Critical reflections on research approaches, accounting regulation and the regulation of accounting

The design and choice of research approaches, the nature of accounting regulation and the reactions to these regulations in organisations, involving, in effect, the regulation of accounting, are three themes of considerable importance in accounting research. They are the three themes that have dominated the research agenda of the author throughout his academic career. This paper explores the nature of these three key research themes developing some critical reflections on what has been discovered about each of these themes using the author's sole and joint research and publications as a vehicle for this analysis.     

Political ideology and accounting regulation in China

This paper analyzes the relationship between political ideology and accounting change covering the transition from Maoism to Dengism in China. Under Mao, the ideological principles of class struggle primacy, central planning, and public ownership were mobilized to construct a class view of accounting according to which Western accounting concepts were prohibited because they were considered a tool of capitalist exploitation. Under Deng, the new ideological principles of economic development primacy, marketization, and mixed-ownership paved the way for a different view of accounting to emerge. Accounting was re-presented as a science and a neutral technology with no national boundaries, and the adoption of what were deemed Western accounting concepts, such as conservatism, was encouraged. In both eras, accounting was construed as a malleable object shaped by the force of the dominant political discourse. We show how in each era political ideology created a context that was rendered more or less compatible with the adoption of particular accounting concepts.     

Strategic behavior and regulation research in accounting

This paper focuses on models of political behavior that implicitly or explicitly form the foundation for empirical economic consequences studies in accounting. The studies that have appeared adopt a single-period of single-agendum-item perspective. This paper discusses differences in rational political behavior that arise naturally in single-period versus multiperiod settings. The behavioral implications of varying configurations of available information on agents' “ preferences” are also considered. Because of the tremendously complex empirical domain being studied, examples are relied on heavily to motivate the discussion rather than engaging in a formal modeling exercise.     

Development of accounting regulation in Jordan

This study examines the development of accounting regulation in Jordan with emphasis on the dominant environmental factors that influence it. In order to have a better understanding of Jordan's present accounting practices, and its future development tendencies, we examine the path of accounting in Jordan since the early days of the nineteenth century, and analyze how Jordan's accounting environment — political, economic, legal and cultural — influenced the development of accounting in Jordan. We also examine Jordan's recent move towards full adoption of International Financial Reporting Standards (IFRS) and find that Jordan's colonial past has exerted a strong influence. In addition, we conclude that political and economic factors, through privatization and the resulting accounting reforms, contributed more to the development of accounting practices than other environmental factors. Privatization led to reforming Jordan's disclosure regulation and laying down of the corporate-governance policy framework. Our conclusions could be of interest to other countries, particularly developing countries, who want to improve the quality of their accounting disclosures and practices.     

The market for public accounting services: Demand,supply and regulation

An analysis of the market for public accounting services is derived from agency theory. The theory shows that owners and their agents (employees) benefit from monitoring. Furthermore, the owners and managers of enterprises bear the cost when potential investors and users of financial statements (outsiders) fear that those in control operate the enterprise contrary to the interests of the outsiders. The demand for public accounting services is derived from these concerns. The public accountants' comparative advantages in providing this service, the structure of the market supplying the service, and the nature of the demand for its regulation follow from the initial analysis. In the last part of the paper the staff reports of the 1972 U.S. House of Representative (Moss) and Senate (Metcalf) committees are examined and compared with the available evidence.     

Agency problems,accounting slack,and banks’ response to proposed reporting of loan fair values

We investigate the determinants of bank representatives’ responses to the United States Financial Accounting Standard Board’s 2010 Exposure Draft that proposes fair value measurement for most financial instruments. Over 85% of the 2971 comment letters were received from bank representatives, with most bank-affiliated letters addressing—and opposing—one issue: fair value measurement of loans. The Exposure Draft proposes that companies report both fair value and amortized cost measures for loans; thus, the proposal should result in increased levels of loan-related information and improved financial reporting transparency. We investigate three reasons for bank representatives’ resistance. First, fair value measurement should result in less accounting slack than the current incurred-loss model for loan impairments; therefore, we propose that representatives from banks that historically utilized that slack will resist fair value measurement for loans. Second, we propose that agency problems are an important motivating factor because bank representatives reaping more private benefits from their franchises have less incentive to support increases in financial reporting transparency. Third, we test whether the most common reasons for opposition included in the comment letters are associated with negative letter writing. Our analyses support the first two determinants of bank representatives’ resistance to the Exposure Draft. Specifically, accounting slack and lower demand for accounting transparency are strongly associated with resistance to the standard. However, we find that stated reasons for resistance are not associated with letter writing. Specifically, representatives at firms with difficult to value loans and firms that mostly hold loans to maturity are no more likely to resist the standard than others. The narrow scope of bank representatives’ comments and our empirical findings suggest that bankers’ responses to the Exposure Draft may be more driven by concerns over reduced availability of accounting slack and accompanying de facto regulatory forbearance than by the conceptual arguments they offer. Our results have implications for standard setters, who must navigate special interests as they attempt to promulgate high quality accounting standards, and for users of financial statements who must consider how political forces shape generally accepted accounting principles.     

