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We contribute to the literature on institutional and organizational change by integrating two related areas of study: the theory and methods of analysis informed by the research on institutional logics and historical-event sequencing. Institutional logics provide the theory to understand how the content of culture influences organizational change; historical-event sequencing reveals the underlying patterns of cultural transformation. We apply this dual perspective to the cases of institutional stability and change in organizational governance in three industries: accounting, architecture, and higher-education publishing. Research on governance has focused on changes in organizational design between markets, hierarchies, and networks. Missing from this research is an understanding of how institutions at the wider societal level motivate organizations to adopt one of these governance forms over another. We examine how the governance of firms in these industries has been influenced by the institutional logics of the professions, the market, the state, and the corporation by focusing on three mechanisms – institutional entrepreneurs, structural overlap, and historical-event sequencing. Overall, our findings reveal how accounting was influenced by state regulation producing a punctuated equilibrium model, architecture by professional duality producing a cyclical model, and publishing by market rationalization producing an evolutionary model of institutional change in organizational governance.

This chapter examines the sources of variation in organizational form among accounting and law firms. We first summarize research in the organization of professional service firms and explain its evolution. This is followed by the argument that variations around the P2 archetype have emerged in response to different market and institutional pressures faced by accounting and law firms. Drawing on contingency and institutional theory, we show how the changing balance between the influence of market and institutional factors has resulted in structural variation.

Mandatory auditor firm rotation (mandatory rotation) has been a controversial issue in the United States for many decades. Mandatory rotation has been considered at various times as a means of improving auditor independence. For example, in the United States, the Public Company Accounting Oversight Board (PCAOB) has considered mandatory rotation as a solution to the independence problem (PCAOB, 2011) and the European Parliament approved legislation that will require mandatory rotation in the near future (Council of European Union, 2014). The concept of implementing a mandatory rotation policy has been encouraged by some constituents of audited financial statements and rejected by other constituents of audited financial statements. Although there are apparent pros and cons of such a policy, the developmental process of such a policy in this country has not necessarily been an open-democratic, objective process. Universal mandatory rotation may or may not be the ideal solution; however, an open-democratic, objective process is needed to facilitate the development of a solution that considers the needs of all major stakeholders of audited financial statements – not simply accounting firms and public companies, but also investors. The purpose of this paper is to critically examine key issues relating to mandatory rotation and to encourage and stimulate future research and ongoing dialogue regarding this issue, in spite of efforts by certain constituents to silence the issue. This paper provides an overview of the various reasons, including practical, theoretical, political, and self-motivated reasons, why a mandatory rotation policy has not been implemented in the United States in order to address the potential conflict of interest between the auditor and client. This paper will also discuss how some deliberations of mandatory rotation have been flawed. The paper concludes with a summary of key issues along with two approaches for regulators, policy makers, and academics to consider as ways to improve the process and address auditor independence. The authors are not advocating for any specific solution; however, we are advocating for a more objective, unified approach and for the dialogue regarding auditor rotation to continue.

This article is the third in a trilogy of articles that discuss the professionalism (or deprofessionalism) of the accounting profession. The first examines the slow uphill climb of accounting and auditing practice to the level of being recognized as a highly trusted profession. The second examines the stagnation in professionalism leading to deprofessionalization of the accounting profession. This third article looks at the resulting directionless efforts of accounting and auditing firms in the wake of major deprofessionalization events. The interest in this study is the time period immediately following the passage of the Sarbanes–Oxley Act (SOX) of 2002 which is described in this paper as the “Post-SOX” history of public accountancy in the United States. During this time period, nearly equally mixed activities of professionalism and deprofessionalism have resulted in a status quo with directionless efforts doing little if anything to reverse decline in professionalism. Public accountants continued to experience conflict with the Securities and Exchange Commission (SEC) over independence rules. The large Certified Public Accountant firms generated controversies and squabbles concerning “auditing and consulting,” while at the same time they faced questions regarding the marketing and selling of aggressive tax shelters. In addition, most of the self-regulating aspects of the profession declined dramatically following passage of SOX. While initially both tax fees and audit fees of CPA firms increased during this time period, concerns are again arising as the large CPA firms more recently have renewed the emphasis on advisory services. While revenues have both increased and changed in composition during the post-SOX era, public opinion has maintained a status quo. The post-SOX era has also seen a weakening in the Code of Conduct, providing more liberties for CPAs to maximize self-interest. Meanwhile, the PCAOB faced constitutional challenges, while at the same time the AICPA experienced strong divisions in its membership. To provide some sense to these directionless efforts, this study, similar to the prior two articles in this trilogy, concludes with a summary analysis based on the nine SOCRECELIST criteria, and the question whether public accountants have learned their history lesson.

Prior research finds evidence that audit quality is positively associated with the joint purchase of tax nonaudit services (NAS) and concludes that jointly provided tax services result in audit-related knowledge spillovers that lead to improved audit quality. We extend this line of research. We examine the relation between auditor-provided tax services and restatements and determine whether this relation differs when the auditor is a small or large accounting firm. We also examine whether the Securities Exchange Commission’s restrictions on certain tax consulting practices (SEC, 2006) altered this relation. Specifically, we measure whether the probability of financial statement restatements varies with (1) variation in accounting firm size (measured as PCAOB annually inspected firms versus PCAOB triennially inspected firms), and (2) the joint provision of audit and tax services. We find a negative relation between auditor-provided tax services and restatements which is consistent with prior research. We also find that this relation is significantly more negative when the auditor is a small accounting firm. Finally, we find that the lower probability of a restatement associated with the joint provision of audit and tax services persists regardless of auditor size after the SEC-imposed restrictions on certain tax consulting services in 2006. Our study provides evidence that accounting firms, and particularly small accounting firms, benefit from knowledge spillovers when jointly providing audit and tax services and these benefits lead to improved audit quality. Prior research concludes that large auditors provide higher audit quality and that the provision of tax services improves audit quality. Our results provide evidence that audit quality improvements are greater for small auditors and their clients. This improvement narrows that audit quality gap between large and small auditors. We do not find evidence that the SEC’s restrictions on certain tax consulting services altered the relation between audit quality and tax services.

