Audit committee effectiveness : informal processes and behavioural effects

Purpose This paper seeks to investigate the conditions and processes affecting the operation and potential effectiveness of audit committees (ACs), with particular focus on the interaction between the AC, individuals from financial reporting and internal audit functions and the external auditors. Design/methodology/approach A case study approach is employed, based on direct engagement with participants in AC activities, including the AC chair, external auditors, internal auditors, and senior management. Findings The authors find that informal networks between AC participants condition the impact of the AC and that the most significant effects of the AC on governance outcomes occur outside the formal structures and processes. An AC has pervasive behavioural effects within the organization and may be used as a threat, an ally and an arbiter in bringing solutions to issues and conflicts. ACs are used in organizational politics, communication processes and power plays and also affect interpretations of events and cultural values. Research limitations/implications Further research on AC and governance processes is needed to develop better understanding of effectiveness. Longitudinal studies, focusing on the organizational and institutional context of AC operations, can examine how historical events in an organization and significant changes in the regulatory environment affect current structures and processes. Originality/value The case analysis highlights a number of significant factors which are not fully recognised either in theorizing the governance role of ACs or in the development of policy and regulations concerning ACs but which impinge on their governance contribution. They include the importance of informal processes around the AC; its influence on power relations between organizational participants; the relevance of the historical development of governance in an organization; and the possibility that the AC’s impact on governance may be greatest in non-routine situations.

Informal interactions between audit committees and internal audit functions : exploratory evidence and directions for future research

Purpose – This paper aims to recognise the importance of informal processes within corporate governance and complement existing research in this area by investigating factors associated with the existence of informal interactions between audit committees and internal audit functions and in providing directions for future research. Design/methodology/approach – To examine the existence and drivers of informal interactions between audit committees and internal audit functions, this paper relies on a questionnaire survey of chief audit executives (CAEs) in the UK from listed and non-listed, as well as financial and non-financial, companies. While prior qualitative research suggests that informal interactions do take place, most of the evidence is based on particular organisational setting or on a very small range of interviews. The use of a questionnaire enabled the examination of the existence of internal interactions across a relatively larger number of entities. Findings – The paper finds evidence of audit committees and internal audit functions engaging in informal interactions in addition to formal pre-scheduled regular meetings. Informal interactions complement formal meetings with the audit committee and as such represent additional opportunities for the audit committees to monitor internal audit functions. Audit committees’ informal interactions are significantly and positively associated with audit committee independence, audit chair’s knowledge and experience, and internal audit quality. Originality/value – The results demonstrate the importance of the background of the audit committee chair for the effectiveness of the governance process. This is possibly the first paper to examine the relationship between audit committee quality and internal audit, on the existence and driver of informal interactions. Policy makers should recognize that in addition to formal mechanisms, informal processes, such as communication outside of formal pre-scheduled meetings, play a significant role in corporate governance.

Audit pricing and product differentiation in small private firms : evidence from Thailand

Purpose – There is limited evidence on how differences in economic environments affect the demand for and supply of auditing. Research on audit pricing has mainly focused on large client markets in developed economies; in contrast, the purpose of this paper is to focus on the small client segment in the emerging economy of Thailand which offers a choice between auditors of two different qualities. Design/methodology/approach – This paper is based on a random stratified sample of small clients in Thailand qualifying for audit exemption. The final sample consists of 1,950 firm-year observations for 2002-2006. Findings – The authors find evidence of product differentiation in the small client market, suggesting that small firms view certified public accountants as superior and pay a premium for their services. The authors also find that audit fees have a positive significant association with leverage, metropolitan location and client size. Audit risk and audit opinion are not, however, significantly associated with audit fees. Furthermore, the authors find no evidence that clients whose financial year ends in the auditors’ busy period pay significantly higher audit fees, and auditors engage in low-balling on initial engagements to attract audit clients. Research limitations/implications – The research shows the importance of exploring actual decisions regarding audit practice and audit pricing in different institutional and organizational settings. Originality/value – The paper extends the literature from developed economies and large/listed market setting to the emerging economy and small client market setting. As far as the authors are aware, this is the first paper to examine audit pricing in the small client market in an emerging economy.

