The relationship between culture and tax evasion across countries: Additional evidence and extensions

This study builds on the work of Tsakumis et al. [Tsakumis, G. T., Curatola, A. P,. & Porcano, T. M. (2007). The relation between national cultural dimensions and tax evasion. Journal of International Accounting, Auditing and Taxation, 16, 131-147] by conducting further empirical analysis of the relationship between Hofstede's [Hofstede, G. H. (1980). Cultures consequences: International differences in work-related values. Beverly Hills, CA: Sage Publications] cultural dimensions and tax evasion across countries using multiple measures of tax evasion to gain additional evidence on the subject. Moreover, this study extends the preliminary international tax evasion model developed by Tsakumis et al. [Tsakumis, G. T., Curatola, A. P,. & Porcano, T. M. (2007). The relation between national cultural dimensions and tax evasion. Journal of International Accounting, Auditing and Taxation, 16, 131-147] to examine, along with culture, the impact of legal, political, and religious variables on tax evasion across countries. Based on data from 47 countries, and after controlling for economic development, the regression results indicate that the higher the level of uncertainty avoidance and the lower the level of individualism, legal enforcement, trust in government, and religiosity, the higher is the level of tax evasion across countries. These findings remain robust to multiple measures of tax evasion. Government policymakers should find the results of this study useful in assessing the likelihood of tax evasion from cultural, legal, political, and religious perspectives, and in developing tax reform policies to reduce tax evasion.     

National differences in incentive compensation practices: The differing roles of financial performance measurement in the United States and the Netherlands

This paper describes the findings of a study aimed at providing an international replication of a US-based study by Gibbs et al. [Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2004). Determinants and effects of subjectivity in incentives. The Accounting Review, 79(2), 409–436; Gibbs, M., Merchant, K., Van der Stede, W., & Vargus, M. (2006). The structure of incentive contracts: Evidence from auto dealerships. Working Paper, University of Chicago, University of Southern California, London School of Economics and University of Texas-Dallas] focused on the incentive compensation practices of firms in the automobile retailing industry. The purpose was to determine the extent to which these practices and their effects were similar across countries. Theory provides conflicting predictions as to whether international practices should reflect a situational “best fit” or “global best practices.” We collected a dataset comparable to that of Gibbs et al. from Dutch automobile retailers. The findings reveal dramatic differences in practices across the two countries. As compared to the US firms, the Dutch firms are much less likely to provide their managers with incentive compensation in any form. Where Dutch firms do offer incentive compensation, the payouts are smaller and their bonus awards are less likely to be based on profit measures of performance. But where the Dutch firms use incentive compensation, their performance/reward functions are more complex. Moreover, unlike in the US firms, in the Dutch firms the effects of the use of incentive compensation on net profit and pay satisfaction are negative.     

Accounting for the dissolution of a nation state: Scotland and the Treaty of Union

Building upon the insights of socio-historical accounting research this paper attempts to show accounting’s centrality to major historical events. In this context, accounting is viewed as a technology which was employed in order to implement a particular political programme – the union of the Scottish and English parliaments in 1707. Accounting is presented as both a necessary and impossible technology in this context. Forging an economic compromise between Scottish and English Parliamentarians necessitated an economic calculation of the relative economic power of each country in the first instance, and some calculated reconciliation between the two in the second. However, such a calculation also proved to be impossible as competing political factions contested the figures, ostensibly on technical grounds, but substantively on an ideological basis. Furthermore, building upon the notion of impossibility, the paper shows that political programmes can sometimes be subservient to the technologies that they rely upon for their implementation. Faced with congenitally failing accounting practices the political programmes associated with union had to be modified into something that was deliverable through the constraints of the extant accountability.     

