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The purpose of this paper is to test a conceptual framework explaining the role of relationships and trust in enabling the purchase of business advice by small business owner–managers from their external accountants.

The study uses a semi-structured interview approach with 20 small- and medium-sized enterprise (SME) owners and accountants in London and Melbourne.

The interview data support the conceptual framework’s central proposition that relationships and trust, rather than being antecedents of demand for advice, are necessary conditions for enabling latent demand. SMEs with greater propensity to trust are more open to buying business advice but not necessarily from their accountant.

A limitation of the fieldwork is that it is based on a non-random and limited sample of accountants and SMEs.

Accountants in public practice can no longer assume that the already established relationships with their clients, developed while providing compliance services, will automatically lead SME clients to purchase business advice.

The paper contributes to the accounting literature by developing a conceptual model of relationships and trust that will assist the profession in better understanding the complex dynamics of the accountant–client relationship. The conceptual model distinguishes, for the first time, the antecedent factors of demand for business advice from the enabling roles of relationships and trust. Fieldwork interviews also yielded new insights into how SMEs’ decisions to purchase business advice are influenced by specific personality traits of SME owner–managers and additional antecedent demand factors not identified in the extant literature – economic conditions, environmental turbulence and business life-cycle.

This paper aims to conduct an experiment that investigates the effect of the ambiguity present in international financial reporting standards (IFRS) on the judgments of auditors. This paper also examine the effects of the personality trait of ambiguity tolerance on judgments of auditors.

This paper conduct an experiment in which experienced Australian-based auditors are placed in hypothetical revenue recognition and lease classification decision contexts. The participants are members of the Australian accounting profession who are familiar with applying IFRS.

This paper find support for the perception that when the relevant IFRS are more ambiguous, auditors make less aggressive reporting judgments compared to when the IFRS are less ambiguous. The results also unveil a novel finding that auditors who are more tolerant of ambiguity are likely to choose the accounting treatment that best reflects the economic substance of a transaction when interpreting IFRS compared to those who are less tolerant of ambiguity.

These results would be of interest to policymakers and accounting researchers as they continue to contemplate a shift to more principles-based IFRS.

To the best of the authors’ knowledge, this study is the first to examine the influence of an individual’s ambiguity tolerance on financial reporting quality in jurisdictions that have adopted IFRS.

This study aims to investigate whether “small- and medium-sized enterprises” (SMEs) benefit from their external accountants’ business advice through enhanced firm performance. Most SMEs draw on external support, and their main advisors are external accountants (Bennett and Robson, 1999). The resource-based view of the firm suggests that firms will seek external support if they perceive a gap in their internal resources.

Data were collected from a questionnaire mailed to a random sample of Australian SMEs, defined as businesses having between 5 and 200 full-time employees.

An analysis of 380 survey respondents confirms a positive relationship between the voluntary purchase of business advice and SME performance, and that SME performance is further enhanced when business advice is purchased jointly with auditing. These relationships apply to the small (5-49 employees) but not to the medium-sized (50-200 employees) businesses. Findings are consistent with smaller firms having narrower resource bases and thus a greater need to source business advice.

The accounting profession has long encouraged a broadening of its service base, and evidence that small businesses perceive a performance benefit from their accountants’ business advice provides support for the profession’s strategy.

This research extends the empirical literature investigating the link between the business advice of an external accountant and SME performance. It explains small firms’ demand for business advice by extending the application of the resource-based view of the firm and provides new evidence consistent with “knowledge spillover” from auditing to business advice in the small firm environment.

Business advisory services are an emerging service category for external accountants in the small and medium-sized enterprise (SME) environment. The purpose of this study is to investigate determinants of SME demand for business advice, drawing on the agency theory, relational marketing and resource-based literatures.

The study empirically tested theoretical predictions based on an Australia-wide survey of SMEs, in which 485 firms responded to a questionnaire.

The results show that the purchase of business advice is significantly and positively associated with the perceived competence of the external accountant, but significantly and negatively associated with length of the relationship. However, the authors observe a significant positive interaction between tenure of the relationship and competence. A unique contribution of this study is the development of the understanding of the combined role of the external accountant’s competence and the tenure of the relationship. The findings indicate that SMEs require time to verify whether accountants have the competence to provide business advice, suggesting that information asymmetry and uncertainty is minimised only after SMEs have nurtured relationships with their external accountants, and after they have developed some confidence in the competence of their external accountants. At the same time, the negative association with tenure suggests that when accountants are not perceived as competent advisors, SMEs purchase less advice over time.