Collaboration to improve evacuation centre operations in Queensland

Purpose The purpose of this paper is to provide a case study of two organisations working in evacuation centres which overcame challenges to develop a constructive relationship, resulting in improved outcomes for disaster-affected people. A wide range of services for disaster-affected communities are provided as part of emergency sheltering. Collaboration between agencies providing services is essential, but sometimes challenging. Design/methodology/approach A wide range of services for disaster-affected communities are provided as part of emergency sheltering. Collaboration between agencies providing services is essential, but sometimes challenging. The purpose of this paper is to provide a case study of two organisations working in evacuation centres which overcame challenges to develop a constructive relationship, resulting in improved outcomes for disaster-affected people. Findings The Preferred Sheltering Practices provides an ongoing anchor for Australian Red Cross and Environmental Health Australia (EHA) (Queensland) Inc.’s relationship and has led to other tangible benefits such as involvement in each other’s events and trainings. The relationship has become embedded in each organisation’s day-to-day business ensuring the relationship’s sustainability beyond individual staff movements. Originality/value This case study provides an example of how collaboration can be achieved between two organisations with seemingly different mandates to improve the response for disaster-affected communities.

Member perceptions of ESG investing through superannuation

Purpose Environmental, social and governance (ESG) risks have the potential to negatively impact financial returns, yet few superannuation funds integrate these considerations into their investment selection. The Cooper Review (2010) identified a lack of member demand as a key impediment to ESG investing by superannuation funds. Given this problem, the aim of this study is to explore superannuation fund members’ perceptions of ESG investing by their funds in order to identify reasons for the lack of demand. Design/methodology/approach An on-line survey was developed and distributed to assess possible reasons why members do not select ESG investment options. In total, 549 Australian superannuation fund members responded to the survey. Findings Results indicate that the majority of superannuation fund members are interested in ESG investing. Members lack awareness of their fund’s approach to ESG investing, and they do not perceive there to be a financial penalty from ESG investing. Finally, members show a preference for consideration of governance issues over both social and environmental issues. Research limitations Respondents are well educated and the majority did not choose their superannuation fund. There was no measure of financial literacy included in the research instrument. There is also a general limitation in surveying superannuation fund members when they lack knowledge about superannuation. Practical implications The results indicate that superannuation members are interested in both superannuation and ESG investing. Given the low take-up of ESG investment options, this finding raises the question of how effectively funds are engaging their members. Social implications The results should be of interest to superannuation funds and may lead to renewed interest in promoting ESG products. Originality/value This is the first study to examine superannuation members’ attitudes and behaviours towards ESG investing in the context of superannuation. The study also adds to our understanding of member decision making in the $1.8 trillion superannuation industry.

Examining the implementation of ISO 9001 in Indonesian construction companies

Purpose To examine the implementation of quality management systems (QMSs) of Grade 7 (G-7) Indonesian construction companies. This includes the initial motives that have driven the development of QMSs, barriers to effective QMS implementation, the current practice and integration of QMS-ISO 9001 principles and elements, and the performance of contractors implementing such QMSs. Design/methodology/approach A survey was conducted involving 403 respondents (Quality Management Representatives, Managers, and Project and Site Engineers) from 77 G-7 as well as ISO 9001 certified Indonesian construction companies. Findings The main motive for G-7 contractors in establishing and implementing ISO 9001 based QMSs are identified as being to effectively and efficiently control project activities. Respondents apparently do not often experience problems related to QMS implementation. However, issues of management attitude and purpose are identified as barriers that may affect effective QMS implementation. The study highlights the ISO 9001 principles and elements that still require to be more critically applied by G-7 contractors in order to fully implement and improve their current QMS effectiveness. The findings also suggest that, although certified, many G-7 contractors have not yet achieved a satisfactory level of performance to be truly competitive in global markets outside Indonesia. Originality/value To date, only limited research has been conducted into the application of ISO 9001 in the Indonesian construction industry. The research findings reinforced the value of pursuing more effective QMS implementation. They also support current attempts to introduce ISO 9001 QMSs to a much wider base of Indonesian construction companies, particularly small and medium sized contractors and builders.