Incorporating real-options analysis into the accounting curriculum

In this paper, we argue that accounting curricula should be expanded to cover the topic of real options. Our argument relies on reference to the [American Institute of Certified Public Accountants (AICPA) (1999) (Core Competency Framework, New York, NY: AICPA <http://ceae.aicpa.org/Resources/Education+and+Curriculum+Development/Core+Competency+Framework+and+Educational+Competency+Assessment+Web+Site/> Accessed 21.08.08], the framework for curriculum change espoused by [Arya, A., Fellingham, J. C., & Schroeder, D. A. (2003). An academic curriculum proposal. Issues in Accounting Education, 18(1) 29–35], a global study of core competencies for management accountants [International Federation of Accountants (IFAC), (2002). Competency profiles for management accounting practice and practitioners. New York, NY: International Federation of Accountants], a global capital-budgeting “best practices statement” [International Federation of Accountants (IFAC), (2008). International good practice guidance: Project appraisal using discounted cash flow. New York, NY: International Federation of Accountants], current specifications of the CMA exam [Institute of Management Accountants (IMA), (2008). Certified management accountant (CMA) learning outcome statements (effective 07/01/04), updated 07/2008. <http://www.imanet.org/pdf/CMA%20%20LOS.pdf> Accessed 29.10.08.], and elements of the Albrecht and Sack report [Albrecht, W. S., & Sack, R. J. (2000). Accounting education: Charting the course through a perilous future. Accounting education series, Vol. 16. Sarasota, FL: American Accounting Association]. We make special reference to the linkage of the topic of real options to two broad educational goals: decision-modeling and risk analysis. Existing resources that accounting faculty can use to incorporate real options into the curriculum are limited. As a response, we provide an extended example that accounting educators can use to cover the topic of real options. This example uses a set of binomial trees (one for cash inflows and another for cash outflows). The step-by-step approach presented in this paper allows students without a technical/mathematical background to extend discounted-cash-flow (DCF) decision models (e.g., NPV) to incorporate real options that are embedded in proposed investment projects.     

Rationalisation,charisma and accounting professionalisation: perspectives on the intra-professional conflict in Greece, 1993–2001

During the 1990s Greek auditors and branches of international accounting firms in Greece fought a veritable professional war over the jurisdiction of statutory auditing. This intra-professional conflict developed against a backdrop of profound changes in the socio-economic and political fabric of the country, along pro-liberal, free market lines. This paper looks at a particular episode of that conflict––an attempt by the indigenous auditors to regain the monopoly of practice they lost, following the `liberalisation' of the Greek auditing profession in 1992. The paper argues that Max Weber's theoretical work on history and social development can be applied in helping to understand complex processes of contemporary change in the accounting profession. The analysis of this case study posits that rationalisation and charisma play a major role in helping to effect historical change through their influence on class–status–party, the tripartite stratificatory structure of modern society. In these encounters, multifarious social, economic and political actors with overlapping or differing interests interact with one another. The end result is that historical development is read as a fluid process whose outcome appears uncertain, although certain trends may be discernible in the particular historical juncture examined in this case study.     

Politicizing the expertise of the accounting industry in the realm of corporate social responsibility

The accounting industry plays an important role in the production and implementation of accountability mechanisms surrounding corporate social responsibility practices. Operating as both politicians and implementers of knowledge (Gendron, Cooper, & Townley, 2007), the expert activities of accountants are never purely technical. This paper focuses on the mediating role of accounting firms and professional bodies in aligning the socially responsible practices of organizations with the rational morality of the market. I show that the construction of the market as a moral marker of socially responsible action is the result of a major effort of rationalization aimed at justifying the emergence of a social and moral conscience in business, not in the name of subjective feelings or human values, but in the name of an economic and depoliticized logic of profitability. Drawing on the political analysis of Latour (2004) [Politics of Nature: How to Bring the Sciences into Democracy] and his metaphor of the ‘modern constitution’, I view the economicization of corporate social responsibility as symptomatic of the power imbalance between the world of humans and the world of objects governing the political structure of contemporary society and weakening democratic activity.     