Including audit regulation in the accounting curriculum

Audits and auditors are regulated to uphold audit quality, thus regulation is important to the public interest and clearly impacts firms and CPAs. Moreover, the reach of audit regulation has expanded greatly in the last decade with the establishment of the Public Company Accounting Oversight Board (PCAOB). Recent research and calls from the profession point to enhancing the coverage of audit regulation in the accounting curriculum so that students understand the consequences of failing to adhere to professional standards. In this paper, we propose regulatory content for inclusion in the curriculum, we survey and catalog existing auditing textbooks and other educational materials for regulatory content, and we suggest flexible alternatives for incorporating this topic into the curriculum. It is our hope that, with these resources, faculty can more effectively include audit regulation in the classroom and achieve a high level of student comprehension and learning on the topic.     

State regulation of accounting practices and municipal borrowing costs

This article examines the association between state regulation of accounting practices and municipal borrowing costs. The results demonstrate that stringent accounting regulations do have an effect on borrowing costs after abstracting the effects of other explanatory variables. The direction of the observed effect is difficult to assess due to presence of multicollinearity in the model. However, lower borrowing costs are suggested by the analysis.     

Culture and accounting change: A new perspective on corporate reporting regulation and accounting policy formulation

This paper proposes and illustrates a new methodological framework for studying corporate reporting regulation and accounting policy formulation at the nation specific level. The process of corporate reporting regulation is viewed as a social system, and change analysis is used to determine the essential properties of such a system. The framework allows examination of the system's norms and values; the nature of its interdependencies both internally and with other social systems; the factors to which the system is especially sensitive; and the way in which culture influences the form and functioning of the system's elements.     

会计报告、会计方程与会计误差

会计方程是会计报告的理论基石。现行会计方程以资产恒等于负债加所有者权益为核心。会计科学的本质是计量科学,计量科学的重要特征是存在计量误差。会计对资产的计量是估计与判断的结果,而估计与判断必然产生会计误差。但现行会计方程没有反映会计误差,从而影响了以会计方程为基石的会计报告的科学性和有用性。本文引入会计误差的概念,对会计基本方程进行探讨,在此基础上,对会计误差的内涵、产生与影响、会计误差与托宾q的关系等问题进行研究,旨在对会计报告改革有所帮助。     

Sustainability accounting regulation in Spanish public sector organizations

In 2011, the Spanish government made sustainability accounting mandatory for public sector organizations. This paper documents why, despite the new legislation, the quantity and quality of sustainability accounting practices remains low.     

Comparing self-regulation and statutory regulation: Evidence from the accounting profession

The accounting profession in the United States recently shifted from self-regulation by peer review to statutory regulation by the Public Company Accounting Oversight Board (PCAOB). Using this shift, I compare outcomes from self-regulation and statutory regulation for the same group of firms. I find that firms choosing their own reviewers, and firms choosing reviewers likely to be connected through prior relationships, tend to receive peer review opinions more favourable than their subsequent PCAOB reports, suggesting that some firms obtained ‘friendly’ reviews in the peer review era. On the other hand, reviewers with relevant industry knowledge are less likely to give such favourable reviews. Further, reviewers from the same geographic area are likely to give peer reviews that are more negative than the subsequent PCAOB reports. Additional analysis suggests that peer reviewers from similar industry or geographic areas bring greater firm-specific expertise to the reviewing process. In the PCAOB regime, I find that firms inspected later tend to receive PCAOB reports more favourable than their peer reviews, suggesting some trends over time in PCAOB reporting. Overall, the findings help in understanding the influences on each approach to regulation, and suggest a nuanced understanding of both approaches as having strengths as well as weaknesses.     

