected since Swiss corporate law explicitly states that dividends, which must be voted on by stockholders, are to be based upon a firm's reported earnings. From a value perspective, thin trading conditions and a long-term investment horizon are expected to increase the importance of dividend payments and to influence the informativeness of reported earnings. Results indicate that Swiss managers do engage in dividend-based earnings management, that earnings quality signals are used by managers to voluntarily constrain their accounting choices and that the value relevance of ea...
TL;DR: In this article, an early report on an experiment undertaken by a group of managers of "social economy" firms is presented, which comprises an attempt to articulate and then apply a practicable approach to assessing corporate social responsibility within a framework derived from the theory of logiques d'action.
Abstract: This paper provides an early report on an experiment undertaken by a group of managers of ‘social economy’ firms. The experiment comprises an attempt to articulate and then apply a practicable approach to assessing corporate social responsibility within a framework derived from the theory of logiques d'action. The intention of the report is to illustrate a novel approach to the perennial problem of social responsibility in organizations and, thereby, to illustrate very briefly some of the inevitable practical problems that arise in turning theoretical criteria into operational processes. The experiment referred to here is continuing.
TL;DR: In this article, the authors examined auditor liability rules under imperfect information, costly litigation and risk-averse auditors, and showed that strict liability outperforms negligence with respect to risk allocation and the probability that a desired level of care is met by the auditor if competitive liability insurance markets exist.
Abstract: This paper examines auditor liability rules under imperfect information, costly litigation and risk-averse auditors. A negligence rule fails in such a setting, because in equilibrium auditors will deviate with positive probability from any given standard. It is shown that strict liability outperforms negligence with respect to risk allocation and the probability that a desired level of care is met by the auditor if competitive liability insurance markets exist. Furthermore, our model explains the existence of insurance contracts containing obligations a type of contract often observed in liability insurance markets.
TL;DR: In this paper, the authors consider that the two most important current influences on the accounting profession are the development of new information technology and the elaboration of an ever more complex regulatory framework.
Abstract: This article considers that the two most important current influences on the accounting profession are the development of new information technology and the elaboration of an ever more complex regulatory framework. The article examines the evolution of business reporting on the Internet and its likely consequences for accounting, accountants and assurance services provided by auditors. It then reviews the evolving regulatory framework, noting that this is reaching into new areas, including environmental reporting, social reporting and corporate governance. It concludes with an examination of the paradoxes of globalization in the context of accounting regulation.
TL;DR: In this article, the authors review the evolution of financial reporting in the EU and consider how this is likely to affect auditing in the future, showing how the European Commission has recently concentrated its harmonization focus on the consolidated accounts of listed companies and the use of International Accounting Standards.
Abstract: The article reviews the evolution of financial reporting in the EU and considers how this is likely to affect auditing in the future. The analysis shows how the European Commission has recently concentrated its harmonization focus on the consolidated accounts of listed companies and the use of International Accounting Standards. The move towards internationally harmonized reporting seems likely to require auditing to be harmonized throughout Europe, which seems to impact recent national auditing standards. It is probable that this trend will continue and in the short term will cause changes in the arrangements for external overview of the audit and in national auditor independence rules.
TL;DR: The role of the auditor is considered both from the perspective of the capital market and in an agency context, and the article assesses how this interacts with the regulator as mentioned in this paper, and examines a number of theoretically possible options for regulating audit independence and audit quality.
Abstract: The article considers, from the perspective of the European Commission, what is the role of the regulator in seeking to intervene in the provision of statutory audit services. The role of the auditor is considered both from the perspective of the capital market and in an agency context, and the article assesses how this interacts with the regulator. It then goes on to examine a number of theoretically possible options for regulating audit independence and audit quality. It ends by presenting current Commission activity in this area.
TL;DR: In this article, the authors report results of a survey conducted in 86 undergraduate education institutions in 16 countries in Europe and investigate whether the most innovative topics in management accounting are taught in these institutions.
Abstract: The article reports the results of a survey conducted in 86 undergraduate education institutions in 16 countries in Europe. The primary goals of the analysis are to provide information on management accounting courses in Europe and to investigate whether the most innovative topics in management accounting are taught. The survey targeted accounting professors across Europe, mainly members of the European Accounting Association. Data evidence similarities across countries inasmuch a very similar pool of topics is taught in different institutions in different countries. However, differences outweigh similarities when comparing the relative importance attributed to various topics within a course.
