Informal communications, nonformal communications and mentoring in public accounting firms

Control is important within public accounting firms for a variety of reasons. Yet professional pronouncements are limited in providing guidance to auditors in the form of formally stated rules and requirements. The purpose of this article is to examine the non-formalized, non-rule oriented approaches employed in large public accounting firms to effect control. More specifically, it is directed towards understanding the possible roles of informal and nonformal communications and mentoring in managing public accounting firms.Based upon evidence gathered using a naturalistic, qualitative research methodology, it is concluded that: (1) informal communications exist in public accounting firms, play a limited role in informing organizational members of the politics and power within the organization, and are of some benefit to lower level individuals; and (2) nonformal communications and mentoring are involved with the performance of audit tasks, socialization of the individual firm, and instruction as to politics and power within the organization, and benefit the protege, mentor and firm, though at some cost. Implications of the study are also explored.     

The job satisfaction of higher level employees in large certified public accounting firms

This research study is divided into two parts. In the first part differences between audit, tax and management services (MS) specialists holding positions of Senior or higher and employed by large CPA firms are examined on three dimensions: (1) job satisfaction, (2) personal characteristics and (3) job features. Using multivariate analysis several differences between MS specialists and audit tax specialists as a combined group are detected. However, no statistically significant differences were found on the three dimensions between audit and tax specialists. The second part of the study concerned predicting the job satisfaction of audit, tax and MS specialists using personal characteristics and job features as independent variables in multiple regression. Moderate success was achieved in predicting the job satisfaction of audit and tax specialists, but predicting the level of job satisfaction of MS specialists was unsuccessful. The results of this study have policy implications for large CPA firms as well as research implications for job satisfaction researchers.     

Corporatisation and accounting change: The role of accounting and accountants in a Malaysian public utility

Using an explanatory case study, this paper presents an in-depth analysis of a Malaysian public utility which was required to transform itself into a self-financing, efficient and profitable organisation through a process of corporatisation. Despite attempts to enhance profitability by imposing new rules of budgeting, and by recruiting new accounting graduates, the case reveals that although accounting changes were enacted, over time they became separated from, and only loosely coupled to, other organisational activities. Concepts from institutional theory were used as sensitising devices to inform the research, but alone they were unable to fully explain the case. Consequently, an extended framework, which treats loose coupling as both a process and an outcome, and which recognises the intertwining of trust, resistance and power was developed. This theoretical framework provides a possible explanation for the mixed findings about the effectiveness of public sector financial reform which have been revealed in a wide array of research studies.     

An empirical examination of stress in public accounting

This paper presents the results of an investigation of stress in public accounting, using a national sample of certified public accountants. The relationship between a set of predictor variables (organizational stressors and work/home conflict) and a set of criterion variables (job-related tension, job dissatisfaction, and propensity to leave public accounting) was analyzed using canonical correlation analysis. Job-related tension was associated with heavy work demands; job dissatisfaction and intension to leave were associated with slow career progress, unfulfilling jobs, and unclear job objectives.     

Perceptions of master of accountancy graduates concerning their job search and employment experiences with public accounting firms

The public accounting profession has been calling for a 150-hour education requirement for new entrants to the profession for over two decades. The rationale for increasing the entry-level education requirement is that since the business world is more dynamic and complex than ever before, new professionals need broader knowledge and skills to be able to cope. Graduates of master of accountancy (MSA) programs would appear to be the type of students that public accounting firms are seeking since they often have intellectual breadth gained through undergraduate degrees in areas other than accountancy, current technical competence in accountancy, and frequently have work experience. This paper reports the results of a study undertaken to determine the perceptions of MSA graduates concerning: (1) how recruiters from public accounting firms viewed their non-accounting academic backgrounds and work experience; (2) how well prepared they were for their first jobs in public accounting as compared to traditional undergraduate accounting majors; and (3) any bias they experienced during the hiring process. The results of this study indicate that although a majority of the respondents who desired careers in public accounting were able to secure jobs in the field, they believed it was harder for them to get jobs in public accounting than their peers with just undergraduate degrees. The majority did not feel that public accounting firms viewed their non-accounting academic backgrounds and work experience favorably. Although more than half believed that they were paid more than their peers who held only undergraduate degrees, less than half felt that they were given more responsibility. The results also indicate that older MSA graduates believed that they were subject to age bias during the interview process.     

New development: The protective role of conservatism in public sector accounting

This article picks up a discussion in international business accounting about the appropriate definition and use of conservatism (or prudence) and calls for a similar discussion in public sector accounting. If financial reports present an overly optimistic situation, politicians might use them to justify spending public money that is not there, risking the sustainability of services and ‘borrowing’ from future generations.     