Theories of the state and the state of accounting: Economic reductionism and political voluntarism in accounting regulation theory

It has recently been suggested that the inability of the economics-finance literature to say anything definitive about the appropriate form of accounting regulation highlights the need to augment neoclassical economic analysis with sociopolitical considerations. It is argued in this paper that patching up the orthodox theory would be futile; that the flaws are so fundamental as to warrant abandoning neoclassical state theory and embarking on a serious debate about radical theoretical alternatives. Economic reductionism and political voluntarism are shown to be the main flaws in the neoclassical theory, and these deficiencies are primarily responsible for the present theoretical disarray. After a brief overview of radical theories of the state, this paper suggests that replacing—not refurbishing—neoclassical state theory is the most plausible strategy for accounting researchers.     

Cross-listing as a Global Depository Receipt: The influence of emerging markets,regulation, and accounting regime

This paper examines factors influencing international firms’ decisions to cross-list as Global Depository Receipts (GDRs). We focus on differences in regulatory and accounting requirements between exchanges and the economic clustering that has arisen with increasing globalization. An important economic influence on this decision is the home country, reflecting trade ties. Higher US regulation and governance requirements influence firms from emerging markets to issue GDRs rather than ADRs on a US exchange. Using local GAAP or IFRS also tends to deter firms from listing as an ADR, suggesting that the cost of US GAAP reconciliation is an important consideration in the decision to list as a GDR or an ADR.     

Obesity,Mortality, and the Obesity Paradox

The percentage of the population who are obese has grown dramatically on a worldwide basis over the last several decades, although the growth in the prevalence of obesity has slowed recently at a high level in the United States. Although there have been numerous studies of the effect of this trend on mortality, the findings have been inconsistent and controversial, in part because of methodological differences and the complexity of the relationships between obesity and mortality. The objective of this article is to discuss the issues surrounding these relationships and to shed light on the likely effects of the obesity epidemic on mortality. Of particular interest is the so-called obesity-mortality paradox, where mortality experience is lower for overweight and in some cases obese individuals than for those of normal weight. Although more recent studies of the relationship between mortality and obesity seem to indicate those who are obese have experienced a reduced percentage of additional mortality, this may in part be due to the shorter average time those currently obese have been exposed to their condition, the heterogeneity of the normal and obese populations, measurement issues including treatment of smokers and those who are ill, and study design limitations. An increased number of premature deaths may arise as more individuals who are obese are exposed for a longer period to excess adiposity. Although public policy issues surrounding obesity are being addressed with a great deal of activity and publicity, they have and will continue to prove quite challenging for both individuals and society to manage and overcome. The prevalence of obesity has had and will continue to have a significant effect on the mortality experience in most areas of actuarial practice. As a result, it is important for actuaries to enhance their understanding of these effects.     

Drought,resettlement and accounting

Drought, an insidious form of natural disaster, occurs frequently in the United States. The droughts of the 1930s were a national emergency which combined with economic depression to cause widespread rural poverty and distress. Governmental responses to the crisis were many and included the establishment of experimental resettlement projects for dislocated families. Operated by liberal, socially progressive agencies, these projects attempted to re-establish farm families on more productive land in less arid areas. One such project was the Red River Valley Farms Project in North Dakota. Here, business and home planning, budgeting and record keeping by client families was compulsory. Drawing on the notion of the ‘heroic bureaucracy’, this historical study reveals accounting as a key facilitative technology in the recovery phase of a disaster. The comprehensive accounting records maintained by each family contributed to their successful resettlement and provided the government agency with copious data for monitoring the performance of the project, measuring the progress of its participants, and identifying where support was most needed.     

Magic,accounting and morale

This paper compares some uses made of accounting by modern societies with the use of witchcraft in less advanced ones. A common factor is a need for machinery to accommodate awkward facts in a way which does not undermine the fundamental beliefs of the culture. Western examples of this behaviour are analysed, and it is hypothesised that it occurs because low morale increases sensitivity to good and bad news. Such sensitivity affects the efficiency and existence of the organization.     

Control,organisation and accounting

Organisation control is a subject of fundamental importance to the designer of accounting control systems. Yet discussions of accounting control tend to take place against a back-cloth of incomplete and outmoded theories of organisation and simplistic and authoritarian concepts of control. In this paper, the applicability of a cybernetic model of control to the control of human organisations is explored, with particular reference to the role of accounting information systems. The analysis uncovers a number of issues that require resolution before the model can be applied to accounting information system design. Some directions for research on accounting controls are discussed.