The necessary characteristics of environmental auditors: a review of the contribution of the financial auditing profession

The business community faces many pressures from the green consumer, environmental groups, employees and investors to accept its environmental accountabilities and to provide information about its environmental performance. This information is becoming increasingly important to a broad range of corporate stakeholders because it is a key resource in managing a business’s response to the issue of environmental accountability. Businesses need to ascertain whether potential responsibilities for environmental implications on business are considered within their companies. A number of arguments have emerged concerning the relevance of the financial auditing profession in contributing to this area of environmental concerns. The paper is principally concerned with (1) reviewing the literature in an attempt to answer the questions: (i) can the financial audit profession make a contribution in the area of environmental audits? (ii) are financial auditors in a position to assess environmental implications for business and take part in environmental auditing? (2) The paper goes on to suggest a general framework of the necessary characteristics of environmental auditors.     

基于资本成本的股利决策分析

在委托代理关系和信息不对称条件下,公司经理应以资本成本决策股利支付,贯彻资本成本观念。公司经理资本成本观念是在资本成本作用机制下形成的,需要具备一定的条件。我国上市公司股利支付的随意性表明,公司经理缺乏资本成本观念,其原因在于资本成本作用机制所要求的条件不具备,因此,规范上市公司股利支付行为应从健全资本成本作用机制所要求的条件入手。     

The business case for regulation of corporate social responsibility and accountability

This paper develops an alternative (or supplementary) theoretical justification for the regulation of corporate social responsibility (CSR) and social and environmental accounting and reporting (SEAR) to the justification contained in the extant academic literature. It does this by demonstrating how, contrary to the dominant business discourse, increased regulation designed to protect the social and environmental interests of a range of stakeholders can also serve to enhance corporate economic performance and shareholder value.

The theoretical perspectives developed in this paper are drawn from Beck's and Giddens’ theories on reflexive modernity, and indicate that reflexively appropriated knowledge can be a key factor in developing socially constructed understandings of the social and environmental risks to a range of stakeholders inherent in business operations.

In situations where voluntary self-regulation of CSR and SEAR has been ineffective in preventing corporate actions and decisions that have resulted in damaging social and environmental consequences, processes of reflexivity can substantially increase public awareness of the level of risk they face from corporate operations. Such increased perceptions of risk can lead to a loss of trust in an individual corporation or a whole industrial sector, and this can be exacerbated where stakeholders begin to actively seek out alternative risk discourses to inform themselves about possible risks of which they were previously unaware. We argue that effective statutory regulation could avoid these outcomes, and the loss of shareholder economic value that can flow from these outcomes.     

Judgment and Decision‐Making Research in Auditing and Accounting: Future Research Implications of Person,Task, and Environment Perspective

The discipline of accounting and auditing has increasingly recognized judgment and decision making (JDM) as highly important attributes in the profession because individuals such as managers, auditors, financial analysts, accountants, and standard setters make pivotal judgments and decisions. Many studies undertaken in this domain of research also substantiate the significance of JDM in accounting and auditing. This study evaluates all the papers published in 10 accounting journals among the leading ones from 1980 to 2010 that fall within the domain of JDM research. The categorization of the studies reviewed in this paper is based on Bonner's ( 1999 ) three major determinants of JDM: Person, Task, and Environment variables. The review highlights the progress in the literature over the past three decades and also identifies the methodological limitations of previous research. The identified limitations will be useful for improving the research method of future JDM studies in accounting and auditing. The review also draws inferences on how JDM research in auditing, which is well established, could usefully guide future JDM research in financial accounting.     

Performance choice,executive bonuses and corporate leverage

This study examines the causal link between a firm's leverage decisions and the characteristics of its CEO bonus plans. Results from a simultaneous equations model strongly suggest that highly levered firms are less likely to use return on equity (ROE) or ROE-based accounting performance measures to determine executive bonuses. Estimates also indicate that firms with fewer debt covenants, higher interest rates on debt, and a greater proportion of executive pay in the form of stock options are less likely to adopt ROE-based measures for use in CEO bonus plans. These findings lend strong support to the efficient contracting hypothesis. The conflicting interests of corporate stakeholders, especially between stockholders and creditors, encourage firms to tie executive pay to performance metrics like return on assets (ROA) that will strike the optimal balance between the agency costs of debt and the agency costs of equity.Data availability: all data are available from public sources.     

