Auditor's engagement risk and audit fees:the role of the audit firm alumni

This study explores the effect of the association of audit firm alumni with their alma mater on audit prices. The tests indicate that there is a moderate reduction of up to 21% in the level of audit fee when alumni (i.e., former employees) of the incumbent audit firm sit on the client board of directors which is consistent with the engagement risk theory. This suggests that there is an 'alumni effect' in the market for audit services. The findings hold only in the large company segment of the market. The results are robust to different model specifications and alternative samples. The sample comprises all executive and non-executive directors who run the UK quoted companies and are simultaneously ICAEW qualified chartered accountants. The study's implications for the accounting profession and the regulators are also discussed. © 2007 The Author Journal compilation © 2007 Blackwell Publishing Ltd.

Financial risk management for management accountants:Society of Management Accountants Canada, American Institute of Certified Public Accountants and Chartered Institute of Management Accountants

Management accounting guideline

Understanding accountants' participation in accounting information systems implementation : Malaysian evidence

The study is a two-part study starting with a nationwide survey in the private sector. The hypotheses derived from the Western literature were not significantly supported when the results were analyzed. It seems that the existing literature related to the phenomenon under investigation is mainly Anglo-Saxon culture oriented which is different from the Malaysian culture where the study was conducted. However, access barriers to private sector organizations shifted the focus of the research to the second part of the study that examined the issues in detail in four public sector organizations currently implementing accounting information systems – two hospitals and two universities. In the second part of the main study, the researcher developed formal and substantive propositions from the qualitative interviews which were substantiated using a cross-case analysis; as a result, a model for accountants’ participation in AIS implementation is proposed. The research shows that the process of influencing accountants to participate in AIS implementation is more complex than the literature suggests. There were many issues that surfaced during the case studies, such as conflict and empowerment which set a foundation for further research about how participation can be secured to help make the implementation of AIS part of an organizational agenda success.

Role conflicts of management accountants in the context of their structural relationship to production

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The changing roles of accountants in industry.

Both accountants and their professional associations have come under pressure in recent years to move with a changing environment. A research project was established therefore in order to study the present roles of accountants in industry, to consider how such roles have evolved, and to consider ways in which these roles might change in the future. Apart from these specific objectives, the thesis also attempts to come to terms with some of the major philosophical and theoretical challenges that face sociology. Given these broad aims, and given a limited amount of previous research, the approach was to derive tentative classifications and propositions from empirical investigation, rather than to test preconceived hypotheses. Data was obtained primarily from ninety-nine structured interviews with both accountants and other managers from twelve industrial enterprises. Aside from studying specifically the changing roles of accountants in industry, the following areas were investigated: the historical development of industrial organisations, accounting systems, and the professional accounting bodies; the process of occupational entry, socialisation, and career paths of accountants; and the current education, training, and career development of, and labour market for, accountants in industry. Despite variations according to accountants' positions, the sample's work characteristics and orientations were found to be similar to those of managers from other areas. In fact most accountants were more concerned with 'getting on' than committed to a career in accounting or to any particular professional association or employing organisation. While there was a move towards a more general business involvement for the majority of the sample, there was also in some cases an increasing demand for specialist accounting skills. In conclusion, although an eventual technological substitution for the work of accountants in industry is thought to be unlikely, their work is becoming more liable to evaluation and intervention form those outside their occupational group.

The effects of perceived business uncertainty, external consultants and risk management on organisational outcomes

Purpose: The purpose of this paper is to investigate the relations between perceived business uncertainty (PBU), use of external risk management (RM) consultants, formalisation of RM, magnitude of RM methods and perceived organisational outcomes. Design/methodology/approach: This paper is based on a questionnaire survey of members of the Chartered Institute of Management Accountants in the UK. Using AMOS 17.0, the paper tests the strength of the direct and indirect effects among the variables and explores the fit of the overall path model. Findings: The results indicate significant and positive associations exist between the extent of PBU and the level ofRMformalisation, as well as between the level ofRMformalisation and the magnitude of RMmethods adopted. The use of externalRMconsultants is also found to have a significant and positive impact on the magnitude of RM methods adopted. Finally, both the extent of RM formalisation and the magnitude of RM methods adopted are seen to be significantly associated with overall improvement in organisational outcomes. Research limitations/implications: The study uses perceptual measures of the level of business uncertainty, usage of RM and organisational outcomes. Further, the respondents are members of a management accounting professional body and the views of other managers, such as risk managers, who are also important to the governance process are not incorporated. Originality/value: This study provides empirical evidence on the impact ofRMdesign and usage on improvements in organisational outcomes. It contributes to the RM literature where empirical research is needed in order to be comparable with the traditional management control system literature.

