Internal audit involvement in enterprise risk management

Purpose – The purpose of this paper is to examine the impact of internal auditors’ involvement in enterprise risk management (ERM) on perceptions of their willingness to report a breakdown in risk procedures and whether a strong relationship with the audit committee affects such willingness to report. The study also investigates the use of ERM and the role of internal audit in ERM in Australian private and public sector entities.
Design/methodology/approach – The study uses an experimental design, manipulating the internal auditor’s involvement in ERM and the strength of the relationship between internal audit and the audit committee. Participants are 117 certified internal auditors. The study also gathers descriptive data on the use of ERM.
Findings – The study indicates that a high involvement in ERM impacts the perceptions of internal
auditors’ willingness to report a breakdown in risk procedures to the audit committee. However, a strong relationship with the audit committee does not appear to affect their perceived willingness to report. The study also finds that the majority of organisations have recently adopted ERM. Internal auditors are involved in ERM assurance activities but some also engage in activities that could compromise objectivity.
Research limitations/implications – There are internal and external validity threats associated with the experimental design.
Practical implications – The findings reinforce the need for organisations to adhere to the recommendations of the Institute of Internal Auditors and to ensure that internal auditors do not play an inappropriate role in ERM.
Originality/value – The paper contributes to our understanding of the impact of involvement in ERM on internal audit objectivity and of the current role of internal audit in ERM in Australia.

Perceptions of corporate social and environmental accounting and reporting practices from accountants in Bangladesh

Purpose – The aim of this study is to elicit accountants' perceptions regarding corporate social and environmental accounting and reporting practices in a developing country such as Bangladesh.

Design/methodology/approach – Members of the Institute of Chartered Accountants of Bangladesh (ICAB) were surveyed to determine their perceptions on issues pertaining to social and environmental accounting and reporting practices in Bangladesh.

Findings – Whilst the findings show that accountants have positive attitudes toward corporate social and environmental accounting, progress is limited, with the absence of ICAB in making any noticeable effort to develop such practices.

Research implications – Unlike prior studies, the implications of this study suggest that without international influence, it is less likely that institutional forces in Bangladesh (ICAB and the government) would be effective in dealing with social and environmental accounting and reporting issues.

Originality/value – While prior studies advocate proactive roles of the accounting profession, this study argues that proactive roles are less likely to prevail in the context of Bangladesh without direct intervention from institutional and regulatory authorities in the international arena.

Corporate sustainability reporting of major commercial banks in line with GRI : Bangladesh evidence

Purpose – This paper aims to examine the tendencies of sustainability reporting by major commercial banks in Bangladesh in comparison with global sustainability reporting indicators outlined in the GRI framework together with banks' predilection toward reporting 16 GRI financial service sector (FSS) specific performance indicators.

Design/methodology/approach – Based on the GRI G3 guidelines, the paper investigated banks' reporting in five broad areas of sustainability, such as environment, labour practices and decent works, product responsibility, human rights and society. The 2008/2009 annual reports of 12 major commercial banks listed on Dhaka stock exchange were analysed and coded using a content-based technique.

Findings – The results show that information on society is addressed most extensively with regard to extent of reporting. This is followed by the disclosures prepared on decent works and labour practices and environmental issues. Furthermore, the disclosures of product responsibility information and the information for human rights are rather scarce in banks' reporting; on the subject of FSS-specific disclosures, only seven items out of 16 are disclosed by all sample banks.

Research limitations/implications – The findings of the study indicate that Bangladeshi commercial banks' social disclosures could develop in this style to become more holistic and over time (in association with the country's central bank involvement) to resemble a type of structured reporting to the point where they are properly labelled per se.

Originality/value – The study contributes to the social disclosure literature, in particular in a developing countries banking sector context, seeing as it disseminates evidence of the standing on social disclosures practices at the level of GRI with developing countries' banks data.

Does the change of accounting regulation on employee share options give rise to greater scope for earnings management?

Purpose – The purpose of this paper is to address the concern about the impact of accounting regulatory change pertaining to employee share options (ESOs) on earnings management. Following Australia’s adoption of International Financial Reporting Standards (IFRS) in 2005, companies are required to recognise the fair value of ESOs as expenses. Due to inherent imprecision in the estimate of ESO’s fair value, the regulatory change from disclosure to recognition was widely claimed to potentially give rise to an alternative mechanism to manage earnings. This study provides empirical evidence on whether the regulatory change leads to earnings management problems.

Design/methodology/approach – This study uses the regulatory change in accounting for ESOs to provide a direct test of earnings management between disclosed versus recognised regimes for the same sample of firms. The sample consists of Australian firms from S&P/ASX300 for the period from 2003 to 2006.

Findings – The results show that, although the accounting regulatory change from disclosure to recognition may provide an alternative earnings management vehicle, there is no evidence of this occurring. There could be several reasons for this finding. First, the statistical tests lack power. Second, there are stricter audit tests on recognised amounts than on disclosed amounts. Third, given the concern of excessive pay and the close scrutiny of compensation, managers may have already understated ESO values in the disclosure regime. Finally, managers have limited time and resources and the effort involved in the adoption of IFRS in 2005 could have restricted the time available to manage earnings via the ESO reporting channel.

Originality/value – This study adds to the limited research on whether a change in accounting regulation for employee share options from disclosure to recognition gives rise to greater scope for earnings management. One reason for the lack of empirical evidence in the research is due to the problem of designing a test. Bernard and Schipper suggest that within-firm studies have limitations for comparing the effects of recognition versus disclosure when the change is driven by an estimate becoming more reliable. A cross-sectional study is also problematic due to self-selection bias if firms can choose between disclosure versus recognition. This study circumvents potential design problems raised by Bernard and Schipper by setting a test using regulatory change which allows the test to be compared directly using the same company.

Packaged good : responses from Australian journalism educators on the Reporting Diversity project

The Reporting Diversity Project provides teaching materials on reporting cultural diversity for journalism educators and university students. This article reports the findings from a survey designed to gauge journalism educators' awareness of the online curriculum resources and their views on the usefulness of these materials. The survey was also used to capture journalism academics' views on educational resources produced with government support. This article includes the findings from a series of trials of the Reporting Diversity teaching resources with a small cohort of academics from throughout Australia. It includes their evaluation of the resources and reveals ways in which the modules are being used and adapted for different classroom settings.

Human rights performance reporting : a study of corporations within Australian financial sector

This paper investigates the human rights performance reporting practices of the top 50 Australian financial service companies listed in the Australian Stock Exchange. All corporate reporting media, including annual reports, Social Responsibility Reports (CSR) and company websites, were reviewed to document their disclosure practices for the current period (2009/2010). In considering a number of international voluntary guidelines on human rights, a content analysis instrument containing 80 specific human rights themes, under 10 general categories, was developed to examine corporate reporting media. The results remain intensely unimpressive. The number of companies that disclosed human rights items is extremely low; the majority of the items were not disclosed by any of the companies under investigation. However, compared to CSR reports and company websites, annual reports were the preferable media used to disclose human rights issues. The result indicates how ineffective the voluntary global guidelines are in ensuring that Australian financial corporations report on their human rights performances.