Bringing the environment into bank lending: implications for environmental reporting

In recent years, it has come to be recognised that banks' lending operations affect, and are affected by, the state of the natural environment. In particular, rising public concern about the state of the natural environment, as reflected in legislation and consumer attitudes, poses risks for the state of a bank's lending portfolio. Even if they are not directly concerned about the environment, banks therefore have an incentive to understand the environmental implications of their lending decisions. This generates a potential demand for environmental information on companies.This paper reports on empirical research conducted to explore the interface between bank lending and the demand for environmental information. Based on a postal questionnaire survey of banks engaged in corporate lending in the UK, supplemented by a programme of semi-structured interviews, it reports on: the extent to which UK banks incorporate environmental considerations into their corporate lending decisions; the sources of information used by banks when making corporate lending decisions which involve environmental considerations; and lending bankers' views on developments in environmental reporting.The results indicate, inter alia, the importance that bankers attach to the annual report, notwithstanding its traditional limitations as a source of information on corporate environmental impact, and some desire for extensions to environmental disclosure. However, those desired developments are relatively narrow in scope, mirroring banks' principal interest in protecting their loans, and tend not to extend to more comprehensive forms of environmental disclosure such as might be expected to be found in a separate corporate environmental report.     

The Roles of Performance Measures and Monitoring in Annual Governance Decisions in Entrepreneurial Firms

This paper analyzes annual corporate governance decisions at firms making initial public offerings (IPOs) of common stock between 1996 and 1999. Our objective is to examine relations between firms' corporate governance decisions and the informativeness of available measures of managerial performance. We consider financial measures such as earnings and stock return, as well as direct monitoring. We collect a sample of IPO firms from the manufacturing, Internet, and technology (non-Internet) industries, and examine how the use of various performance measures in annual compensation grants and turnover decisions varies with the information environment of the firm and with the extent of venture capital influence. Consistent with prior research that finds earnings are of limited usefulness in firm valuation for Internet firms, we find Internet firms place less importance on earnings and greater importance on stock returns in determining compensation grants than do non-Internet firms. We also find that compensation grants of firms with little or no venture capital influence display significantly stronger association with accounting and stock performance measures than those of firms with more intense monitoring by venture capitalists. This result is consistent with direct monitoring and the use of explicit performance measures acting as substitute governance mechanisms.     

Does voluntary carbon disclosure reflect underlying carbon performance?

Carbon information is becoming more and more important in the decision making of stakeholders, but there is growing concern regarding the reliability of corporate carbon disclosure and a lack of empirical studies addressing this issue. The purpose of this paper is to examine whether voluntary carbon disclosure reflects firms’ true carbon performance. Level of carbon disclosure was measured based on content analysis of Carbon Disclosure Project (CDP) reports, and our carbon performance index focused on both carbon intensity of emissions and carbon mitigation. Based on a sample of 474 U.S., U.K., and Australian firms, our findings show a significant positive association between carbon disclosure and performance, suggesting that firms’ voluntary carbon disclosure in the CDP is indicative of their underlying actual carbon performance. This result is consistent with signalling theory. Our findings are useful for corporate stakeholders and governmental policymakers who are concerned about the quality of voluntary greenhouse gas disclosure.     

Market Interest in Nonfinancial Information

During the past two decades, more and more companies have volunteered to provide “corporate social responsibility” or “sustainability” reports that include information about their environmental, social, and governance (ESG) policies and performance. Such reporting has come about largely in response to demands by a wide range of stakeholders for information about how the company's operations are affecting society in a number of different ways. But do investors really care about companies' ESG performance and policies? Using data from Bloomberg, the authors provide the first broadly based empirical evidence of investors' interest in ESG data. More specifically, the authors show how interest in the top 20 ESG metrics varies with geographical location (European vs. American), asset class (fixed income vs. equity), and firm type. At the aggregate market level, there is greater interest in environmental and governance information than in “social” information. U.S. investors are more interested than their European counterparts in governance and less interested in environmental information. Equity investors are interested in a wider range of nonfinancial information than are fixed income investors. And whereas sell‐side analysts are primarily interested in greenhouse gas emissions, money managers tend to focus on a broader set of metrics. Similarly, pension funds and hedge funds have shown interest in more nonfinancial metrics than insurance companies. The authors' bottom line: Companies need to recognize the growing market interest in nonfinancial information and ensure that they are providing it according to the specific information needs of market users.     

