Ethical impact of artificial intelligence in managerial accounting

Recent advances in technology have accelerated digitalization and intelligence in modern business. Particularly, the increasing use of Artificial Intelligence (AI) in managerial accounting is expected to accurately measure corporate performance, provide intelligent analyses, and predict the future of a company. However, along with the benefits, ethical concerns of using AI also arise, such as deprofessionalization, data breach, and isolation among accountants. This paper explores the ethical impact of AI in managerial accounting at both pre- and post-adoption stages. Based on 47 interviews conducted with companies, an AI system vendor, and regulators, we found that data security, privacy, and misuse; accountability; accessibility; benefits and challenges; and transparency and trust of AI are among the most common ethical risks in the development and use of AI in managerial accounting. Unique ethical impacts on four types of stakeholders: developers, managers in charge of AI adoption, managerial accountants, and regulators, were also discovered.     

Instructional case: Blue Ridge Revisited—Integrating ABC and OROS Quick® software

Blue Ridge Manufacturing Company produces customized towels for the US sports market. Recently, competitive pressures motivated the company to institute an activity-based costing (ABC) system for allocating manufacturing support costs to its major product lines. Management is pleased with the manufacturing cost information that the ABC system is providing and is beginning to use the ABC data to drive process improvements. To secure additional gains, management is now interested in conducting a customer profitability analysis. Currently, the company allocates its Selling, General, and Administrative (SG&A) costs to products and/or customers on the basis of sales volume (units). The question posed to you, in your role as a member of a team of managerial accountants, is whether the SG&A costs can be more accurately assigned to customer groups (“large,” “medium,” and “small,” as determined by sales volume). To this end, you have been asked to build and interpret the results of an ABC model that assigns SG&A costs to each of these three customer groups. Blue Ridge has recently implemented a new software system that includes an ABC module (called OROS Quick®), which you will use to build your cost assignment model and to respond to a number of managerial questions based on the cost analysis you perform.     

International Professional Labour Markets and the Narratives of Accountants

This paper analyses the emergence of an international labour market in accountancy and the role it plays in the careers of Big Six Irish accountants. It suggests that within Irish accountancy an international hierarchy has arisen which places sites such as London above areas like Bermuda. The justifications for this hierarchy are often technical, i.e. one learns new accounting techniques in London but not in Bermuda. However, although technical justifications play a role in this hierarchy, the paper argues that its emergence has more to do with narrative than with technical factors. That is, it is argued that Irish accountants perceive core sites as being more “progressive” than peripheral areas and in order to display their ambition and adherence to “progressive” accounting values they migrate to the core and not the periphery. This narrative coincides with a wider narrative in Ireland, which claims professional migration is a good thing because it means Irish professionals learn new skills in the core and bring these back thus enabling the state, and the firms they work for, become competitive in an increasingly global economy. This narrative rejects the concept that professional migration is a reflection of Ireland's economic dependence in favour of viewing it as a sign of progress.     

Who Influences the Design of Management Accounting Systems? An Exploratory Study

This paper outlines the results of an exploratory, survey‐based study of the relative influence of managers and management accountants on management accounting system (MAS) design. The findings reveal that, on average, corporate management have the stronger influence on MAS design. However, the strength of their influence does vary both across firms and the sub‐areas of management accounting and, in a significant number of cases, the management accountants’ influence is the greater. The results, therefore, suggest that the processes by which MASs evolve differ across firms due to the variation that exists in the influence exerted by these two parties in MAS design. This finding is significant for researchers studying change and difference in management accounting practice.     

Changes in the value relevance of research and development expenses after IFRS adoption

We investigate whether the nature of differences between national GAAP and IFRS is associated with differential changes in the value relevance of R&D expenses after the adoption of IFRS across countries. Using a difference-in-differences study on a sample of public companies in nine countries that covers pre-IFRS and post-IFRS periods during 1997–2012, we find that the value relevance of R&D expenses declines after IFRS adoption in countries that previously mandated immediate expensing or allowed optional capitalization of R&D costs. On the contrary, there is no change in the value relevance of R&D expenses for countries that switched from the mandatory capitalization rule to IFRS. We also investigate the moderating effects of national institutions on the changes in the value relevance of R&D expenses after IFRS adoption. We find that in countries with stronger investor protection, the changes in the value relevance of R&D expenses are larger. In addition, changes in the value relevance of R&D expenses are smaller for countries whose national culture is characterized by higher uncertainty avoidance. Our findings highlight the importance of both accounting standards and national institutions in explaining the changes in the value relevance of accounting information after IFRS adoption.     