Predicting change in management accounting systems: national culture and industry effects

This study replicates the model developed in Libby and Waterhouse's [Libby, T., & Waterhouse, J. H. (1996). Predicting change in management accounting systems. Journal of Management Accounting Research, 8, 137–150] exploratory study of changes in a population of 23 management accounting control systems, and the five components of planning, controlling, costing, directing, and decision making, at the organizational level in Canadian manufacturing firms. The determinants of size, organizational capacity, intensity of competition, and centralization (replacing decentralization) are used to examine a sample of manufacturing firms in Singapore. Regression results from survey data partially support the cross-national transferability of their findings. Additional analyses show consistency between manufacturing and industrial firms but not service-oriented firms, suggesting limited generalizability of the model across different economic sectors.     

Asymmetric adjustment in the prime lending-deposit rate spread

The hypothesis that bank lending rates adjust differently to rising versus declining market rates is empirically examined. This study applies threshold autoregressive and momentum threshold autoregressive models developed by Enders & Granger [Enders, W. & Granger, C. (1998). Unit root tests and asymmetric adjustment with an example using the term structure of interest rates. Journal of Business & Economic Statistics 16, 304-311] and Enders and Siklos [Enders, W. & Siklos, P. (2001). Cointegration and threshold adjustment. Journal of Business & Economic Statistics 19, 166-176] to the prime lending-deposit rate spread. Within the context of these models, this paper provides evidence of asymmetric adjustment in the spread.     

A French connection; paths to a ‘new system’ of accounting for the Royal Navy in 1832

This study contextualises the official introduction of double entry bookkeeping in the Royal Navy, in 1832. The objective is to consider how accounting developed and changed through the competing logics of path dependent processes and to provide insights and explanations of those accounting changes in the Royal Navy. An innovative theoretical framework combines the longer-term lens of historical institutionalism with the roles of key actors to investigate change, logic and meaning of accounting in the Royal Navy in the context of financial reforms resulting from governmental investigations. The study is intended to make a contribution to accounting history and theory by means of this extension of historical institutionalism, exploring the options available and the paths taken at critical junctures, as the result of key players and their influence on the practices developed. The study identifies the paths available to the Royal Navy in the adoption of this ‘new system’ of accounting. The paper contributes to the literature on accounting development and change, on military accounting history and on the political nature of accounting in exploring the influences for change.     

Developing performance-measurement systems as enabling formalization: A longitudinal field study of a logistics department

This paper reports on a developmental approach to performance-measurement systems (PMS). In particular, we look at characteristics of a development process that result in the PMS being perceived by employees as enabling of their work, rather than as primarily a control device for use by senior management. We will refer to such a PMS as “enabling PMS”. The theoretical part of the study builds on ideas of enabling versus coercive formalization [Adler, P. S., & Borys, B. (1996). Two types of bureaucracy: Enabling and coercive. Administrative Science Quarterly 41 (March), 61–89]; on notions of organizational learning (e.g., [Zollo, M., & Winter, S. G. (2002). Deliberate learning and the evolution of dynamic capabilities. Organization Science 13(3), 339–351]); and on awareness of the incompleteness of performance measures (e.g., [Chapman, C. S. (1997). Reflections on a contingent view of accounting. Accounting, Organizations and Society 22, 189–205; Lillis, A. M. (2002). Managing multiple dimensions of manufacturing performance—An exploratory study. Accounting, Organizations and Society 27, 497–529]). The empirical context entails a mixed-method, 3-year longitudinal study of the logistics department of a medium-sized company in the beverage manufacturing industry. Qualitative data were gathered through interviews, participation in meetings, action research, and review of company documents. We also analyzed two waves of quantitative survey data, gathered from a panel of 42 employees. We find that a development process that is experience-based contributes to the enabling nature of the PMS, as it builds on existing skills, local practices, and know-how on performance measurement to enrich the PMS step-by-step over time. Also, experimentation with specific performance measures was found to enhance the enabling nature of the PMS: testing, reviewing, and refinement of conceptualizations, definitions, data, and presentations of new performance measures. Professionalism was significantly related to positive attitude toward performance measures in our survey data. The results also illustrate that transparency of the PMS itself is key to enabling PMS.     