Impacts of flooding on SMEs and their relevance to chartered surveyors:

This is the final report of the RICS Education Trust funded “Developing Flood Expert Knowledge in Chartered Surveyors – DEFENCES” research project. The UK has endured a number of major flood events in recent years, and the UK Environment Agency (2009a) identified that about 5.2million properties in England, amounting to one in six, are at risk of flooding. The impacts of flooding include direct and indirect impacts and can be particularly devastating for small and medium-sized enterprises (SMEs) who are generally more vulnerable to such events than larger business organisations. Recent flood events have established how costly flooding can be to the SME sector (Pitt, 2008, ABI, 2010), which has given greater impetus to the need to improve the resilience of at-risk SMEs. A lack of professional advice on flood protection and adaptation measures represents a potential barrier to the uptake of such interventions by SMEs. A recent Royal Institution of Chartered Surveyors (RICS) survey, as quoted in Defra (2008) notes that, although a majority of chartered surveyors would like to work in this area of practice (flood risk assessment and adaptation), they are conscious of gaps in their competency, knowledge and understanding. The research project sought to contextualise this broader issue and investigate how chartered surveyors can bridge the gap in providing professional flood advice to SMEs. Further, a shift in the UK government policy on flood risk management is evident, where at-risk communities are urged to adapt to flooding. This places greater emphasis on property-level flood adaptation, providing further impetus for Chartered Surveyors to be involved. Findings of the research will be of interest to the RICS, the RICS Flood steering Group, practicing surveyors generally, SMEs, business support and policy making organisations.

Integrating risk management with performance management

This article argues that, post Enron, governance reforms around the world have served to raise the profile of risk management, and emphasise the need for a corporate wide approach to internal control that is overseen by the Board of Directors. In the US, this is most clearly demonstrated by the emergence of Enterprise Risk Management (ERM), defined as 'a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.' (COSO, 2004, p.2). In practical terms, however, the introduction of an enterprise wide holistic risk management system poses a big challenge to all but the smallest of organisations. The financial crisis has clearly shown that enterprise wide risk management remains a dream rather than a reality for even the world's largest and once highly respected companies.

Reporting and managing risk:a look at current practice at Tesco, RBS, local and central government

These case studies from CIMA highlight the need to embed risk management within more easily understood behaviours, consistent with the overall organisational culture. In each case, some form of internal audit team provides either an oversight function or acts as an expert link in that feedback loop. Frontline staff, managers and specialists should be completely aligned on risk, in part just to ensure that there is a consistency of approach. They should understand instinctively that good performance includes good risk management. Tesco has continued to thrive during the recession and remains a robust and efficient group of businesses despite the emergence of potential threats around consumer spending and the supply chain. RBS, by contrast, has suffered catastrophic and very public failures of risk management despite a large in-house function and stiff regulation of risk controls. Birmingham City Council, like all local authorities, is adapting to more commercial modes of operation and is facing diverse threats and opportunities emerging as a result of social change. And DCMS, like many other public sector organisations, has to handle an incredibly complex network of delivery partners within the context of a relatively recent overhaul of central government risk management processes. Key Findings: •Risk management is no longer solely a financial discipline, nor is it simply a concern for the internal control function. •Where organisations retain a discrete risk management cadre – often specialists at monitoring and evaluating a range of risks – their success is dependent on embedding risk awareness in the wider culture of the enterprise. •Risk management is most successful when it is explicitly linked to operational performance. •Clear leadership, specific goals, excellent influencing skills and open-mindedness to potential threats and opportunities are essential for effective risk management. •Bureaucratic processes and systems can hamper good risk management – either as a result of a ‘box-ticking mentality’ or because managers and staff believe they do not need to consider risk themselves.

