Audits of Complex Estimates as Verification of Management Numbers: How Institutional Pressures Shape Practice

Auditors and regulators have invested heavily in improving audits of estimates in recent years, but problems in this area persist. We examine the causes of these problems and why they persist. To do so, we interview 24 very experienced auditors about how they audit complex accounting estimates such as fair values and impairments and what problems they experience in the process. We find that auditors overwhelmingly choose to audit the details of management's estimate rather than use other allowable approaches. The steps auditors describe and the language they use to describe those steps indicate that they follow a process of verifying individual elements of management's assertions on a piecemeal basis, resulting in overreliance on management's process, rather than engaging in a critical analysis of the overall estimate. The problems that auditors identify are consistent with this view, and include failures to notice inconsistencies among the estimate and other internal data or external conditions and overreliance on specialists to identify, evaluate, and challenge critical assumptions. We interpret these processes and problems using institutional theory and identify two root causes: standards' and firm policies' emphasis on verifying management's model, and audit firms' division of knowledge between auditors and specialists. Institutional theory proposes these conventions arise from firms extending use of procedures that are legitimate in one area (i.e., auditing accounts without significant uncertainty) to a new area (i.e., auditing complex estimates), even though they are likely less effective in the new area. These conventions are reinforced by regulators' method of inspection and by firms' reluctance to change methods without a prompt to change to a clearly better method. We argue that these institutionalized conventions thwart auditors' good‐faith attempts to engage in skeptical analysis of estimates. Thus, audit quality problems are likely to persist.     

The influence of voluntarily disclosed qualitative information

We examine the voluntary disclosure of qualitative information about actions involving governmental agencies and managerial intentions or beliefs in R&D project announcements in The Wall Street Journal. Our analysis indicates that information regarding government approval and managerial intentions/beliefs voluntarily disclosed in R&D project announcements interacts with industry/firm variables to provide significant incremental explanatory power in both the innovation and commercialization stages of R&D projects. Our data also indicate that the biggest impact is from managerial intentions, especially an intent to increase market share when coupled with being a larger firm. Copyright © 2000 John Wiley & Sons, Ltd.     

Networks and leadership development: Building linkages for capacity acquisition and capital accrual

Social networks can aid the leadership development process through facilitating access to important developmental assignments and the acquisition of capabilities to handle associated challenges. Although much of the traditional focus of leadership development has been on building intrapersonal capabilities, functioning effectively as a leader necessitates the development of interpersonal capabilities associated with dyadic ties and relational capabilities associated with patterns of ties within networks. Such capabilities allow aspiring managers to accrue not only human capital, but social and system capital as well. Aspiring managers can tap task, career, and friendship/support networks to aid developmental and career success. Structure factors, including strategic choices, network characteristics, and the technological interface moderate the ability of managers to convert potential network contacts into significant leadership development and capital accrual. Personal factors also influence leadership development prospects. Overall, there are many ways in which network concepts associated with dyadic and relational levels of analysis can facilitate addressing the challenges that are key to leadership development.     

Entrepreneurship: venture creation subprocesses,subdomains, and interfaces

While research interest in entrepreneurship continues to develop, considerable debate transpires on what exactly constitutes entrepreneurship and how to define the field appropriately. Thus, we sought to sort through a wide variety of entrepreneurship research in order to make sense of how various topics examined by scholars syndicate to comprise the field. First, we examine some of the numerous definitions that have been presented in literature thus far and offer our own definition based on a reasonable conclusion encompassing the parallels of thought. We then further comprehend the boundaries of entrepreneurship by examining subprocesses, subdomains, and interfaces. This integrative approach to understanding the field of entrepreneurship will be useful for current and future scholars interested in studying issues related to entrepreneurial phenomena by helping them recognize the multitude of factors that compose entrepreneurship, and thereby improve the quality of empirical and theoretical work in the field. We will conclude with a discussion of implications for entrepreneurial research, practice, and academic career development.     