Multimedia super corridor, Malaysia: Knowledge-based urban development lessons from an emerging economy

Purpose Knowledge-based urban development (KBUD) has been an effective strategy and an opportunity for emerging economies for catching up with the developed economies. The paper aims to investigate and provide insights on KBUD in the context of emerging economies. Design/methodology/approach The paper scrutinizes the Multimedia Super Corridor of Malaysia (MSC) by focusing on the planning, development and orchestration of the knowledge corridor. Findings The paper reveals a number of lessons and insights drawn from the development of MSC as the largest manifestation of KBUD initiative in Malaysia. Originality/value The paper provides lessons and recommendations on the planning, development and management of KBUD for emerging economies that are seeking a prosperous development.

Gen Y recruitment: Understanding graduate intentions to join an organisation using the Theory of Planned Behaviour

Purpose Using the Theory of Planned Behaviour (TPB) framework, this study explored whether the standard TPB constructs explained variance in Gen Y individuals’ intentions to join their ideal organisation. Design/methodology/approach A mixed methods approach was used featuring qualitative and quantitative methods. Findings The overall TPB model accounted for a significant 51.6% of the variance in intention to join one’s ideal organisation in the next six months with the significant predictors in the model being subjective norm and perceived behaviour control but not attitude. Research limitations/implications Using graduating students from a single Australian university sample may mean that the current findings may not extend to all Gen Y individuals. The current study has demonstrated the explanatory utility of the TPB in relation to graduate Gen Y’s intention to join their ideal organisation, providing further evidence of the robustness of the TPB framework in an organisational setting. Practical implications These findings have implications for enhancing understanding of the most effective recruitment processes for Gen Y students entering the workforce. The findings could inform recruitment policies and strategies to attract Gen Y applicants. Originality/value To our knowledge this study is the first application of the TPB to this topic. The current research extends the recruitment literature with a theoretically-based investigation. Identification of factors which inform organisational recruitment strategies, allow organisations to stand out from their competitors and potentially achieve a larger application pool from which to select the best human capital and sustain competitive advantage.

How long does stigma impact property values

Purpose - The purpose of this paper is to determine the impact stigma has on property values and how long the stigma remains after the Not in My Back Yard (NIMBY) structure has been removed. Design/methodology/approach - A quantitative analysis was undertaken, using a high voltage overhead transmission line (HVOTL) case study, to determine the effect on property values prior and post removal of the NIMBY structure. A repeat sales index in conjunction with the regression analysis determined the length of time, the stigma remained after removal of the NIMBY structure. Findings - The results show that while the NIMBY is in place the impact on value is confined to those properties in close proximity. This is in contradiction to the findings, where on removal of the NIMBY the property values of the whole neighbourhood improve with the stigma remaining for 3 to 4 years. Research Implications - The implication of this research is that property Valuers need to change the way they take into account the presence of NIMBYs when valuing property with more emphasis, being placed on the neighbourhood rather than just the properties in close proximity. While the HVOTL was in place, only properties in close proximity were negatively affected, but on removal of the HVOTL the whole neighbourhood increased in value. Originality/value - Results expand on current knowledge by demonstrating the length of time the market takes to adjust to the removal of a NIMBY structure.