Session III: Securities Law in Twenty‐First Century America: A Conversation with SEC Commissioner Robert Jackson

SEC Commissioner Robert Jackson comments on three major issues the Commission has been investigating: (1) the concentration of ownership among American stock exchanges; (2) the extent of common ownership of, and potential for undue influence over, U.S. corporations by large institutional shareholders; and (3) the role of corporate boards in promoting and protecting stakeholder interests as well as shareholder interests. In the first of the three areas, Jackson argues that the ownership of 12 of the 13 U.S. stock exchanges by just three financial conglomerates suggests a competitiveness problem— one that, despite the significant reductions in trading costs during the last 15 years, should receive further investigation. To the concerns raised by the common and increasingly concentrated ownership of U.S. public companies by institutional shareholders, the Commissioner's main response is to note that whatever culpability corporate America is forced to assume for our large and growing environmental and social problems must be shared with the largest U.S. institutional shareholders, whose collective resources and influence confer a responsibility to help guide companies when responding to such problems. Finally, on the issue of stakeholder theory and ESG, Jackson insists that asking corporate boards to put the interests of all stakeholders on a par with their shareholders’ when making strategic business decisions would be a mistake. Besides creating a major accountability problem, the adoption of stakeholder theory in place of “the clear, single‐minded objective function of increasing long‐run shareholder value” would deprive boards of their principal guide “when making the difficult tradeoffs among stakeholders that effective oversight and management of public companies require.”     

Sarbanes-Oxley and the Future of Accounting

Following the Enron debacle, massive public pressure led the United States government to enact the Sarbanes-Oxley Act of 2002. While this act was intended to protect investors and improve the accuracy and reliability of corporate disclosures, it also contained provisions which could have a major impact on the public accounting profession in the United States. It is possible that these effects could extend to Australia, where the public accounting profession is also subject to scrutiny following revelations of corporate misconduct. This paper explores the provisions of the Sarbanes-Oxley Act relating to the accounting profession, the reaction of the profession and possible ramifications for public accounting in Australia.     

Judges' attitudes toward the public accounting profession: An update

This study examines U.S. judges' attitudes toward the public accounting profession and the extent to which they have changed over the last 16 years: (a) early in the decade of the 1990's (1993), (b) late in the decade of the 1990's, but before the Enron and subsequent corporate accounting debacles (1997), (c) three years after the Enron debacle (2003), and (d) following the recent market collapse related to the failures of our financial institutions (2009). As previously reported (Reckers et al., 2004) attitudes of judges toward the public accounting profession are known to be representative of the views of other stakeholders (lawyers, jurors and MBAs) and would be expected, and have been found, to be relatively stable over time. Nonetheless attitudes are subject to change if given a substantial stimulus and the corporate debacles at the beginning of this decade, the corresponding CPA firm litigation and the demise of Arthur Andersen arguably constituted such a stimulus. It was reported that a significant erosion of judges' attitudes toward the public accounting profession could be measured in 2003 (Reckers et al, 2004). Given that judicial attitudes have been found to be significantly correlated with judgments rendered in a laboratory experiments, sharp erosion of attitudes is a concern. Judges were re-examined in 2009 to determine if attitudes had potentially rebounded. Reasons to expect attitudes may have rebounded include (a) expectations related to federal reforms of the auditing profession (e.g., SOX, PCAOB), (b) lack of recent accounting scandals, and (c) the financial institutions debacles of 2008. In comparison to the perceived abuses of the financial industry revealed in 2008, the earlier accounting abuses may have faded away.     

Integrated Reporting: A Review of Developments and their Implications for the Accounting Curriculum

Integrated reporting (IR) is a major development in a number of sustainability-related accounting initiatives and, if widely adopted, will require significant developments in professional and university accounting curricula. These will include: a strategic rather than operational or transactional focus; longer- rather than short-term outlook; prospective rather than retrospective analysis; qualitative commentary as well as quantitative information; and reports on wider business performance metrics rather than on narrower external financial reporting data or audit compliance. This paper reports on ACCA's support of and response to the latest initiatives in IR, in particular the impact this will have on the education and training of accountants in order to reflect these new principles to prepare the twenty-first-century accountant for a much more challenging role in the near future. These developments can only be in the wider public interest of improving the relevance of information for decision-making, for all stakeholders, and allow greater efficiency in the allocation of financial and other resources and in adding public value.     