Management accounting: Are new techniques making in-roads with practitioners?

Despite numerous criticisms and the examples of specific companies changing to a particular technique, there are few empirical studies providing evidence of the status of management accounting practice. The primary purpose of this study was to examine trends in the adoption of the new managerial accounting techniques by manufacturing firms. Evidence of changes in the direction of managerial accounting would have significant future implication regarding the direction of management accounting education and of accounting theory. The results of this study indicate that new techniques are being adopted while traditional systems are being maintained, suggesting that a broadening of innovations in management accounting may require the development of a new and separate course dealing strictly with these innovative techniques in the transition to world-class manufacturing.     

Brand value accounting: an international comparison of perceived managerial implications

Data concerned with the managerial implications of brand value accounting were collected from accountants and marketing managers working in strongly branded companies in New Zealand (N.Z.), the United Kingdom (U.K.) and the United States (U.S.). Since the external reporting climate in the U.S. prohibits the inclusion of brand value as a separate asset in the published balance sheet, it was anticipated that U.S. managers would be the least positively disposed to the potential of beneficial managerial implications deriving from brand valuation. Contrary to this expectation, managers in the U.K are the least positively disposed to potential managerial implications associated with brand value accounting. This result is particularly interesting as brand value accounting has commanded considerable attention from the U.K. accounting profession since the late 1980s when several large U.K. companies elected to capitalize brand values in their external financial statements. In addition to the international differences noted, the degree of commonality of findings across the three countries is also noteworthy. The data reported provide strong support for the view that there is considerable potential for positive managerial implications from brand value accounting.     

Role conflicts of management accountants and their position within organisation structures

The research examines accountants' and managers' perceptions of management accounting roles under conditions of centralisation and decentralisation of the management accounting function. Decentralization was associated with greater interaction between accountants and other managers and with the provision of accounting information perceived as being more pertinent to managerial needs. However, whatever the structural relationship, there were criticisms of the accountants' passivity in management. Contrary to expectations neither interpersonal relationships nor excessive power of accountants were problematical, nor did many accountants show bureaucratic orientations. Their inability to meet service expectations were perhaps, related to ambiguity and stress emanating from the accounting workflows.     

“Holier-than-thou” perception bias among professional accountants: A cross-cultural study

Theoretical conceptions of culture in accounting research are controversial, ranging from highly deterministic, quantified and componential perspectives (such as Hosfstede's five dimensional model) to those that suggest continual changes in cultural values brought about by forces of acculturation. This paper makes a contribution to cross-cultural accounting research by examining the influence of competing theoretical perspectives of culture and acculturation on “holier-than-thou” perception bias. “Holier-than-thou” perception bias leads to individuals perceiving themselves as acting more ethically than comparable others when confronted with ethically uncertain work-related behaviours. This study contributes to cross-cultural accounting research by surveying Australian and Indian professional accountants from big four accounting firms. We firstly seek to establish the prevalence of “holier-than-thou” perception bias in both cultural settings. Secondly, we examine the differential and competing influences of culture and acculturation on perceptions of accountants from the two countries on measures of this bias. Data was collected through a survey questionnaire administered to samples of senior accountants from the big accounting firms in Australia and India. The questionnaire comprised an auditor-client conflict and two whistle-blowing scenarios and used two questions to measure the magnitude of the bias. The results show that “holier-than-thou” perception bias exists among accountants within each of the two countries. However, the magnitude of the bias was not significant between the countries. The results support the theory of acculturation in big accounting firms. Our findings have implications for accounting research where the presence of “holier-than-thou” perception bias needs to be considered in cases where respondents are questioned on socially sensitive issues. The findings may be useful to accounting researchers, managers of multinational enterprises in general, and big-four accounting firms in particular. Our conceptual framework applied in this study is innovative and provides a template for assessing current controversies in cross-cultural accounting research.     