SOCIAL ANALYSES OF ACCOUNTING INSTITUTIONS: ECONOMIC VALUE,ACCOUNTING REPRESENTATION AND THE CONCEPTUAL FRAMEWORK

The paper is a commentary on Bryer's article &ldquo;A Marxist Critique of the FASB's Conceptual Framework&rdquo;; the commentary is divided into three main sections. The first section begins by addressing the changing relationships between accounting and economics and, more specifically, the ideas of economic value and accounting representation (often called &ldquo;representational faithfulness&rdquo;, see Bryer, p. 582) that underlie Bryer's concerns with the FASB project. The second section considers the role of the FASB conceptual framework project in order to address the different ways that the &ldquo;impact&rdquo; of the FASB's Conceptual Framework project upon accounting practices can be considered. Several of the existing studies of this project that consider its purpose in social and political terms are reviewed. This is not to suggest that the FASB's work has had @9pno@2p effects, but rather that its consequences might be thought of in institutional and political terms. In the final section some of the specifics of Bryer's Marxist analysis are addressed. In particular the relationship between Marxian analysis and accounting change is considered.     

THE SUBJECTIVITY OF THE FASB'S CONCEPTUAL FRAMEWORK: A COMMENTARY ON BRYER

Bryer argues that the FASB's conceptual framework is inherently subjective because it is based on the concept of &ldquo;economic value&rdquo;, or the anticipated net cash inflows attributable to presently owned assets. By contrast, Marxist economics is based on objective facts that can be measured to a &ldquo;socially required level of accuracy&rdquo;. The objective facts of a Marxist conceptual framework rest on the theory that capital circulates in three forms: money, commodities to be sold, and commodities to be used in production. Capital, and, therefore assets, are essentially physical (or technical) in nature rather than monetary in nature. Measurement of assets is objective because Marxist theory emphasizes management stewardship and requires historical cost and a strict realization criterion for recognition of revenue. Bryer's argument that the FASB's conceptual framework is &ldquo;unacceptably subjective&rdquo; because it is based on &ldquo;economic value&rdquo; is misplaced. A careful reading of the FASB's concepts statements suggests that assets represent service-potential, or &ldquo;use-value&rdquo; in Marxist terms, and that economic-value is never advocated as a conceptual basis for the measurement of assets. The reason the FASB's conceptual framework is &ldquo;subjective and vague&rdquo; is that the FASB lacked the political will to advocate a conceptual preference for any particular measurement method.     

Does it matter where assets are held and income is derived? Further evidence of differential value relevance from Quebec

In this paper, we build on recent studies documenting an economic discount on firms located in the Canadian province of Quebec that seems to be associated with the political risk generated by the Quebec separatist movement (e.g., Graham, Morrill, & Morrill, 2005). We use information on firms’ economic activity in the province of Quebec as collected and published by the Quebec business newspaper Les Affaires for the period 1990–2008. We find that variables proxying for extent of operations in Quebec are associated with market-to-book multiples on book value and earnings.     

Trust for accounting and accounting for trust

This paper combines insights from the sociology of knowledge and the emerging practice-based literature on learning and knowing to extend the institutional framework of accounting change developed by Burns and Scapens [Burns, J., Scapens, R.W., 2000. Conceptualising management accounting change: an institutional framework. Manage. Acc. Res., 11, 3–25]. In particular, it explores how management accounting systems (MAS) can be implicated in processes of learning and culture change, and used to identify ‘trustworthy’ solutions in the face of organisational crises. A case study of an Italian company, which was subject to massive change following its acquisition by General Electric, is used to discuss how, when crises arise and organisation members find themselves under intense pressure for change, their rationales and routinised behaviour, which are driven by the existing knowledge and cultural assumptions, are challenged. The case illustrates how MAS can act as sources of trust for the processes of change – i.e., accounting for trust; while at the same time being socially constructed objects of trust – i.e., trust for accounting. Drawing on the concept of personal trust and the notion of roles as access points to organisational (expert) systems, the paper discusses how, in this case, finance experts facilitated the acceptance and progressive sharing of new rationales and routines. Clearly, this does not guarantee that change will occur or occur in some ‘desired’ direction in other cases, but it increases the possibility of replacing trust in the predictability of routines with feelings of trust for change.     