This paper provides evidence on the impact of regulatory environment on financial reporting quality of transitional economies. This study compares the financial reporting quality of Hong Kong firms which are cross-listed in mainland China with those of Hong Kong firms cross-listed in China using specific earnings management metrics (earnings smoothing, timely loss recognition, value relevance and managing towards earnings targets) under pre- and post-IFRS regimes.

The financial reporting quality of Chinese A-share companies and Hong Kong listed companies are examined using earnings management measures. Using 2007 as base year, the study used a cumulative of −5 and +5 years of convergence experience which provide a total of 3,000 firm-year observations. In addition to regression analyses, we used the difference-in-difference analysis to check for the impact of regulatory environments on earnings management.

Through the lens of contingency theory, our results indicate that the adoption of the new substantially IFRS-convergent accounting standards in China results in better financial reporting quality evidenced by less earning management. The empirical results further shows that accounting data are more value relevant for Hong Kong listed firms, and that firms listed in China are more likely to engage in accrual-based earnings management than in real earnings management activities. We established that different earnings management practices that are seemingly tolerable in one country may not be tolerable in another due to level of differences in the regulatory environments.

The findings show that Hong Kong listed companies’ exhibit higher level of financial reporting quality than Chinese listed companies, which implies that the financial reporting quality under IFRS can be significantly different in regions with different institutional, economic and regulatory environments. The results imply that contingent factors such as country’s institutional structures, its extent of regulation and the strength of its investor protection environments impact on financial reporting quality particularly in transitional and emerging economies. As such, these factors need to be given appropriate considerations by financial reporting regulators and policy-makers interested in controlling earnings management practices among their corporations.

This study is a high impact study considering that China plays a significant role in today’s globalised economy. This study is unique as it the first, that we are aware of, to compare real earnings activities against accrual-based earnings management in pre- and post-IFRS adoption periods within the Chinese and Hong Kong financial reporting environments, distinguishing between cross-listed and non-cross-listed firms.

Online education may meet the needs of students who do not want to attend classes or of working adults who want to obtain a college degree. Yet an open question is whether online (OL) degrees meet the needs of employers (Adams & DeFleur, 2006; Columbaro & Monaghan, 2009). Specifically, our exploratory study investigates how professionals in public accounting firms perceive OL accounting degrees as compared to accounting degrees earned in the traditional face-to-face (FTF) environment relative to a hiring decision. To examine these issues, a survey was administered to accountants of small- and large-sized public accounting firms located in the southeast United States.

Our results revealed that public accounting professionals, in general, indicate a strong preference to hire students with a traditional FTF accounting degree as opposed to a candidate with an OL accounting degree. Even when both candidates (traditional vs. OL accounting degrees) had passed the CPA examination, public accounting firm professionals still prefer the traditional accounting degree. Yet public accounting firms were more willing to hire a candidate with an OL accounting degree from an Association to Advance Collegiate Schools of Business (AACSB) accredited university than a candidate with an OL accounting degree from a non-AACSB accredited university. Lastly, we found that the preferences for traditional accounting degrees existed across different job titles (e.g. partner, manager, senior) and different sized public accounting firms.

The time period from the mid-1980s through 2002 is described in this series of research as a “pre-SOX” era of rapid deprofessionalization in U.S. pubic accountancy resulting in the loss of professional status. This was a period, however, when all professions were suffering some deprofessionalization. During the pre-SOX period it appears that leadership in public accountancy responded to a nearly perfect storm of changes confronting the profession with a corporate mentality of management by objectives, commercialization, and profit maximization resulting in constant and substantial net deprofessionalization greater than that of other professions. Starting in the late-1970s and continuing through 2001, some critics of public accountancy have asserted that leaders in the profession either lost or forgot what was required for public accountancy to be recognized as a profession. The conclusion stated in this paper is that public accountancy has lost its professional status in or before 2002. The reasons and events leading to this conclusion are presented and discussed. In the United States it appears as though once professional status is lost, regaining the elite status is more difficult. The question is if public accountancy can learn from history going into the substantial changes to be confronted in the post-SOX era of public accountancy and regain or at least make progress toward regaining professional status.

Notwithstanding the relevance of managerial control systems (MCS) in any organization, as well the distinctive role they can play in family business, due to its specific features, the literature rarely dealt with the role and characteristics of MCS in family business. Taking into account previous contributions from different disciplines (organization, management accounting, and family business), the current work aims to better understand the state of the art about research in the field of MCS in family business in order to identify main research gaps and propose future research directions.

Forty-five articles have been analyzed, which were issued in 29 sources. Research findings show that the literature on MCS in family business is limited and not very conclusive. Some authors focused on the type of controls, other authors outlined the role of MCS in managerialization and the relation with professionalization. A few studies focused on some specific mechanisms, especially strategic planning and compensation. Some contributes dealt with MCS’ determinants and impacts. Differences between family and non-family firms were proposed. However, a clear and organized picture of the features of MCS in family firms, their determinants, and impacts has not yet been developed. Particularly, the impact of the distinctive features of family business on MCS represents an underdeveloped research field along with how MCS can be differently developed and used in different kinds of family firms. In the light of findings of the literature review, we propose a reference research framework on MCS in family business.