TL;DR: In this paper, the authors present a view of the drivers of quality in auditing and assesses how these may be impacted by changes in the rules on the independence of auditors.
Abstract: This article reviews recent changes in the business environment and considers how these impact upon auditing. It presents a view of the drivers of quality in auditing and assesses how these may be impacted by changes in the rules on the independence of auditors.
TL;DR: The activities of FEE (Federation des Experts Comptables Europeens) in the context of the developing environmental agenda is reviewed in this paper, with an overview of past and current work.
Abstract: This paper reviews1 the activities of FEE (Federation des Experts Comptables Europeens) in the context of the developing environmental agenda. After a brief consideration of the constitution of FEE and of FEE's objectives as a whole, FEE's work in the area of environmental issues is discussed. This discussion covers the setting up and the operation of its Environmental Working Party (EWP), and a review of FEE's environmental work to date. While an overview of past and current work is given, some key areas of topical concern and activity are examined in more detail: in particular the scope for FEE to influence agendas at the European and wider international levels is considered.
TL;DR: In this article, the authors examined the association between average stock returns and average book returns and addressed the question as to whether there are common size and book-to-market factors in earnings and returns.
Abstract: The present paper examines the association between average stock returns and average book returns and addresses the question as to whether there are common size and book-to-market factors in earnings and returns. The results of the empirical research, conducted in the Athens Stock Exchange, suggest that when the sample firms are grouped into size, book-to-market portfolios stock returns properly reflect differences in the evolution of accounting profitability. Moreover, it is found that the return on investment (ROI) measure contains size and book-to-market factors analogous to the mimic risk factors inherent in stock returns, in the sense that they capture information missed by ROI.
TL;DR: In this paper, the authors discuss the different elements involved in the corporate governance and enforcement process in Germany, including the two-tier board, the executive board's responsibility for preparing financial statements, the statutory audit, the approval of the financial statements by the supervisory board, and the arrangements for addressing unsuitable accounting.
Abstract: The article sets out the different elements involved in the corporate governance and enforcement process in Germany, including the two-tier board, the executive board's responsibility for preparing financial statements, the statutory audit, the approval of the financial statements by the supervisory board, and the arrangements for addressing unsuitable accounting. After having described the current framework, it then goes on to review how corporate governance and enforcement is likely to evolve, including improved accounting, improved audit and changes in the role of the supervisory board. It also examines the case for a compliance review mechanism.
TL;DR: In this article, a discussion of the influences shaping the future of the accounting and auditing profession in Europe and the profession's response to the new demands is presented, including the development of worldwide rules for the profession but not precluded action at regional level through the Federation des Experts Comptables Europeens.
Abstract: This article is a discussion of the influences shaping the future of the accounting and auditing profession in Europe and the profession's response to the new demands. It reviews influences on accounting, emanating from worldwide movements and also from particularly European sources, and then examines the reactions of the European profession. This has included development of worldwide rules for the profession, but not precluded action at regional level through the Federation des Experts Comptables Europeens.
TL;DR: In this paper, a content analysis is presented of the European and North American auditing papers published in accounting and auditing research journals in the period 1990-7, and the authors assess the effects of local institutions on audit research.
Abstract: Auditing is claimed to have become more and more a global discipline. As a result of the expansion of the international audit firm networks, and the proliferation of International Standards on Auditing, differences between national auditing practices seem to have diminished. Surprisingly, national audit research communities seem to develop rather independently, suggesting that national institutions still play an important role in the production of audit research. Therefore, the objective of this paper is to assess the effects of local institutions on audit research. To that end, evidence is provided on the production of audit research in two areas: Europe and North America. Europe is an area with high variation in auditing institutions, while North America is an area with low variation in auditing institutions. A content analysis is presented of the European and North American auditing papers published in accounting and auditing research journals in the period 1990–7. The findings of the output assessment show that, compared to North American audit research, descriptions of national auditing institutions and environments are a dominant topic of European auditing papers, and that the output in terms of journal articles is lower. Subsequently, the paper attempts to explain why the assessed European and North American auditing research differs. The paper argues that the substantial differences in national institutional environments within Europe have two effects on European auditing research. On the one hand, national differences in auditing institutions and environments are an important subject of study. On the other hand, these differences result in a segmentation of the European audit research market, which is lacking in the North American market. The existence of a large number of smaller national auditing research markets results in different incentives, output and performance measures of auditing researchers. The paper concludes with an assessment of the future of audit research as a global discipline.
Journal Article•