Deconstruyendo el resultado contable convencional para diseñar un resultado contable ambiental

In this paper, the difficulty of accurately defining the flows of expenses and income related to corporate environmental management, using as storyline the design of an algebraic model of accounting result to make visible the most significant items in this area, is discussed. The main conclusions are centred in the need to link environmental protection expenditures and environmental revenues to specific goals in order to assess the company environmental performance and the risk of taking environmentally inefficient decisions to improve the public image thanks to this statement. The main limitations of the proposed model are the problem of linking accounting homogenized variables to environmental protection goals and the exclusion of environmental externalities.     

注册会计师在环境审计中所占地位初探

随着国际地位的日益提高以及经济的快速发展,我国的环境保护压力日益加剧,环境审计势必将发挥越来越重要的作用。但现阶段我国环境审计的主体是政府主导的相关部门,审计效果并不理想。为了避免在公有制经济中政府干预进入市场导致低效率,根据委托-代理理论的相关内容,可以确立注册会计师在环境审计中的主体地位。在此基础上,进行以财务为导向的审计活动,从而增强所披露信息的准确性及时效性,以促进企业利益相关者做出正确的决策。     

Green Strategy Costing: Early Days

Environmental impact and management is becoming a major priority for corporate strategists. while considerable information on corporate environmental disclosure practices in annual reports is now available, little is known about the internal environmental decision and control information systems in use, and corporate attitudes particularly to environmental costing. This paper reviews international green strategy developments and their implications for management accounting practice and examines environmental information and costing approaches and attitudes in a small number of Australian companies.     

公司治理结构中会计目标的法律经济学解释——兼论我国会计法律制度的完善

公司治理涉及各种利益相关者责权利的划分和制衡。会计是连接权利和利益的纽带,会计信息质量在公司治理结构中扮演着重要的角色。公司治理中对各种利益相关者的约束与制衡机制需要以会计信息作保障。会计目标与公司治理目标具有内在的关联性,在我国公司目前所处的经济环境下,公司目标是影响公司治理结构的重要因素.会计法律制度的完善对我国公司治理具有重要的意义。     

The accountant will have a central role in saving the planet … really? A reflection on ‘green accounting and green eyeshades twenty years later’

There is widespread but not universal acceptance that organisations should provide ‘accounts’ of not only their financial performance, but also of their social and environmental performance. There have also been various suggestions across time that traditional financial reporting frameworks, albeit with some modification, have relevance to calls for greater corporate accountability. This paper seeks to dismiss such suggestions. For the accounting profession to be able to meaningfully contribute to extending accountability beyond investors, lenders, and creditors (and it undoubtedly serves these interests well) it will need to abandon many core accounting conventions and principles – something that is deemed unlikely to occur – at least in the readers’ lifetime. This paper also highlights the apparent absurdity of using market-based mechanisms (such as cap-and-trade systems for pollutants) to solve social and environmental problems that were effectively caused by ‘the market’. Having questioned the role of the accounting profession in contributing to broad-based corporate accountability, the paper concludes by questioning the role of accounting and business educators in instilling some form of personal social responsibility in the minds of students.     

论财务会计信息在公司治理中的作用

财务会计信息对于公司治理具有重要意义。高质量的会计信息可以降低管理层与外部人之间的信息不对称,从而有助于解决逆向选择和道德风险问题;信息披露自身可以对管理层形成有效的约束,促使管理层强化受托责任,并可以为相关主体提供治理所需信息,从而加强外部人对管理层的监督和制约;通过降低对其他高成本治理机制的需求,高质量的会计信息还可以有效地降低公司治理的整体成本,提高治理效率。因此,财务会计信息是实现公司治理目标、保护投资者利益的重要工具。我国应当不断地完善会计准则,并加强会计监管,以提高会计信息质量,更好地为公司治理服务。     

Management accounting and corporate governance: An institutional interpretation of the agency problem

Challenging the dominant economic agency theory of corporate governance with a new discourse drawn from institutional theory, the paper analyses how management accounting is implicated in corporate governance. The proposed institutional theory of agency links the micro-institutions of the organization that are informed by the practices of management accounting with external institutional players and stakeholders. The paper identifies emerging narratives in which the management accounting profession has recognised a distinctive, post-Enron set of sensibilities. Although techniques drawn from strategic management accounting can be adapted to embed better corporate governance practices, the institutional theory of agency identifies tensions between the heroic CEO narrative and the routinization of strategy implicit in strategic management accounting.