Towards a conceptual model of whistle-blowing intentions among external auditors

Whistle-blowing has received considerable attention in the ethics literature. However, following the collapse of Arthur Andersen in the Enron debacle, whistle-blowing within audit firms has taken on greater importance. Given the profession's requirements to be confidential, independent and to act in the public interest (e.g. Sarbanes–Oxley Act, 2002), there is a need for a model that is specific to the audit profession (e.g. Louwers, Ponemon, & Radtke, 1997), and in particular, that addresses auditors' whistle-blowing intentions. This paper presents a conceptual model on whistle-blowing intentions among external auditors where an auditor's individual factors (attitudes toward whistle-blowing, perceived behavioural control, independence commitment, personal responsibility for reporting and personal cost of reporting) have a direct influence on his or her intentions to whistle-blow, but are moderated by isomorphic factors (perceived organisational support and team norms) and issue-specific factors (perceived moral intensity). Using justice and institutional theories, the proposed model anticipates that whistle-blowing within an audit firm produces both positive and negative consequences to society, the audit firm and the individual whistle-blower. However, where audit firms have adequate formal supporting mechanisms for reporting wrongdoings to internal and external parties, the negative effects and personal costs of reporting will be minimised.     

Does societal trust make managers more trustworthy?

This study examines the effects of shareholders' trust on managers' bad news hoarding. Using a large sample of listed firms from 33 countries, we find that firms domiciled in countries with higher societal trust have higher stock price crash risk, which indicates that managers may exploit shareholders' trust to conceal bad news and that a low-trust society can be beneficial in restraining management misconduct due to the monitoring undertaken by low-trust outsiders. We also find that the positive association between societal trust and crash risk is less pronounced (1) when low-trust foreign shareholders have greater control over a country's firms, in line with the view that low-trust shareholders' concerns about being expropriated by managers and the consequent strong efforts at monitoring; (2) when long-term investors have greater control over a country's firms, suggesting that long-term investors playing a complementary role in monitoring corporate governance; and (3) when a country has strong formal institutions, such as investor protection and financial accounting systems, suggesting that robust formal institutions are substitute for social norms.     

Tax compliance in a social setting: The influence of social norms,trust in government,and perceived fairness on taxpayer compliance

Voluntary tax compliance is important for governments around the world as they try to manage budget deficits. Traditional methods to improve tax compliance, such as increased audits, can be costly to implement. The purpose of this study is to examine the influence that social factors have on individuals' tax compliance intentions. Results of a survey of 217 U.S. taxpayers found support for the influence of social factors on tax compliance. This research concludes that social norms influence compliance intentions indirectly through internalization as personal norms. Specifically, as the strength of social norms in favor of tax compliance increases, personal norms of tax compliance also increase, and this leads to a subsequent increase in compliance intentions. We also conclude that trust in government has a significant influence on both perceived fairness of the tax system and compliance decisions. This study adds to current tax research in two important ways. First, the results suggest that the influence of social norms on tax compliance is largely through internalization as personal norms. Second, to the best of our knowledge this is also the first tax compliance study in which perception of fairness is modeled as a function of trust rather than vice-versa. This research may help taxing authorities develop less costly and more effective strategies for increasing taxpayer compliance.     

Consumption,Credit, and the Missing Young

There are more young adults today with either no credit history or insufficient credit history to be scored by one of the major credit bureaus than there were before the Great Recession—a reality that is likely an outcome of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009–10. In regressions that include a rich set of controls, we show that measures of young adults missing a credit score in credit bureau data act as a drag on state-level consumption growth. We demonstrate that this effect is driven by young people's loss of access to credit since the legislation went into effect.     

