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The purpose of this paper is to investigate the current practices of large UK organisations with respect to post-audits of capital projects with the aim of improving management decision making in the future. The investment process has been clearly mapped out in the literature, with the initial project proposal, appraisal, selection (investment decision), implementation, completion, and finally the post-audit. It is this latter stage which is ignored by so many organisations and has received less attention in the academic literature, a gap the author hopes to fill.

The empirical data are collated from a postal questionnaire, semi-structured interviews, followed by a short e-mail questionnaire. A methodological triangulation of empirical data obtained from the questionnaires and interviews, were undertaken to overcome some of the deficiencies from just using one method of data collection. The research is empirical and uses exploratory descriptive analysis to interpret the findings. The author focuses on the aspect of organisational learning theory as a process of continuous improvement, learning from past experience, especially in the management decision-making paradigm.

The author discovered nine important reasons for undertaking post-audits and ten for not. An important observation is that while those organisations which do not undertake post-audits attach a greater level of importance to “the reasons for not carrying out post-audits” and “the problems faced in the implementation of post-audits”, these difficulties have been overcome by those organisations that undertake post-audits. Evidence suggests that the current change in business culture, as a result of the recent financial crisis, may be refocusing the aims of post-audits from a learning exercise to one of managerial responsibility.

The research may be limited (in forming general conclusions) as it is based on a relatively small sample size. The author does not, however, believe that this distracts from its importance.

The author argues that training the non-users to overcome the perceived difficulties would enhance the investment decision-making process by encouraging them to learn from the experience of those that undertake post-audits.

The research is original as it reports on a current survey and will fill, what the author perceives to be, a gap in the literature. The respondents to the research consists of some of the most senior executives from the largest UK organisations and their views on academic issues are, in many cases, difficult to obtain; this research therefore has value in this respect. The findings point the way to new lines of enquiry in this field.

While investment decisions may be financial decisions, there is a growing recognition that they are also often non-financially based decisions. The purpose of this study is to report findings focused on the project selection stage of capital budgeting, which has the objectives of exploring for: the relative degree of emphasis decision makers attach to a financial and non-financial orientation in capital budgeting; and the role, if any, that two agency theory variables have on the relative degree of emphasis: a personal incentive for project go-ahead and monitoring of project outcomes through a post-audit.

Discrete choice experiments (DCEs) are used and framed in a between-subjects 2 (personal incentive) × 2 (monitoring) design. DCEs are well-suited to research questions which examine some tension between competing alternatives. For example, trade-offs involving the relative degree of emphasis decision makers attach to a financial and non-financial orientation in capital budgeting.

In the absence of a personal incentive and monitoring, decision makers attach a significant degree of emphasis to cash inflows and cash outflows, both financial factors, and one strategic non-financial factor being improvement in the position of the firm vis-à-vis competitors in capital budgeting. However, when decision makers receive a personal incentive from project go-ahead, they attach a lower degree of emphasis to cash outflows. Alternatively, when there is monitoring through a post-audit and a personal incentive, decision makers attach a higher degree of emphasis to cash outflows.

Decision makers attach a significant degree of emphasis to only a relatively narrow band of attributes in making a capital budgeting decision, which is true in both the absence of and in the presence of the agency conditions. There is also little support for the view that there is any higher degree of emphasis attached to a financial orientation vis-à-vis a non-financial orientation. A particularly important finding relates to the overarching goal of monitoring through a post-audit. One view is that it should foster more accurate forecasting by making forecasters aware that their efforts will be reviewed. However, the findings of this study appear to be more supportive of a view that post-audits might lead agents to become more conservative or even shy away from projects.

The study makes contributions to the growing field of research which has the objective of exploring for the relative degree of emphasis decision makers attach to a financial and non-financial orientation in capital budgeting. In particular, it extends the prior research through its investigation of the role that two agency theory variables play in the relative degree of emphasis decision makers attach to a financial and non-financial orientation: a personal incentive for project go-ahead and monitoring of project outcomes through a post-audit.