Accountants as institutional entrepreneurs:changing routines in a telecommunications company

Findings: As part of the consequences of new public management reforms, we illustrate how institutional entrepreneurs de-established an older state-run bureaucratic and engineering-based routine and replaced it with a business- and accounting-based routine. Eventually, new accounting routines were reproduced and taken for granted by telecommunications management and employees. Research Limitations/implications: As this study is limited to a single case study, no generalisation except to theory can be made. There are implications for privatisation of state sector organisations both locally and internationally. Originality/value: The paper makes a contribution to elaborating the role of institutional entrepreneurs as agents of change towards privatisation and how accounting was used as a technology of change. Purpose: The purpose of this paper is to explicate the role of institutional entrepreneurs who use accounting technology to accomplish change within a privatised telecommunications company. Design/methodology: The case study method is adopted. The authors draw on recent extension to institutional theory that gives greater emphasis to agency including concepts such as embeddedness, institutional entrepreneurs and institutional contradiction.

A conceptual framework of accounting policy choice under SSAP 20

Purpose - To provide a framework of accounting policy choice associated with the timing of adoption of the UK Statement of Standard Accounting Practice (SSAP) No. 20, "Foreign Currency Translation". The conceptual framework describes the accounting policy choices that firms face in a setting that is influenced by: their financial characteristics; the flexible foreign exchange rates; and the stock market response to accounting decisions. Design/methodology/approach - Following the positive accounting theory context, this paper puts into a framework the motives and choices of UK firms with regard to the adoption or deferment of the adoption of SSAP 20. The paper utilises the theoretical and empirical findings of previous studies to form and substantiate the conceptual framework. Given the UK foreign exchange setting, the framework identifies the initial stage: lack of regulation and flexibility in financial reporting; the intermediate stage: accounting policy choice; and the final stage: accounting choice and policy review. Findings - There are situations where accounting regulation contrasts with the needs and business objectives of firms and vice-versa. Thus, firms may delay the adoption up to the point where the increase in political costs can just be tolerated. Overall, the study infers that firms might have chosen to defer the adoption of SSAP 20 until they reach a certain corporate goal, or the adverse impact (if any) of the accounting change on firms' financial numbers is minimal. Thus, the determination of the timing of the adoption is a matter which is subject to the objectives of the managers in association with the market and economic conditions. The paper suggests that the flexibility in financial reporting, which may enhance the scope for income-smoothing, can be mitigated by the appropriate standardisation of accounting practice. Research limitations/implications - First, the study encompassed a period when firms and investors were less sophisticated users of financial information. Second, it is difficult to ascertain the decisions that firms would have taken, had the pound appreciated over the period of adoption and had the firms incurred translation losses rather than translation gains. Originality/value - This paper is useful to accounting standards setters, professional accountants, academics and investors. The study can give the accounting standard-setting bodies useful information when they prepare a change in the accounting regulation or set an appropriate date for the implementation of an accounting standard. The paper provides significant insight about the behaviour of firms and the associated impacts of financial markets and regulation on the decision-making process of firms. The framework aims to assist the market and other authorities to reduce information asymmetry and to reinforce the efficiency of the market. © Emerald Group Publishing Limited.

Postsocial relations:towards a performative view of accounting knowledge

This paper discusses the impact and influences of the growth of postsocial relations on accounting practice. Aspects of the growth of knowledge cultures, which have been argued to impact social and organizational arrangements, are discussed. Extending this view to accounting, we see accountants forming a distinctive knowledge culture with their own unique rules of how knowledge is constituted. These rules are embedded in accounting systems and practices. This paper suggests the need to further develop a research program that seeks to investigate accounting practice in local settings. The discussion in the paper is based on views which posit the growth of intimate links with epistemic objects within organizations and society. This paper argues that such ideas lead to an increasing tendency for us to experience the changes in societal relations and social arrangements as a compression of time and space. The paper relates these ideas to developments in the accounting research literature.

Inscribing the organization:representations in dispute between accounting and production

This paper assumes that a primary function of management accounting is the representation of "accounting facts" for purposes such as organizational control. Accountants are able to offer conventional techniques of control, such as standard costing, as a consequence of their ability to deploy accounting representations within managerial and economic models of organizational processes. Accounting competes, at times, with other 'professional' groups, such as production planning or quality management people, in this role of representing the organization to management. The paper develops its arguments around a case illustration of cost accounting set in a low technology manufacturing environment. The research relates to a case organization in which accountants are attempting to establish the reliability of accounting inscriptions of a simple manufacturing process. The case research focuses on the documents, the inscriptions that vie for managements' attention. It is these sometimes messy and inaccurate representations which enable control of complex and heterogeneous activities at a distance. At the end of our site visits we observe quality management systems in the ascendancy over the accountants' standard costing systems. © 2006 Elsevier Ltd. All rights reserved.