社会性基本公共服务财政支出与居民消费关系的实证分析——基于2007~2012年省级面板数据

从规模与结构两方面,实证分析了我国社会性基本公共服务财政支出对居民消费的影响,同时对城乡差异性在社会性基本公共服务供给方面的表现进行了分析。实证发现:2007~2012年间,我国社会性基本公共服务财政支出对居民消费的影响不显著,并具有明显的城乡差异性。从分项来看,教育支出对居民消费的影响效果不显著,在城乡差异表现方面,教育支出对城镇居民消费的影响效果不显著,但对农村居民消费却有着一定的挤入效应;社会保障和就业支出对居民消费具有一定的挤出效应,但在城乡差异表现方面,这种影响都不显著;医疗卫生支出对居民消费具有一定的挤入效应,且挤入作用在城乡之间的差异较小。     

Household financial planning and savings behavior

Greater personal responsibility toward financial decision-making is being advocated on a global basis. Individuals and households are encouraged to take a more active approach to personal finance. In this paper, we examine behavioral factors, which lead households toward savings and financial planning across a panel of 1253 Dutch households. In line with the available literature, we find that an individual's propensity to save decreases with age and is higher among the financial literate. Moreover, we find that saving behavior varies across generations, and is significantly dominant among baby boomers. This generation effect, however, weakens once we account for more individual specifics. Our results offer evidence for parental influence, and for the effects of the psychological and behavioral metrics of numeracy, self-efficacy, locus of control and future orientation. A good understanding of these personality variables helps to explain why some take financial responsibility while others do not.     

Explaining equity shares in international joint ventures: Combining the influence of asset characteristics,culture and institutional differences

This paper investigates the determinants of the observed contracted equity share ownership structure in international joint ventures (IJVs). We propose that the inherent intangibility of the assets that partner's contribute to the IJV, and both formal (legal) and informal (cultural) institutional differences between partners contribute to explaining the negotiated division of the IJV's equity share. Empirical results from 442 UK-based home-foreign IJVs, indicate that an IJV partner's equity share ownership is positively correlated with the intangibility of the assets they contribute to the IJV relative to those of the second partner. Both cultural and formal institutional differences exert a moderating influence on the observed asset intangibility-equity share relationship for the foreign IJV partner. We attribute this finding to both risk perceptions and the liability of foreignness.     

Growth,financial development,societal norms and legal institutions*

Do societal norms help to explain cross-country differences in financial development? We analyze whether societal norms, in addition to legal institutions, have an impact on financial development. In particular, we address the implications of the inclusion of societal norms on the analysis of the impact of financial development on economic growth. Our first conclusion is that societal norms indeed are important in explaining stock market capitalization, while this is not the case for the supply of bank credit. Secondly, the value added of including societal norms in models that explain financial development or, indirectly, economic growth largely coincides with the inclusion of formal institutions, like legal variables.     

Animal Spirits,Financial Markets,and Aggregate Instability

This paper examines whether people's animal spirits were drivers of U.S. business cycle fluctuations. In the context of an estimated macroeconomy with endogenous financial market frictions, allowing for “psychological” or nonfundamental expectational shocks improves the fit of the model and, at the posterior mode, these shocks account for well over one-third of output fluctuations. Exogenous financial frictions are considerably less important. U.S. data favor the indeterminacy model over versions of the economy in which animal spirits cannot play a role.     

Relationships between national economic culture,institutions, and accounting: Implications for IFRS

National economic culture has an indirect influence on accounting at the national level through the mediating variable of institutions. The relationships are evaluated using measures of national economic culture from Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies (House et al., 2004); measures of institutions from the World Bank (Kaufmann et al., 2007); and measures of national accounting from the Financial Standards Foundation (2008). At the national level, institutions are found to mediate the relationship between economic culture variables and accounting. The empirical findings indicate that accounting in a given nation is linked to the nation's supporting institutions, which institutions in turn are influenced by the national economic culture of those who maintain them. This suggests that altering aspects of accounting within a nation can be expected to entail much more than formal adoption of standards, principles, or innovations. Institutional adjustments must be made and the impact of national economic culture must be understood and appropriately addressed.     

SCAN: A Case-Based Reasoning Model for Generating Information System Control Recommendations

This paper describes SCAN, a case-based reasoning model for generating information system control recommendations. The purpose of the paper is to explain how a case-based reasoner may be used to support inexperienced information system auditors in evaluating controls and proposing audit recommendations. As a case-based reasoner, SCAN functions by reasoning by analogy to similar past cases. SCAN models audit experience as traces of past cases which are stored in a case knowledge base. In addition to a database of past audit cases, SCAN consists of indices for storing and retrieving cases, a similarity metric for measuring case similarity, and rules for using similar cases to generate control recommendations. SCAN uses past cases to remind the user of previous control failures, to set expectations about case features and controls, to use as a pattern against which to compare a client's controls and to help justify or explain its recommendations. SCAN's recommendations were judged to be more like those of an experienced auditor than either a student or a textbook model.     