Globalization,paradox and the (un)making of identities: Immigrant Chartered Accountants of India in Canada

We study the labour market experiences of immigrant accountants in Canada, to reveal the tensions contradictions and paradoxes embedded in neoliberal globalization. Drawing on themes within pragmatic sociology (Boltanski & Thévenot, [1991] 2006), we argue that globalization has differentially impacted on the moral orders underpinning the identity projects of the Canadian state and the elite sector of the accountancy profession and this has in turn created three paradoxes: paradox of the state, paradox of the market and paradox of place.     

New development: Between politics and strategic planning—the management of government priorities in Lithuania

ABSTRACT

How do political agendas impact on strategic planning practices? This article shows that recent changes to the framework for managing government priorities have made Lithuania’s strategic planning system more politically responsive by mobilizing political attention, leadership and state funding to major government commitments. However, these changes have not yet translated into any longer term outcomes because policy implementation practices did not change very much.     

The Enron effect in the electric services and natural gas industry on accounting choices

The political cost explanation of positive accounting theory suggests that the accounting choices and reactions of managers to a perceived crisis are impacted by expected responses of regulators and politicians. During the early months of 2001, the Enron failure and the rolling blackouts that affected many communities in California had captured the attention of the California Governor, the media, and the regulators. In this study, I examine whether the intense level of scrutiny caused by Enron, operating in the western region, had a spillover effect on accounting choices of firms within and beyond its region in the electric services and natural gas industry that is consistent with the political cost explanation [Watts, R., & Zimmerman, J. (1986). Positive accounting theory. Englewood Cliffs, NJ: Prentice Hall]. The regulators, the Federal Energy Regulatory Commission (FERC) and the Securities and Exchange Commission (SEC), were concerned about the depth of Enron’s trading schemes, financial reporting credibility, as well as the involvement of other firms. I find evidence consistent with the political cost explanation and that accounting choices vary systematically within and beyond the western region.     

Commentary on Roy Suddaby,Yves Gendron and Helen Lam “the organizational context of professionalism in accounting”

The paper by Suddaby et al. (Suddaby, R., Gendron, Y., & Lam, H. (2009). The organizational context of professionalism in accounting. Accounting Organizations and Society, 34(3–4), 409–427.) advances our understanding of the erosion, or otherwise, of traditional professional values by locating the debates in organisational and work contexts. This commentary seeks to extend the debate by posing questions about the theory and evidence of the paper. In particular, it argues that changes in professional attitudes and values cannot easily be understood without a consideration of the broader social and political contexts.     

Why is research on management accounting change not explicitly evolutionary? Taking the next step in the conceptualisation of management accounting change

In this article we discuss the evolutionary foundation of the OIE-guided management accounting change research building on the framework of [Scapens R.W. 1994. Never mind the gap: towards an institutional perspective on management accounting practice. Management Accounting Research, 5, 301–321.] and [Burns, J. and Scapens, R.W., 2000. Conceptualizing management accounting change: an institutional framework. Management Accounting Research, 11, 3–25.]. We argue that research on management accounting change should be based on evolutionary theory, but that the full potential of evolutionary theory has not yet been described or used in management accounting research. The conceptualisation and understanding of management accounting change can be improved and expanded if the evolutionary approach is developed beyond the general belief that it describes only small and gradual, often slow, changes. In this article we show that an evolutionary perspective on management accounting change implies that management accounting’s development is explained as the interaction between the evolutionary sub processes of retention (inheritance), variation and selection. Thus, both continuity and change are seen as evolutionary outcomes. These processes follow the cumulative causality that Charles Darwin proposed and Thorstein Veblen applied to the social sciences. Such a comprehensive theory, here labelled Universal Darwinism, must, however, be given substance with supporting details.     