Occupational differentiation and exclusion in early Canadian accountancy

Canada’s 1881 census enumerators posed a range of questions that provide scope for an in–depth investigation of the identity of its accounting functionaries (accountants and bookkeepers) in that year. The significance of our findings is explained by applying the concept of closure through exclusion and occupational differentiation. We discover that Canada’s accounting community, at the dawn of professional organisation, was dominated by people originating from Great Britain & Ireland. The rural/urban divide for Canada’s accountants is the inverse of that for the population as a whole and, as in Britain, congregation occurs around the major commercial ports. Significant differentiation exists between the demographic profile of Canada’s accounting functionaries compared with its entire population and between that of accountants compared with bookkeepers. Strong evidence of exclusionary closure is revealed through an analysis of the demographic characteristics of the initial leaderships of Canada’s early accounting associations. The paper concludes by identifying opportunities for further research.     

Effect of cognitive style and professional development on the initiation of radical and non-radical management accounting innovations

This study examines the effects of adaptive/innovative cognitive style, and professional development on the initiation of radical and non‐radical innovations by individual management accountants. Data are gathered through questionnaire and follow‐up interviews with practising management accountants. The results show that management accountants with a more innovative (adaptive) cognitive style tend to initiate more (fewer) radical relative to non‐radical innovations, and that this effect is amplified by professional development. The study has implications for research in management accounting innovation and for practice, including the importance of maintaining a balance of radical and non‐radical innovations in organizations, and of professional development.     

Succeeding in managerial accounting. Part 2: a structural equations analysis

Does the type of knowledge, and levels of ability and experience needed, depend on rank in managerial accounting? Are the knowledge, ability, and experience needed for managerial accounting success, consistent with the Libby & Luft (L&L) model (1993) of the determinants of judgment performance in accounting? We explore these questions using structural equation models of the performance evaluations of 2941 practicing managerial accountants. Results indicate that technical managerial accounting knowledge, ability, and experience predict job performance success for junior managerial accountants; industry knowledge, tacit managerial knowledge (TMK) and experience predict success for seniors; and, industry and TMK predict success for managers. The results suggest significant (though not identical) commonality in the predictors of success in managerial accounting and the determinants of judgment performance identified in the L& L model.     

A survey of factors influencing the choice of product costing systems in UK organizations

This paper reports on the findings of a postal questionnaire that examines the extent to which potential contextual factors influence the characteristics of product costing systems. Prior research has mostly used the adoption or non-adoption of ABC systems to capture the characteristics of product costing systems. This research has generally been inconclusive and has been unable to establish strong links between ABC adoption and those contextual factors that have been identified in the literature that are conducive to the adoption of ABC systems. Instead of using only the adoption or non-adoption of ABC systems as a measure of product cost system design this research uses four different proxy measures of cost system sophistication to capture the characteristics of the product costing systems. This allows for a more robust test of the relations among the predictor variables and cost system sophistication. Results indicate that higher levels of cost system sophistication are positively associated with the importance of cost information, extent of use of other innovative management accounting techniques, intensity of the competitive environment, size, extent of the use of JIT/lean production techniques and the type of business sector. No association was found between the level of cost system sophistication and cost structure, product diversity and quality of information technology.     

On the emergence of strategic management accounting: An institutional perspective

Strategic management accounting (SMA) has been presented as an efficacious approach to strategy formulation and implementation. It also suggests accountants move away from purely financial concerns to give consideration to wider business issues. Management accounting change has attracted significant research attention in recent years. This case study explores the issues which surround change and which enable the adoption of SMA and the repositioning of management accountants to become more strategic. The empirical enquiry is based in one company through a prolonged series of interviews and meetings which enabled activities over a number of years to be reviewed. This revealed an increasing strategic role for management accountants in informing strategic decision‐making and how this role came into being. The research is informed by institutional theories and neoinstitutionalism in particular, to interpret the external and internal influences on the change in roles of some management accountants and the outputs of their work.     