Investment project post‐completion auditing (PCA) is capable of yielding significant benefits to firms wishing to tighten the control of existing projects and also to improve their decision‐making and planning procedures. An increasing proportion of large companies now operates post‐audits in pursuit of these benefits. However, adoption and implementation of PCAs is not problem‐free. Among the likely drawbacks is the possibility of deterring staff from advancing proposals for new investment. However, evidence from an empirical study shows that there appears to be no significant relationship between adoption of PCA and level of investment expenditure, in either absolute terms or when adjusted for disposals or size of firm. This suggests that some of the difficulties typically associated with PCAs may be overstated. Concludes with a survey of the issues which would‐be adopters of PCAs should address and offers a checklist of action points designed to lubricate the introduction of PCAs.

Discusses how most organizations use formal methods which are purely objective and rational to evaluate system projects. Such methods are incapable of capturing the social aspects of system projects and as such are not appropriate. Inappropriate evaluation mechanisms and criteria have caused the detrimental effects of organizational bias to flourish, thereby defeating the purposes of project evaluation. Organizations, either knowingly or unknowingly, are judging instead of evaluating projects with the intention to punish or reward the project teams and so encourage biasing effects. Contends that an effective project evaluation should adopt a socio‐technical approach to reflect the socio‐technical nature of information systems. Describes and illustrates managerial guidelines on socio‐technical approach to project evaluation capable of accounting and controlling for the obvious effects of organizational bias.

This study investigates how a tax agency would assess the liability of a taxpayer who has first adopted a new, controversial tax‐saving scheme, which might be employed by other taxpayers. The tax agency’s post‐audit assessment to the first taxpayer influences whether and how the innovation will diffuse among taxpayers. We find that it is optimal for the tax agency to settle the issue regardless of whether and how fast the innovation diffuses. A trial is too costly an option for the agency: losing in court would make the innovation public knowledge, and other taxpayers would immediately adopt the new scheme. Neither the number of other taxpayers nor the speed of diffusion affects the amount of the optimal post‐audit assessment. These results suggest that a tax practitioner who markets a new tax‐saving scheme need not limit the speed of diffusion for fear of an aggressive response from the agency.

Recent corporate scandals have resulted in a greater focus on business ethics and governance. The purpose of this study is to examine whether the existing audit regulatory framework adequately serves the legitimate interests of stakeholders.

This study is the first to collect survey data on audit regulatory issues in the post‐Lehman Brothers environment. In total, 190 responses to a mail survey were collected from Big Four auditors and from 166 CEOs. Stakeholder theory is used to analyse these responses.

The results indicate that Big Four auditors and CEOs perceive the disclosure of post‐audit report event evidence to be important in discharging their ethical obligations. Both groups agreed that issuing timely audit reports is important, and that “introducing quarterly audit reporting” is a necessary step to enhance corporate governance. A risk‐based auditing approach necessitates the introduction of quarterly reporting. The findings support the notion underlying business risk auditing (BRA) models developed in public practice and the literature. CEOs are acutely aware of their corporate responsibilities to the company's stakeholders, and demonstrate that they understand the core insights of stakeholder theory by applying this theory in the corporations they manage. These results support the assertion that stakeholder theory has managerial implications and intrinsic value. CEOs comply with their audit disclosure obligations in several ways. Based on the results, a refined stakeholder model is proposed and immediate regulatory reform is recommended.

This study extends the literature on the theoretical development of the stakeholder model, which will facilitate standard setters and regulators in the Asia‐Pacific region and their counterparts in other regions to devise standard guidelines and improve corporate governance.

The purpose of this paper is to identify current practice in respect of the appraisal of both information communication technology (ICT) and non‐ICT capital investments, and to elicit the opinions of senior executives on the various issues concerning such investment practices.

Empirical research based on data from a postal questionnaire, designed around a factual and attitudinal survey.

