What’s in it for Me? An Examination of Accounting Students’ Likelihood to Report Faculty Misconduct

Since there are so few controls over detecting and preventing faculty misconduct, one of the most common ways in which it is discovered is through student reports (in other words, whistleblowing). Given the importance of student reports in bringing to light faculty’s ethical lapses, this paper seeks to understand what factors influence students’ likelihood to report faculty misconduct. We develop an empirical model that integrates the decision process of the Prosocial Organizational Behavior (POB) Model with insights from the emotional perspective on whistleblowing. Specifically, we use an experimental survey to examine how students’ perceived unfairness of the faculty misconduct, feelings of anger, and the students’ self-interest in the situation in conjunction with situational “cues for inaction” lead to the intention to blow the whistle. Overall, the results from our structural model partially support our theoretical model. Interestingly, these findings demonstrate that, in the case of faculty member misconduct, anger and perceptions of unfairness play a greater role than the more rational cost-benefit process of the POB model. These results could aid in development of ethics education for students and could also inform the development of university policies that encourage students to come forward when faced with faculty misconduct.     

The Relationship of Cognitive Effort,Information Acquisition Preferences and Risk to Simulated Auditor–Client Negotiation Outcomes

The auditor–client relationship is a legally-mandated relationship in which one party, the auditor, is hired and paid by the auditee (client) to inform third party stakeholders as to whether the client firm’s financial statements are presented in conformity with national financial accounting standards. When these statements do not meet the criteria for acceptable financial statements, a negotiation situation may arise in which the auditor is presumed to act in the best interests of shareholders and creditors who have no independent knowledge of the auditor’s findings. The client management may then feel forced to defend its numbers. The result is a negotiation between the auditor and client (e.g., Salterio in Account Financ 52:233–286, 2012; Brown and Wright in Account Horiz 22(1):91–109, 2008). This study examines cognitive factors and risk preference factors that may impact the negotiation both in the setting of each side’s negotiation position and on the outcomes of that negotiation using simulated auditor–client negotiations. Questionnaire and simulated auditor–client negotiations were used to generate the data, with MBA and MS in Accounting students playing the role of client CEOs and auditor partners. We further explore the use of a tool, Structural Equation Modeling, to test the data, in the process highlighting its usefulness in auditor–client negotiation research. We find that the cognitive characteristic of need for cognition is significantly and positively related to achievement of the negotiator’s desired income objectives and reported willingness to argue strongly for his/her position. Actively open-minded thinking, a second cognitive variable studied, was not significantly related to success in the negotiations, nor to a reported willingness to argue strongly for his/her position. Finally, we find that perceived aggressive tactics by the other party to the negotiation had a negative impact on the counterpart negotiator’s success in the negotiation, and satisfaction with it. As expected, risk assessment-related variables were not related to outcomes of interest.     

Contemporary Economic thought. The Contribution of Neo-Institutional Economics

This article examines the historical developments of the institutionalist theory of the business enterprise since the early 1900s in order to demonstrate its distinctive characteristics that are often overlooked or belittled by some institutional-evolutionary economists and most mainstream economists. I argue that the institutionalist theory is an evolving and emergent theory, which bears a reciprocal, evolutionary, and cumulative relationship between the business enterprise and society. The institutionalist theory is, therefore, suitable for the understanding of the real-world business enterprise as it can be modified and refined along with the evolution of capitalism. The article begins with a discussion of the present state of the institutionalist theory. The following section is devoted to the major contributions to the institutionalist theory situated in the evolution of U.S. capitalism. The penultimate section provides a critical discussion of new institutional and evolutionary approaches to the firm. The article concludes with a brief discussion as to what should be done for the further development of the institutionalist theory of the business enterprise.     

Modeling the dynamics of inflation compensation

This paper investigates the relationship between short-term and long-term inflation expectations using daily data on inflation compensation derived from the term structure of real and nominal interest rates. We use a flexible econometric model which allows us to uncover this relationship in a data-based manner. We relate our findings to the issue of whether inflation expectations are anchored, unmoored or contained. Our empirical results indicate no support for either unmoored or firmly anchored inflation expectations. Most evidence indicates that inflation expectations are contained.     

Is non-audit services a suitable proxy for auditor independence in the post-SOX period?

Before implementation of the Sarbanes Oxley Act (SOX) in 2002, researchers frequently used fees from non-audit services (NAS) as a surrogate for auditor independence. NAS is still used in this way, even though SOX has restricted the types of NAS that auditors may provide to their clients. Therefore, we pose the following question: What does the literature say about the continuing adequacy of NAS as a surrogate for auditor independence in the post-SOX era? This question is relevant to research in accounting regulation because, if NAS is no longer an adequate surrogate, then research on auditor independence may provide biased results. Overall, we find that many post-SOX studies using NAS have insignificant or counterintuitive results, whereas pre-SOX studies using NAS predominantly have significant results suggesting that NAS impairs auditor independence. Is this shift in findings because NAS is no longer an adequate proxy for independence? We discuss this issue and provide our conclusions, citing relevant research where applicable.     

Formal Rehabilitation Procedures and Insolvent Firms: Empirical Evidence on the British Company Voluntary Arrangement Procedure

The British Company Voluntary Arrangement (CVA) is a relatively new debtor rehabilitation process intended to help financially troubled companies, particularly SMEs, resolve their difficulties without being forced into liquidation by secured creditors anxious to recover their funds. This paper is based on a survey conducted by Milman and Chittenden for the Association of Chartered Certified Accountants that is the largest and most comprehensive on the subject of British CVAs. It has three principal objectives: (i) to outline the defining characteristics of CVAs; (ii) to analyse the relationships between CVA performance and contextual factors; (iii) to provide policy recommendations based on those findings. Among other things we find that CVA success is most closely associated with sound fundamental prospects for recovery and supportive creditors. Our principal recommendation is that ways should be found of lowering the fixed costs of CVAs to make the procedure feasible for a larger number of small firms.     

Texas treasury notes and market manipulation, 1837-1842

This paper examines the course of the value of the paper money issued by the Republic of Texas in New Orleans, from 1837 to 1842, using a newly-constructed weekly time series of quotations, and focusing on the possibility of market manipulation. Specifically, during 1841, misleading information concerning a possible foreign loan reached New Orleans three different times. The first time, the information substantially raised the value of Texas Treasury Notes. The second time, the information raised the value, but to a lesser extent. The third time, the information had no impact.