Organizational culture in public accounting: Size, technology, rank, and functional area

This study examines the nature of organizational culture in public accounting and demonstrates that different aspects of culture exist across and within public accounting firms. Organizational culture is defined in terms of values shared by members of an organization (or organizational sub-unit) that manifest themselves in the practices of that organization. Practices particularly important to the development and maintenance of culture include selection and socialization. The hypotheses state that different aspects of organizational culture vary across public accounting firms of different size and technology, and public accountants of different rank and functional area. These hypotheses are tested and largely supported with responses to a paper and pencil instrument, the Values Survey Module (Hofstede, Institute for Research on Intercultural Cooperation, 1982), which was completed by 338 public accountants across the United States. Implications for accountants and future research are also discussed.     

The implementation of Activity-Based Costing in China: An innovation action research approach

Research on Activity-Based Costing and its applications has mainly been focused on organisations in developed countries. Little has been learnt as to whether ABC techniques can be implemented successfully in organisations in developing countries. With the adoption of an innovation action research approach, we have successfully developed an ABC system jointly with a large Chinese manufacturing company, Xu Ji Electric Co. Ltd. (Xu Ji), for the period 2001–2005. The research provides a unique opportunity to examine some key success factors pertinent to ABC implementation within a Chinese organisational and cultural setting. The findings indicate that top management support, which has been identified as an important success factor in ABC literature, is evidently the predominant success factor in this organisation. In addition, Xu Ji's corporate culture of “top–down” instigation of the adoption of a series of management innovations (e.g., Economic-Value Added^®, Balanced Scorecards and Six Sigma) and its hierarchical command and communication structure, coupled with active involvement of a high proportion of dedicated professionals, can be seen as another success factor in achieving a relatively high level of diffusion of this accounting concept within the organisation. This study also reveals a different insight of internal resistance to change, which is contrary to the evidence presented in the existing ABC literature.     

Assessing international accounting harmonization in Latin America

We draw on institutional theory and interviews with key informants to assess international accounting harmonization in the 13 countries of the Group of Latin American Accounting Standards Setters (GLASS). Some GLASS countries have effected full formal adoption of International Financial Reporting Standards (IFRS), but in others, IFRS are not permitted. In several GLASS countries, IFRS are supplemented by national standards for micro-entities and cooperatives. We conclude that it will be difficult to achieve material harmonization in GLASS countries due to a lack of trained accountants, unreliable enforcement systems, and competing institutional logics of taxation systems, banks and insurance companies.     

Convergence and harmonization of accounting standards in the South Pacific region

Over the last few years there has been a significant increase in the acceptance of International Financial Reporting Standards (IFRSs) which are issued by the International Accounting Standards Board (IASB). Although numerous countries are adopting IFRSs, the approaches used for convergence continue to differ significantly across countries. Using selected countries from the South Pacific region, this paper investigates the relationship between country-specific characteristics and the selection of the appropriate approach used for the adoption of IFRSs. The country-specific attributes that have been found to influence convergence are (1) the set of accounting standards that was prevailing in the country at the time when the selection was made, (2) the availability and experience of professional accountants, (3) the relevant education and professional training, (4) the presence of the Big 4 accounting firms and (5) the accounting regulatory framework. The results of this study suggest that complete comparability in financial reporting may be difficult to achieve across all countries even after adopting the IFRSs. These findings are important because they indicate that attention should be concentrated on theorizing and empirically testing the effects of the country-specific attributes on convergence efforts across various jurisdictions.     

Applicability Of The Conservatism Accounting Convention in China: Empirical Evidence

“Conservatism” is a widely accepted accounting convention in the industrialized world, but it has long been slated and prohibited in China under the orthodox ideological influences. To date, the conservatism convention has not been fully adopted or implemented in Chinese accounting although the Chinese government has made substantial efforts to reform its accounting system to bridge the gaps between the accounting practices in China and other industrialized countries in recent years. This study has, through a wide range questionnaire survey, empirically investigated the applicability of the conservatism accounting convention in China. We found that the survey respondents (consisted of business accountants, management, government officials, bank loan officers, investment analysts and auditors), in general, held no negative attitudes against the conservatism convention under the changing business environment in the country. There is clear evidence that various interested parties of business accounting would support an expanded adoption of “conservatism” in Chinese accounting. The study findings will facilitate a proper assessment of the future development of accounting standards and practices in China.