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This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create…
This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.
This research examines the effect of auditors’ personal debt on their audit decision making. We developed two different background scenarios that vary the level of the…
This research examines the effect of auditors’ personal debt on their audit decision making. We developed two different background scenarios that vary the level of the auditor’s personal debt. While one scenario indicated that the partner lived a modest lifestyle and was relatively free of debt, the other indicated that the partner lived an expensive lifestyle and had considerable personal debt. Our data indicate that auditors receiving the higher personal indebtedness scenario were more likely to believe that the auditor in the case study would sign-off on the audit without doing any additional work. We also found that the propensity to believe that the auditor in the case study would sign-off on the audit without doing any additional work decreased as the participants’ rank within the firm increased. Our research documents that a partner’s level of indebtedness could influence the participant’s audit decisions.
A primary purpose of the voluntary administration legislation is to provide a flexible procedure by which a company can attempt to reorganise its affairs and continue…
A primary purpose of the voluntary administration legislation is to provide a flexible procedure by which a company can attempt to reorganise its affairs and continue trading. Informed decision‐making regarding which companies should attempt reorganisation is critical to the efficient operation of company rescue legislation. This paper explores decision‐making associated with the voluntary administration process, with a focus on the relevance of financial information to the reorganisation decision. Statistical models are developed to provide some insight into the reorganisation decision and the problem of identifying suitable (successful) reorganisation candidates from a pool of distressed companies. Additionally, insolvency experts’ decisions regarding companies’ prospects in reorganisation are examined. The decision accuracy of insolvency experts was found to be significantly lower than statistical model accuracy, indicating that further development of statistical models may be a useful aid to insolvency experts.
This chapter examines the effect of mutual monitoring and the personality trait of need for achievement on subordinates’ budgetary-slack creation in a team-based…
This chapter examines the effect of mutual monitoring and the personality trait of need for achievement on subordinates’ budgetary-slack creation in a team-based environment. Experimental results show that the creation of budgetary slack is lower when mutual monitoring is present than when it is absent. The results also show that a two-way interaction between mutual monitoring and the personality trait of need for achievement affects subordinates’ budgetary-slack creation.
The mathematical modelling of audit fees has emerged in research as onemeans by which the factors which explain the level and variability ofaudit fees can be examined…
The mathematical modelling of audit fees has emerged in research as one means by which the factors which explain the level and variability of audit fees can be examined. Existing literature shows that auditee size and complexity are major determinants of audit costs incurred by an auditee. Examines the power of these and other variables in explaining the variability of external audit fees for a sample of Australia′s largest listed companies and contributes to the existing literature by examining other potentially important factors which explain audit fees, some of which are unique to the present study. Reports results for the effect of: the presence of particular audit firms (for example, Coopers & Lybrand as opposed to say, Price Waterhouse); the extent of the level of internal audit in the auditee and; industrial classification of the auditee (for example, mining, manufacturing, retail, etc.). Results show that a very high proportion of reported audit fees can be explained by linear regression models, especially for certain auditors (for example, Peat Marwick, where over 93 per cent of the variability in fees can be explained by the model) and for certain industries (for example, the building industry, where over 90 per cent of variability is explained). Notes several limitations, especially those relating to measurement difficulties.
In 2014, the European Union (EU) adopted the non-financial reporting Directive (2014/95/EU) making the disclosure of certain non-financial topics mandatory for large…
In 2014, the European Union (EU) adopted the non-financial reporting Directive (2014/95/EU) making the disclosure of certain non-financial topics mandatory for large listed companies. They are required to report on policies, actions and outcomes regarding their environmental impact, social and employee matters, impact on human rights and corruption. Denmark introduced mandatory corporate social responsibility (CSR) reporting already in 2009, while Germany had no specific legislation on CSR reporting before 2017. Some authors allege that regulation positively impacts CSR reporting, while others argue that the voluntary nature of CSR reporting is essential (Romolini, Fissi, & Gori, 2014). Critics of mandatory reporting claim that non-financial reporting should develop bottom-up, as mandatory one-size-fits-all solutions are inappropriate given the differences among companies (ICC, 2015). The aim of this chapter is to evaluate the effect of legislation on reporting quality by comparing Denmark with a long tradition for mandatory reporting and Germany introducing mandatory rather recently. However, a rich body of literature exists on factors impacting CSR reporting other than legislation. These are among others: firm size, ownership structure, industrial sector and culture (Hahn & Kühnen, 2013.)