Leading or managing? Assistant Regional Directors, School Performance, in Queensland

Purpose Education reform aimed at achieving improved student learning is a demanding challenge for leaders and managers at all levels of education across the globe. In 2010, the position of Assistant Regional Directors, School Performance (ARD-SP), was established to positively impact upon student learning across public schools in Queensland, Australia. This study explores the perceptions of the role and leadership understandings of ARDs in Queensland in order to understand more fully the tensions and opportunities they face within this reasonably newly created position. Design/methodology/approach This qualitative study is based on interviews with 18 Assistant Regional Directors and two of their supervisors to gauge a better understanding of the nature of the role as it relates to leadership and management in the Queensland context. Findings Interview data revealed three key themes pertaining to the nature of the role and these were performance, supervision, and professional challenges. A key finding was that the notion of supervision was experienced as problematic for ARDs-SP. Research limitations/implications This study has limitations and these include a sample that focused on Assistant Regional Directors within one State of Australia and one schooling system (i.e. public education); and interviews were the primary data collection source. Originality/value Although there have been studies of supervisors of principals (referred to as superintendents, directors) in other countries and other systems, this study is a first to explore the tensions and opportunities faced by executive leaders in Queensland.

Women at work! evaluating equal employment policies and outcomes in construction

Purpose The purpose of this paper is to examine equal employment policies in Australia’s male-dominated construction industry and categorise the types of activities undertaken against an equal employment typology to identify links to outcomes for women in the form of increased participation and management. Design/methodology/approach To explore the issue of low representation of women in construction through the content analysis of 83 construction organisations’ equal employment opportunity (EEO) reports. Findings This industry is not engaging with equal employment issues and the numbers of women working in the industry and/or management are based on individual decision rather than an institutional commitment to equality in diversity. Research limitations/implications Australian legislation mandates organisational reporting of relevant data and offers public access to this information offering a unique data set. Practical implications An ageing population means that the predominately older male workforce is leaving construction in greater numbers with fewer potential replacements making new labour markets a vital consideration. Social implications Legislation and organisational policies designed to promote EEO for women have existed in numerous countries for decades. One objective of this legislation was to reduce male domination in senior positions and industries/occupations where women were under-represented. Despite this, few women are employed in construction in operational or management roles worldwide. Originality/value This study offers a comprehensive analysis of a male-dominated industry in one jurisdiction rather than a few selected cases and uses a broader rigorous typology for analysis that acknowledges both equal and different treatment options.

Not just what they want, but why they want it: Traditional market research to deep customer insights

Purpose This paper explores advantages and disadvantages of both traditional market research and deep customer insight methods in order to lay the platform for revealing how a relationship between these two domains could be optimised during firm-based innovation. Design/methodology/approach The paper reports on an empirical research study conducted with thirteen Australian based firms engaged in a design-led approach to innovation. Firms were facilitated through a design-led approach where the process of gathering deep customer insights was isolated and investigated further in comparison to traditional market research methods. Findings Results show that deep customer insight methods are able to provide fresh, non-obvious ways of understanding customer needs, problems and behaviours that can become the foundation of new business opportunities. Findings concluded that deep customer insights methods provide the critical layer to understand why customers do and don’t engage with businesses. Revealing why was not accessible in traditional market research methods. Research limitations/implications The theoretical outcome of this study is a complementary methods matrix, providing guidance on appropriate implementation of research methods in accordance with a project’s timeline to optimise the complementation of traditional market research methods with design-led customer engagement methods. Practical implications Deep customer insight methods provide fresh, non-obvious ways of understanding customer needs, problems and behaviours that can become the foundation of new business opportunities. It is hoped that those in a position of data collection are encouraged to experiment and use deep customer insight methods to connect with their customers on a meaningful level and translate these insights into value. Originality/value This paper provides original value to a new understanding how design techniques can be applied to compliment and strengthen existing market research strategies. This is crucial in an era where business competition hinges on a subtle and often intimate understanding of customer needs and behaviours.