Using virtual environments and agent models in multi-criteria decision-making

Decision-making is often a complex task. There may be multiple criteria to be satisfied. The consequences of the available options will have different spatial and temporal distributions affecting different population groups and different generations. Decisions are also frequently made in a social context where perceptions can be as important as facts. In this complex environment, research into decision-making has two aspects: (a) understanding the decision process and (b) assisting the decision process. This paper is based on the premise that these are closely linked and that tools are possible which both help us to understand and provide support to decision-makers. A frequently requirement is determination of the trade-offs involved in complex decision situations. These are difficult to establish. Common approaches have used both stated preference and revealed preference techniques. The latter provides a better reflection of real decisions, primarily in market conditions, but does not have the level of experimental control available in hypothetical choice situations. Experimental economics has recently emerged to try to bridge this gap by providing for control of variables within a decision context made real by salient inducements. After review of these options, and the associated literature, we propose a series of linked developments in visualisation and modelling which will support: definition of non-dominated choice sets; interactive choice experiments which encompass spatial and temporal disaggregation; agent-based models to provide social context; and, visualisation to provide a greater sense of immersion in the decision context supported by more intuitive information. We have begun the integration of the necessary software into a virtual decision environment but this paper is focused on conceptual development.     

Solar Commons: A “Commons Option” for the 21st Century

Private ownership of nature’s gifts—water, air, sunlight—stands in the way of solving the collective problems of the 21^st century. In the case of sunlight, common ownership through community solar trusts can overcome both the inequities and the inefficiencies of investor-owned utilities (IOUs) with legal monopolies. Those monopolies function with the same arrogance as aristocrats did in the past, but now the stakes are higher: the future of the planet. This essay describes the Solar Commons Project by which a team of inspired citizens and public scholars joined to create a form of community-trust solar-energy ownership, in which multiple stakeholders benefit. The goal is to make this “Solar Commons” model an iterable, scalable, model of community solar that empowers low-income neighborhoods in the United States. An integral part of the project is a process of creating community-engaged public art to communicate the nature of community ownership. Artistic and theatrical presentations can help involve the public in dialogues around questions of utility management that are normally couched in technical language designed to obfuscate the political power of electric utilities. One role citizens can play is unmasking utilities when they publicly promote themselves as providers of clean energy, even when they are actively engaged in protecting the interests of fossil-fuel companies. Ultimately, however, creating a Solar Commons involves more than criticizing the failed institutions of the past. It requires us to think innovatively about ways to draw upon the history of the commons to design new modes of sharing sunlight and other common goods to create a more equitable, sustainable future.     

Do state-owned enterprises benefit more from China's cereal grain tariff-rate quota regime?

In 2016, the United States launched a formal dispute with the World Trade Organization (WTO) concerning China's wheat, corn, and rice tariff-rate quota (TRQs) administration. A formal panel was requested in August 2017, with several major grain exporters, including Canada, joining as third-party members. This study employs two unique micro-level datasets to investigate the role of state-owned and non-state-owned enterprises’ (SOE and non-SOE, respectively) in China's agricultural imports. Results suggest that SOEs are noticeably more active in importing quota-bound commodities compared to quota-free imported commodities. Moreover, the larger role of SOEs in China's cereal grain imports is negatively correlated with China's food security targets, as measured by estimated prior year stocks-to-use ratios. Conversely, above average food security targets in China's cereal grain market leads to an important extensive margin adjustment of non-SOE import participation. Finally, we find very little compelling evidence that China's September reallocation of unused TRQ has any economic or statistically significant impact on non-SOE entry into importing or the intensity with which their imports occur.     

Product safety,contracts, and liability

A firm sells a dangerous product to heterogeneous consumers. Higher consumer types suffer accidents more often but may enjoy higher gross benefits. The firm invests resources to reduce the frequency of accidents. When the consumer's net benefit function (gross benefits minus expected harms) is decreasing in consumer type, the firm contractually accepts liability for accident losses and invests efficiently. When the consumer's net benefit function is increasing in consumer type, the firm contractually disclaims liability and underinvests. Legal interventions, including products liability and limits on contractual waivers and disclaimers, are necessary to raise the level of product safety.     

Is it godly to waste food? How understanding consumers' religion can help reduce consumer food waste

Food waste is a problem worldwide, but solutions have yet to adequately incorporate consumers' core values—values which are often rooted in religion. Study 1 shows that restrictive religious norms (e.g., rules about food consumption, fasting) lead to greater food waste, whereas supportive religious norms (e.g., sharing food) lead to reduced food waste. Study 2 replicates prior findings and rules out competing explanations. Study 3 manipulates marketing messaging to show that consumers with higher (lower) levels of religiosity are more likely to reduce food waste with a prevention (promotion) framed message partnered with environmental reasoning or a promotion (prevention) framed message partnered with people-based reasoning. Implications for marketers, consumer advocacy groups, and policy makers desiring to reduce food waste are provided.