The chapter applies a content analysis of 150 CSR reports from German and Danish listed companies between 2008 and 2017 from four different industrial sectors. The chapter finds that mandatory reporting improves overall report quality by lifting the quality floor, yet, without lifting the quality ceiling. Size is important as improvements in reporting are largest in small and medium-sized companies. Companies in environmentally sensitive sectors tend to disclose more relevant environmental information than companies in less sensitive sectors. Both culture and ownership structure has a moderating effect on report quality.
This paper examines the effectiveness of the reliance on a leader’s reputation as an informal control tool to mitigate subordinates’ budgetary slack. In addition, it seeks…
This paper examines the effectiveness of the reliance on a leader’s reputation as an informal control tool to mitigate subordinates’ budgetary slack. In addition, it seeks to explain whether this relationship is mediated by subordinates’ truthfulness in revealing their private information.
A laboratory experiment was conducted involving 60 undergraduate business students who participated in the experiment. A 1 × 2 between-subjects design was employed for the experimental study. Each subject assumed the role of a production manager responsible for setting a budget target. The experimental task employed involved a simple decoding task adapted from Chow (1983).
The results of this study indicate that budgetary slack is lower when a leader’s reputation is favourable than when it is unfavourable. In addition, it is found that subordinates’ truthfulness in revealing private information fully mediates the relationship between a leader’s reputation and budgetary slack.
This paper extends the limited literature on the reliance of informal controls in mitigating budgetary slack by examining a leader’s reputation as an informal control. The findings of this study provide important implications for the design of effective management control systems.
In this interview, Dr. Julia Gluesing describes her career trajectory and the successful approach to teaching global leadership that evolved from her anthropology and…
In this interview, Dr. Julia Gluesing describes her career trajectory and the successful approach to teaching global leadership that evolved from her anthropology and communication background, coupled with deep knowledge of the auto industry and the engineering context. Her lessons are applicable and invaluable for anyone teaching global leadership – or engineers.
The purpose of this paper is to investigate the role stress model originally developed by Fogarty et al. (2000) using more refined measures, a context-specific performance…
The purpose of this paper is to investigate the role stress model originally developed by Fogarty et al. (2000) using more refined measures, a context-specific performance metric and a targeted respondent group. The investigation uses a sample of working professional auditors to investigate the associations between job stressors, burnout and job outcomes using an industry-specific measure of job performance.
The analyses use structural equations modeling procedures to examine a model that postulates that burnout will mediate the relations between job stressors and job outcomes. The data for the study come from 293 survey instruments completed by auditors working at the offices of 11 public accounting firms. A parsimonious job satisfaction scale based on Churchill et al.’s (1985) 27-item scale is developed using classical test-item analysis and is incorporated into the analysis.
The results suggest three significant items of note. First, although prior research has found that burnout partially mediates relations between job stressors and job outcomes, this study shows that burnout fully mediates these associations. Second, the study provides support for the reduced audit quality practices (RAQP) scale as an audit-specific construct for job performance. Finally, results show that the 27-item job satisfaction scale can successfully be reduced to a six-item scale.
While this study is subject to the limitations inherent to all cross-sectional studies that use self-report instruments, the results further the knowledge related to the role stress paradigm in auditor work settings.
This study’s findings provides a cogent argument for human resource managers at public accounting firms to monitor staff burnout levels and implement interventional strategies (Jones III et al., 2010) when these levels become excessive. Efforts to mitigate staff burnout levels may decrease the likelihood of staff engagement in dysfunctional audit practices and the associated costs to the firm and the individual(s) involved.
The findings also demonstrate the superiority of the RAQP scale in terms of explaining variance in auditor performance when compared to the modified performance measures utilized in prior research.