Securities legislation and the accounting profession in the 1930s: The rhetoric and reality of the American Dream

Merino and Neimark (“Disclosure Regulation and Public Policy", Journal of Accounting and Public Policy, Fall 1982, pp. 33–57) examined passage of securities regulation in the United States in the 1930s, concluding that the regulation should be viewed as symbolic (i.e. not expected to result in significant changes in distribution of economic resources), a means of restoring investor confidence and preserving the status quo. Since that time, a number of traditional and critical studies have examined that thesis and offered new insights into the complex interrelationships found in the passage of securities legislation (e.g. Neu, “Reading the Regulatory Text: Regulation and the New Stock Issue Process", Critical Perspectives on Accounting, December 1992, pp. 359–388; Bealing, “Actions Speak Louder Than Words: An Institutional Perspective on the SEC", Accounting Organizations and Society, Vol. 19, 1994, pp. 555-569; Bealing, et al., “Early Regulatory Actions by the SEC: An Institutional Theory Perspective on the Dramaturgy of Exchange"Accounting Organizations and Society, Vol. 21, No. 4, 1996, pp. 317–338). We continue this line of research by developing the rationale behind the argument that symbolic legislation might be sufficient to restore investor confidence. We use as our framework the pragmatic concept of democratic conversation, unique to the United States, to frame the ideological debate. We posit that securities legislation can best be understood as an effort to reestablish the viability of what has been labeled the “American dream". We concur with the conclusion of Wettergreen (“The Regulatory Policy of the New Deal", The New Deal, 1989, pp. 199–213) that passage of the securities legislation must be examined as a response to a moral crisis of capitalism, generated by the “immoral behavior" of the capitalist elite. Following Dewey, we posit that the first priority of any regulation had to be to establish the moral legitimacy of capitalism by restoring trust in the existing system. As Dewey (Liberalism and Social Action, New York: Putnam, 1935) concluded, radical change was needed, otherwise it would merely be symbolic and used as propaganda to maintain the status quo.We then focus on the framers of regulation and the accounting profession. We do this by examining the private correspondence and the actions of the regulators during the early years of the SEC act. We believe our analysis shows that the early SEC commissioners had a commitment to the private property rights paradigm, and were unwilling to confront the monied interests. We support our position in a historical analysis of Accounting Series Release(ASR) No. 4, the Whitney case and the North American case. We interpret the historical evidence as a desire by the regulators to maintain the status quo. Thus, even if we believed the legislation was intended to cause a “real" change, the enforcement was not performed in an activist manner to initiate the change. For example, William O. Douglas (the second chairman of the SEC), who was no doubt a modern day judicial activist, was not an activist when it came to regulation and accounting related issues (e.g. full disclosure). Personal correspondence shows he had close relations with the accounting profession and raises the possibility that he may have been “captured" by the profession.In summary, our arguments are as follows: (i) the rhetoric used by the New Deal was intended to restore trust and fairness in American society; (ii) the underlying basis for the political persuasion was the restoration of the American dream in a liberal environment; (iii) in a contemporaneous analysis of the New Deal environment, Dewey (Liberalism and Social Action, New York: Putnam, 1935) states that, without radicalism of change, the New Deal was doomed to failure since it would be viewed as protecting the status quo—we concur with this view as to the securities regulation and the behavior of Douglas; (iv) Douglas appears to act in favor of the status quo due to his close relations with the accounting profession, and, in our view, being “captured" by the profession and (v) we support our thesis by examining several SEC actions during Douglas’s tenure.