Corporate assets as a trust: for whom are corporate officers trustees in insolvency? the role of incentives in maintaining the trust

Uncertainty is a constant theme when corporations are in financial distress. Yet any successful restructuring of an insolvent corporation requires numerous stakeholders, including creditors, employees and suppliers, repose some degree of trust in those corporate officers who are trying to continue to operate the firm while restructuring it into a viable entity. This article looks at the issue of the positive and negative incentives that can be generated for corporate officers and directors from both their continuing control of corporate assets and their potential personal liability arising from corporate activity both before and after the corporation became insolvent. The potential role these incentives can play in providing a basis for the trust needed to meet the other governance challenges that arise in a restructuring is reviewed in the context of recent developments in Canada concerning the duties of corporate directors to creditors during insolvency. Also reviewed is the role of directors' insurance and indemnification in altering the incentives' effects on directors' behavior. Finally a critical appraisal is given of the present legal regime's provision for compromise of claims against corporate officers during restructuring, as well as the proposal to amend the law to allow complete exoneration of corporate directors from certain liabilities on insolvency. The article urges caution in altering the effects of incentives that may create the necessary basis for trust in the distressed corporation's officers amongst those stakeholders whose co‐operation is crucial to restructuring. Copyright © 2003 John Wiley & Sons, Ltd.     

Political Connections and the Efficiency of Capital Allocation Through Bond Financing in Chinese Listed Companies

Using a database of firms issuing short-term financing bonds and mid-term notes in China from 2007 to 2011, we uncover whether and how political connections influence the companies' capital allocation efficiency. The authors show that politically connected firms have significantly lower capital allocation efficiency, especially in the case of overinvestment subsamples. In addition, different types of political connections have different effects on firms' inefficient investments. Compared with firms connected to members of the people's congresses and the Chinese People's Political Consultative Conference (MPCP firms), firms connected to government officials (GOF) overinvest more and underinvest less. One year after bond financing, GOF politically connected firms decreased overinvestment, while underinvestment undergoes an upward trend in the MPCP firms.     

The Effect of Personnel Characteristics in the Internal Accounting Control System on Discretionary Tax Accruals: Evidence from Korea

This study examines whether the characteristics of personnel in a firm's internal accounting control system (IACS) and auditor characteristics control managers’ discretionary behaviour for tax planning. The study uses a sample of 4210 firm‐year observations from 2006 to 2014. The results show that managers’ discretionary tax planning cannot be controlled when the personnel in charge of internal accounting control are at an optimum level or higher. On the other hand, when a CPA is included among the personnel, the manager's discretionary behaviour is somewhat controlled. Moreover, the results show that firms audited by a large accounting firm also control the manager's discretionary tax planning to some extent. Unlike previous studies that examine the effects of IACS on discretionary accruals mostly in terms of book income, this study's contribution is an examination of the effects of the characteristics of personnel in IACS on the relationship between discretionary book‐tax conformity accruals and discretionary book‐only accruals that can be used when the manager establishes a tax plan. Additionally, this study also provides indirect evidence that the characteristics of auditors and personnel in charge of internal accounting perform a monitoring role that controls the manager's opportunistic behaviour.     

Social capital and entrepreneurial financing choice

This paper investigates the influence of social capital on young firms' financing arrangements. Using a sample of U.S. start-ups, I find that social capital, as captured by secular norms and social networks in the entrepreneur's county, increases access to outside financing and reduces reliance on owner equity to finance the new venture. Financing to entrepreneurs located in counties with greater social capital involves higher amounts of leverage in the form of outside debt. This finding persists in a difference-in-difference test that controls for unobservable geographic determinants of capital structure.     

Who is responsible for rehabilitating the poor? The case for church-based financial services for the poor

This article is a qualitative study, the first part of an ongoing empirical study on the role of churches in providing financial access to the poor. It begins with the question of whether Christian Churches should be involved in providing financial services for the poor. Drawing on the teachings of the Bible, Catholic Social Teachings (CSTs), it concludes that providing such a service is consistent with Christian principles. It then uses the theory of people's psychological sense of a community, the Bible, CST and the extant literature to develop a number of propositions that could form a framework for church-based micro-finance institutions (MFIs).     