The centrality of ethical leadership

Purpose The central argument in this paper is that ethical school leadership is imperative in a context of increasing performance-driven accountability. The purpose of this paper is to focus on school principals’ perceptions of how they understand ethical leadership and how they lead the ethical use of data. Design/methodology/approach This study utilises semi-structured interviews with six state school principals (one primary and six secondary) to explore their perceptions of ethical leadership practices; and how they balance current competing accountabilities in a context of performance-driven accountability. Findings There were four key findings. First, principals used data to inform and direct their practices and their conversations with teachers. Second, while ethics was a central consideration in how principals’ led, practising in an ethical manner was identified as complex and challenging in the current context. Third, Starratt’s (1996) ethical framework proved to be relevant for interpreting principals’ practices. Finally, all of the principals referred to dilemmas they faced as a result of competing priorities and all used a variety of strategies to deal with these dilemmas. Originality/value While there is a small body of research that explores school leaders’ understandings of ethical tensions and dilemmas, there is little research that has focused on school leaders’ understandings of the ethical use of data. This study, then, contributes to this area as it provides a discussion on school principals’ leadership practices in the current climate driven by data use.

Achieving service quality through service innovation exploration-exploitation: The critical role of employee empowerment and slack resources

Purpose This study investigates the effects of service innovation exploration-exploitation on financial performance through the delivery of quality services. Additional emphasis is also given to examining the extent to which employee empowerment and slack resources enhance or suppress the performance benefits of service firms engaging in service innovation exploration versus exploitation. Design/methodology/approach Data were drawn from a multi-informant survey of service firms using a drop-and-collect approach. The survey gathered data from managers, customer service employees and customers to test the hypotheses. Findings The results show that excelling at both exploitative and exploratory innovation helps enhance the quality of services, which in turn yield superior financial performance. Further, empowering employees enhances the relationship between exploratory and exploitative service innovation and service quality. We also show that the extent managers’ perceived their market to be competitive influences in the pursuit of high levels of both service innovation exploration and exploitation and that this relationship is impacted by the extent they believe they have available slack resources. Practical implications The findings suggest that service firms need to pursue both exploitation and exploration at high levels simultaneously and empower their employees to stay ahead of competitors in delivering quality services, which ultimately contribute to the achievement of superior financial outcomes. Also, the findings highlight the importance of employee empowerment, market competitiveness and slack resources in the pursuit of high levels of both service innovation exploration and exploitation. Originality/value These findings and our theory indicate that this study is the first to empirically examine organizational ambidexterity in the context of service innovation exploration – exploitation adopting the principles of combined and balanced innovation. The study provides insights into the critical role of customers’ perceptions of service quality in contributing to firms’ financial performance. Our insights are unique in that the study incorporates managers, employees and customers in an integrated service innovation model.

An improved computational method in structural dynamics

Purpose – In structural, earthquake and aeronautical engineering and mechanical vibration, the solution of dynamic equations for a structure subjected to dynamic loading leads to a high order system of differential equations. The numerical methods are usually used for integration when either there is dealing with discrete data or there is no analytical solution for the equations. Since the numerical methods with more accuracy and stability give more accurate results in structural responses, there is a need to improve the existing methods or develop new ones. The paper aims to discuss these issues. Design/methodology/approach – In this paper, a new time integration method is proposed mathematically and numerically, which is accordingly applied to single-degree-of-freedom (SDOF) and multi-degree-of-freedom (MDOF) systems. Finally, the results are compared to the existing methods such as Newmark’s method and closed form solution. Findings – It is concluded that, in the proposed method, the data variance of each set of structural responses such as displacement, velocity, or acceleration in different time steps is less than those in Newmark’s method, and the proposed method is more accurate and stable than Newmark’s method and is capable of analyzing the structure at fewer numbers of iteration or computation cycles, hence less time-consuming. Originality/value – A new mathematical and numerical time integration method is proposed for the computation of structural responses with higher accuracy and stability, lower data variance, and fewer numbers of iterations for computational cycles.