This research presents evidence of the financial and risk assessment models used by practitioners in the appraisal of both ICT and non‐ICT capital projects. It shows that there was no significant difference between ICT and non‐ICT appraisals in this respect. It does, however, show that there are significant differences between the two types of projects in respect to other important appraisal/evaluation issues. It also uncovers important issues regarding ICT globalisation, project champions, post audits and appraisal teams.

This research does not identify the approach adopted, or the models used, to appraise strategic issues. This is an area for future research.

This research presents data that will assist both practitioners and academics in a greater understanding of the appraisal of both ICT and non‐ICT projects, which will pave the way to better decision making in the future.

It is believed that this is possibly the only survey to simultaneously address the appraisal issues concerning both ICT and non‐ICT projects.

To develop, test and implement a sampling strategy for equipment auditing for a Fortune 100 company.

Regression analysis is applied to auditing of equipment for a large US corporation. Empirical data and test data sets are used to evaluate the efficacy of using regression for auditing and to determine reasonable and efficient sample sizes to be employed across more than 5,000 locations.

Regression is a viable and useful method for equipment auditing when there is anticipated high correlation between pre‐ and post‐audit equipment value. Recommended sample size is dependent upon the size of the location as measured by total pieces of equipment. Decision rules combining acceptable tolerance limits, desired confidence level and sample size are provided.

The method, recommended sample sizes and decision rules are particularly applicable to instances where high correlation is expected between pre‐ and post‐audit equipment values. Standard regression assumptions are not all met in all instances, especially with small sample sizes.

The regression approach and model, sample size recommendations and decision rules for passing or failing an equipment audit described herein have been implemented at a Fortune 100 company, and are generally applicable to equipment and inventory auditing when high correlation between pre‐ and post‐audit equipment is expected.

This paper provides a practical and useful regression‐based approach to sampling for equipment auditing. Recommended sample sizes and decision rules for passing or failing the audit are explicitly defined.

Making rational and undistorted corporate investment decisions is critically important to organisations. “Scientific” investment appraisal can play a central role, particularly setting the hurdle rate. Empirical research reveals that actual rates generally exceed organisations’ cost of capital – the so-called hurdle rate premium (HRP) puzzle. Allowing for bounded rationality of corporate decision-makers, the purpose of this paper is to mobilise the retrievability cognitive bias as one explanation of this paradox.

A systematic structuring and investigation of the legacy of eight scenarios, representing “correct” and “incorrect” decisions on “good” and “bad” proposals, is used to explain the inconsistency between normative capital investment theory and actual practice.

Decision makers’ cognitive processes based on informal perceptions, strengthened by the scope of formal post-audit routines, provide a plausible explanation why investment decision makers tend to systematically set hurdle rates too high.

The findings have still to be explored in more depth by fieldwork and experimental research.

The policy implications of this study are that corporate success could be enhanced by making executives aware of the HRP phenomenon and of its behavioural causes; also by including significant rejected investment proposals in the post-audit programme and communicating the opportunity cost of “false negative” decisions on proposals not adopted.

The paper provides a new explanation for a recognised phenomenon: Allowing for bounded rationality of corporate decision-makers, the paper applies research on a cognitive bias to the setting of the hurdle rate in investment appraisal.

For firms using target costing, separating decision management from decision control helps to minimize the agency costs incurred throughout a product's economic life. Prior literature focuses on decision-management issues related to target costing, such as new product development (i.e., initiation) and production (i.e., implementation). In contrast, this article highlights the decision control aspects of target costing, which consist of ratifying product proposals and monitoring the product's implementation. While products initiated with target costing are chosen because they meet their allowable cost, product ratification requires assessing how well products contribute toward strategic goals, such as improving the firm's market value. To facilitate the ratification decision, this article develops an equation for determining a product's net present value (NPV) based on the same accounting data used during the initiation process. The article also describes monitoring a product's implementation through periodic comparisons to flexible budgets and a post-audit review at the end of the product's economic life.