Desired attributes of public accounting firms in the job selection process: an empirical examination of accounting graduates' perceptions

The purpose of this study is to identify attributes of public accounting firms that accounting graduates find most desirable in their job selection decisions, and the impacts of individual differences on these perceptions. Factor analysis performed on the responses of 167 final-year accounting students in Hong Kong to a 30-item questionnaire identified seven factors. The results indicate that accounting graduates considered help in finishing their professional accounting examinations and good staff relationships as the most important criteria in their choice of employers. In addition, female accounting graduates were more concerned about the possibility of being required to travel or be transferred, but were less concerned about the reputation and profile (such as the client base and the size) of the firms than their male counterparts. Accounting graduates with a higher grade point average (GPA) were less concerned about the working environment, but more concerned about a firms' reputation and profile than those with a lower GPA. The implications of these results are discussed.     

An examination of gender stereotyping as an explanation for vertical job segregation in public accounting

Theorizing that sex-related stereotypes impede women's progression to leadership positions, this study tests the hypothesis that sex-role stereotypes negatively influence the evaluation of female accountants, thus reducing the upward mobility of women to partnerships in public accounting. Although the pro-male bias in our findings was less than robust, the study revealed instances where male managers devalued female managers who exhibited certain “masculine” leadership styles.     

Going public: The role of accounting and shareholder value in making sense of an IPO

This study draws on interviews with corporate executives from four companies that went public and financial analysts involved in evaluating these firms. Top managers in all companies became more focused on short-term financial results than they had been when the companies were private. We contribute to existing research by analyzing, empirically and theoretically, the processes producing this focus. Following an IPO process offered a unique insight into a gradual increase in emphasis on accounting metrics through the outcomes of guided and restricted sensemaking. When preparing for the IPO, guided sensemaking produced an IPO prospectus incorporating quantitative and qualitative commitments. Quantitative commitments were based on accounting metrics, such as earnings per share and profit margin, which provided an important foundation for the financial focus. These commitments became the anchor for subsequent sensegiving and restricted sensemaking when the companies were listed. With the financial analysts as the social anchors, the richer communication in the prospectus was narrowed down to comprise an exclusive focus on the quantitative accounting commitments. The long-term accounting commitments in the prospectus were transformed into short-term targets that must be met when the financial measures served as specific and concrete extracted cues to quickly provide structure to the uncertain situation, gain the financial analysts’ confidence and sustain action. One year after the IPO, the financial focus was taken for granted and managers had accepted the rules of the game.     

The choice between informal and formal restructuring: The case of French banks facing distressed SMEs

This empirical paper investigates the paths leading to the resolution of financial distress for a sample of small and medium-sized French firms in default, focusing in particular on their decisions between bankruptcy and informal (out-of-court) renegotiations. The procedure is depicted as a sequential game in which stakeholders first decide whether to engage in an informal renegotiation. Second, conditional on opting for renegotiation, the debtor and its creditors may succeed or fail in reaching an agreement to restructure the firm’s capital structure. We test different hypotheses that capture (i) coordination and bargaining power issues, (ii) informational problems, (iii) firm characteristics, and (iv) loan characteristics. The empirical implementation is based on sequential LOGIT regressions. First, we find that the likelihood of informal renegotiations increases with loan size and the proportion of long-term debt. These two results support the argument that size matters when deciding whether to opt for informal renegotiation. Second, the probability of a successful renegotiation decreases when (i) the bank in charge of handling the process is the debtor’s “main” creditor and when (ii) the firm is badly rated and its management is considered faulty. Third, the estimations show that collateral plays a significant role in the first stage of the renegotiation process. However, it does not impact the likelihood of success in reaching a renegotiated agreement. Finally, some banks are clearly better than others at leading successful renegotiation processes.     

Informal mentoring relationships and the career processes of public accountants

Research has shown that informal mentoring relationships benefit the protégé, mentor and employing organisation. As such they have been of interest to public accounting firms. The functioning of these relationships in Big Eight/Big Five accounting firms has been investigated in the USA and more recently in Ireland. The career outcome of most interest has been turnover intentions. This paper reports the results of a questionnaire study of mentoring relationships in the Australian state of Queensland. The receipt of mentoring support by accountants is found to be associated with not only lower turnover intentions, but also higher job satisfaction, and lower intentions of female accountants to seek part-time employment. The impact of the organisational context in which these relationships are initiated and cultivated is also investigated. The size of the accounting firm and the national culture of the country in which the firm operates, appear to have some bearing on mentoring experiences.     

The association between accounting students’ lone wolf tendencies and their perceptions, preferences and performance outcomes in team projects

In this study we examine the association between accounting students’ lone wolf tendencies and their perceptions of the usefulness of team work, team interaction behaviors, and team performance. While prior studies find that students generally perceive positive benefits from engaging in team work, our study finds that students with greater lone wolf tendencies perceive fewer benefits from engaging in team work. We also find that during team interactions, teams with a greater proportion of students with higher lone wolf tendencies experience less team commitment and team leadership. Further, such teams rate the outcome of their project negatively, although, there is no significant association with the project marks earned by these teams. We discuss the implications of our findings and suggest directions for future research.     