The paper has important theoretical implications by augmenting agency theory, the relational marketing and the resource-based literature, and it clarifies which antecedent factors are important in explaining demand for business advisory services provided by accountants to their SME clients. In particular, the paper highlights the importance of the combined roles that the external accountant’s competence and tenure play in the SME–accountant relationship, highlighting how these two factors can overcome credence issues and ex ante information problems.

The findings have practical implications for government initiatives targeting support to SMEs, as the findings identify small firms and firms planning to grow as likely to gain the greatest benefit from external advice and support.

This study adds to the limited literature and scant theoretical discussions on the emergence of business advisory services that accountants provide to their SME clients by drawing on several theories to explain the determinants of business advice.

The purpose of this paper is to investigate the association between corporate governance mechanisms and quality of forward-looking information in the Chinese stock market which presents a mandatory disclosure environment for forward-looking information.

Using sales forecasts to proxy forward-looking information and using precision and accuracy to measure the quality of information disclosure, the authors investigate the impact of corporate governance attributes on the precision and accuracy of sales forecasts made by listed Chinese firms in their 2010 annual reports, using logistics and ordinary least squares regressions.

The authors find good corporate governance has a positive and significant impact on the precision choice of sales forecasts disclosure. Firms with good corporate governance are more likely to disclose more precise sales forecasts than providing qualitative discussions on firms’ sales trend. In addition, good corporate governed firms are found more likely to provide precise non-financial information. The authors also find that good corporate governance is positively associated with making more conservative sales forecasts disclosure. However, the authors find no significant relationship between good corporate governance and smaller forecast error.

The study makes significant contributions to corporate disclosure literature. The authors investigate the determinants of the quality of forward-looking information in a mandatory disclosure regime while most forward-looking information disclosure literature have been conducted in a voluntary-based disclosure environment. The authors examine whether in a mandatory disclosure regime, corporate governance mechanisms can play a positive role in precision choices and accuracy of forward-looking information. Further, the study is the first to examine corporate governance and the quality of non-financial forward-looking information (sales target and production goal). The research findings therefore extend forward-looking information disclosure research from financial information to non-financial information.

The empirical findings will provide regulators with evidence on the quality of forward-looking information in a mandatory disclosure regime and the influence of corporate governance on forward-looking disclosure. The properties of forward-looking information disclosure in China should be of interest to policy makers, investors and financial analysts in other international jurisdictions.

The study investigates forward-looking information in a mandatory disclosure regime while most extant forward-looking information studies have been conducted in a voluntary disclosure environment. The study is the first to examine the quality of non-financial forward-looking information such as operational goals and plans, and to investigate the association between the quality of non-financial forward-looking information and corporate governance mechanisms. The research findings extend forward-looking information disclosure research from quantitative financial information to quantitative non-financial information.

The purpose of this paper is to provide insights into the current roles and responsibilities of the internal audit (IA) function and the factors perceived to be necessary to ensure its effectiveness. The current performance evaluation practices of IA are also examined.

Semi‐structured interviews were utilised to elicit the perceptions of key corporate governance actors about the evolving role of IA, as well as IA effectiveness, in terms of its design, measurement and evaluation.

The results of the study suggest significant expansion and refocus of the role of IA and perceptions of its effectiveness. However, the findings also suggest that performance evaluation mechanisms of IA have not evolved contemporaneously. The misalignment between the role and evaluation gives rise to difficulty in assessing the extent to which IA functions are meeting stakeholders' expectations.

The findings are useful in informing the deliberations of regulators and standard setters, as well as providing a benchmark for internal auditors and audit committees. The insights are also relevant for external auditors who are required to consider various aspects of corporate governance, including the objectivity and quality of IA.

The use of semi‐structured interviews facilitates an in‐depth insight and understanding of the perceptions of roles, effectiveness and evaluation of IA and adds depth to the predominantly questionnaire‐based survey approach of prior studies.