Students' beliefs,attitudes and intentions to major in accounting

This study extends the literature that uses the theory of planned behaviour in examining the factors that impact on students' intentions to major in accounting and non-accounting disciplines. A survey of a sample of business students enrolled in an introductory accounting course in a New Zealand University was conducted to gather data about their intended academic majors, and their beliefs and attitudes towards majoring in accounting and non-accounting. The results show that three factors (personal, referents, and control) are determinants of students' intention to major in accounting or other business disciplines. Further analysis revealed that the students' major intentions are influenced by important referents' perceptions. In particular, parents appear to have a stronger influence on students' intentions to major in accounting. Comparisons of differential personal perceptions by accounting and non-accounting majors revealed that accounting majors hold positive perceptions of some of the qualities of the study of accounting and the accounting profession. Significant differences were also found in the control perception between accounting and non-accounting major students.     

Small Business Financial Distress and the “Phoenix Syndrome”—A Re‐evaluation

In a typical “phoenix syndrome” scenario, a small business entrepreneur who controls the financially distressed Company A registers Company B, to which the assets of Company A are transferred in what appears to be fraudulent conveyance. Company B serves as a vehicle through which the business is kept running, without the pressures of the business creditors. If necessary, the entrepreneur will also register Company C and repeat the process. The law usually considers the execution of a “phoenix syndrome” scheme (“phoenixizing”) to be fraud against Company A's unaware creditors. Two major problems undermine, however, the efficient regulation of “phoenix syndrome” schemes. First, although criminal sanctions are available, “phoenixizing” entrepreneurs are not regularly prosecuted and are usually only subject to monetary sanctions (e.g., personal civil liability to creditors). Because defrauders tend to be judgment proof, the result is sub‐optimal deterrence. Second, lawmakers have not considered a more sympathetic explanation to account for the “phoenix syndrome” phenomenon: an entrepreneur resorting to a “phoenix syndrome” scheme might actually be arranging for a last‐resort “home‐made” bankruptcy proceeding, that is, the entrepreneur might be mimicking the role of a formal bankruptcy stay on unsecured creditors' collection efforts, against the background of a cost prohibitive formal bankruptcy proceeding. Put simply, the “phoenix syndrome” scheme is, occasionally, “a poor man's” bankruptcy proceeding. Deterring a “phoenixizing” entrepreneur attempting to rescue a viable business is, of course, unwarranted, as the result is viable businesses being lost. These two problems of under‐deterrence and over‐deterrence mandate a re‐evaluation of the manner in which “phoenix syndrome” schemes are regulated. Obviously, the main question concerns implementation: How can “good” entrepreneurs, attempting to rescue a viable business, be separated from “bad” ones, who attempt to defraud or to rescue a non‐viable business? The paper discusses and evaluates several solutions. Copyright © 2012 INSOL International and John Wiley & Sons, Ltd.     

“Who am I? Where are we? Where do we go from here?” Marxism,voice, representation,and synthesis

Recently Kim (2008) and Chua (1998) have warned critical accounting researchers of the dangers involved in oral history research in accounting involving a privileged researcher(s) and a cultural or racial “other”. The end result of this research often is that the researcher gets a promotion and a pay rise whilst the others remain in the same position that they were in before the research. These warnings are extremely important and should be the source of much personal reflection and even agonizing on the part of those researchers that do this type of research. However, I argue that Kim's negative tone, whilst justified in a polemic, should not discourage researchers to the extent that they shy away from compassionate explorations of topics involving the other in favour of “safer” capital markets or other mainstream accounting research. Those researchers writing from a Marxist perspective will continue to see the primary source of exploitation as the capitalist production process and its extraction of surplus-value from the workers without payment. This does not mean that such researchers somehow “ignore race” although some types of racist acts Marxism finds hard to explain satisfactorily. To illustrate these arguments, I present a case study of the legendary 1970s punk musician and philosopher Joe Strummer of the Clash to suggest how a compassionate and authentic individual can meaningfully and boldly address issues of the other and the exploitation that they face within a Marxist framework. The maturation and increased sophistication of Strummer's lyrics by 1978 suggest that young artists (and researchers) need to be permitted the opportunity to make mistakes and to grow as part of their own existentialist personal journeys.