The role of accounting in high-technology investments

We present new qualitative empirical evidence from a series of interviews with representatives of venture capital support organisations, which discusses the role of accounting in high-technology investments. Our discussion is framed around three propositions on: whether or not the stewardship role of accounting still holds; the usefulness, or otherwise, of accounting information in the valuation of high-technology investments; and assessing the value of intangible assets in the investment decision. We find that accounting no longer plays such a strong stewardship role, certainly for the venture capital investor. Further, its role in enabling investors to make decisions on how, when and how much to invest is limited. We propose that standard setters take this on board in revising reporting requirements.     

The role of accounting in financial disclosure

This paper examines the various demands facing accounting in attempting to supply diverse groups with differing needs the data they desire. Beginning with the notions that, first, accounting is trying to describe a complex stewardship relation and, second, that what we call accounting is in reality many accountings, it examines several current issues in financial disclosure. Essentially, it concludes that a complex set of economic relations must simultaneously rely on several distinct accountings to properly perform the task of disclosure. In general, this conclusion is viewed as desirable.     

The role of attention and memory in accounting decisions

Behavioral research in accounting has ignored the concepts of attention and memory which are crucial both to the development of a complete understanding of how accounting information is processed by humans and to the interpretation of existing research. In this paper, a review of literature from psychology, marketing and artificial intelligence is used to develop a series of significant research areas to increase accountants' understanding of the roles that attention and memory have in the human processing of accounting information.     

Exploring the effectiveness of peer mentoring of accounting and finance students in higher education

This article explores the effectiveness of peer mentoring with accounting and finance students at the University of Dundee. The motives of such a mentoring scheme are to improve the participants' academic performance and to develop their transferable skills. In the context of this study, peer mentoring comprises third year students (mentors) mentoring first year students (mentees). Using a semi-formal tutorial setting and meetings during the latter part of the academic year, mentoring groups address issues such as academic writing skills, study techniques and examination preparation. The effects of mentoring are measured by a comparison of the pre- and post-mentoring examination performance of the mentees. In addition, focus group interviews are used to gather the opinions of the mentees and the mentors as to their impressions about the success of the project. The empirical results suggest that mentoring has had a positive effect on the academic performance of the mentees. The focus group interviews found that both the mentors and the mentees claimed to benefit significantly from their involvement in the project.     

The role of a crisis in reshaping the role of accounting

Prior to 2001, international accounting standards (IAS) were insufficiently attractive to gain the support of US regulators. The potential role of IAS in the US gained prominence during a period of extreme financial reporting instability in 2001–2002. Emerging opinion increasingly upheld principles-based rather than rules-based accounting standards in the face of the financial reporting crisis. But to promote any active shift in the US position, an institutionally legitimate infrastructure for the international accounting standards setter had to be created. As this was taking shape, the globalisation of business activities grew with inter-organizational linkages and cross-national financial inter-dependencies and flows becoming increasingly complex. Given the extensively uncertain, uneven and constantly evolving nature of global business changes, the aptness of applying judgment in assessing financial performance and position rather than relying on the application of pre-defined rules continued to achieve wider acceptance. The argument is made in the paper that international financial reporting standards are today seen to fulfil a global risk mitigating role founded on a logic that had to first gain political and institutional legitimacy and that also had to be viewed as being responsive to perceived market imperatives.     

The association between fair value measurements and banks' discretionary accounting choices

This study examines the association between fair value measurements and banks' discretionary loan loss provisions using regulatory financial data from 2009 to 2016 for a sample of U.S. public bank holding companies. I find that banks recognizing larger proportions of fair value assets and liabilities based on level 2 and level 3 inputs are associated with lower discretionary loan loss provisions. However, there is no significant association between level 1 fair value assets and liabilities and discretionary loan loss provisions. When pre-managed earnings are lower, banks with larger proportions of level 2 and level 3 fair value assets and liabilities report smaller discretionary loan loss provisions to inflate earnings. Banks reporting larger proportions of level 2 and level 3 fair value assets and liabilities are more likely to use discretionary loan loss provisions to beat earnings benchmarks and manage tier one capital ratios. Overall, the results support the proposition that fair value assets and liabilities based on level 2 and level 3 inputs are less transparent and are subject to more discretion regarding loan loss provisions.     

The role of accounting in money laundering and money dirtying

This paper examines the processes involved in the misapplication of accounting knowledge from the angle of financial crime. It analyses the importance of accounting knowledge in the construction of money laundering operations and the development of money dirtying. It shows that contrary to a widely held idea, money laundering and money dirtying techniques are not based on the same accounting practices and deviant mechanisms. This paper explores three degrees of integrating accounting knowledge in the organization of financial crime procedures. It sums up the motivations of white-collar criminals and demonstrates that the preparation of a money laundering operation differs from the financing of terrorist activities.