Use of derivatives in public sector organisations

The present paper develops and tests a model explaining public sector derivative use in terms of budget discrepancy minimization. The model is different from private sector models. Private sector models do not readily translate into the public sector, which typically faces different objectives. Hypotheses are developed and tested using logistic regression over a sample of Australian Commonwealth public sector organizations. It is found that public sector organization derivative use is positively correlated with liabilities and size consistent with the hypotheses concerning budget discrepancy management.

The use of internal audit by Australian companies

Purpose – The purpose of this study is to explore the voluntary use of internal audit by Australian publicly listed companies and to identify factors that lead listed companies to have an internal audit function. Design/methodology/approach – Drawing on the Institute of Internal Auditors' definition of internal auditing, the paper predicts that internal audit use is associated with factors related to risk management, strong internal controls and strong corporate governance. To test the predictions, the study combines data from a survey of listed companies with information from corporate annual reports. The paper also provides descriptive information on the use of internal audit. Findings – The results indicate that only one-third of the sample companies use internal audit. While size appears to be the dominant driver, there is also a strong association between internal audit and the level of commitment to risk management. However, the study finds only weak support for an association between the use of internal audit and strong corporate governance. Research limitations/implications – A limitation of our study is that some of the variables in the model may not be good proxies for the factors being measured. Refinement of the model and the variables used provides an opportunity for future research. Practical implications – The limited use of internal audit by Australian companies has important implications for sound corporate governance. Originality/value – This is the first study that identifies factors associated with the use of internal audit by Australian listed companies.

I am the very model of a special purpose vehicle

Purpose – This paper aims to provide a critical comment on complex funding systems. Design/methodology/approach – This is a critical comment written in the form of a poem. The poem is in the style of the English light opera composers Gilbert and Sullivan, and is a variation on their song “I Am the Very Model of a Modern Major General”, from The Pirates of Penzance. Findings - The poem spotlights financial failure. Originality/value - The poem spotlights the crazy names and poor transparency of special purpose vehicles.

Accounting for competition, governance and accountability during institutional change in not-for-profit and public sector organisations

Purpose The aim of this thesis1 is to analyse theoretically how institutionalisation of competitive tendering2, governance and budgetary policies cannot be taken for granted to lead to accountability among institutional actors3. The nature of an institutionalised management accounting policy, its relevance as a source of power in organisational decision making, and in negotiating inter-organisational relationships, are also analysed. Practical motivation The practical motivation of the thesis is to show how practitioners and policy makers can institutionalise changes which improve the power of management accounting and control systems4 as a mechanism of accountability among institutional actors and in negotiating relationships with other organisations. Theoretical motivation and conceptual approach The theoretical motivation of the thesis is to extend the institutional framework of management accounting change proposed by Burns and Scapens (2000) by using the theories of critical realism, communicative action, negotiated order and the framework of circuits of power. The Burns and Scapens framework needs further theorisation to analyse the relationship between the institutionalisation of management accounting and accountability; and the relevance of management accounting information in negotiating in inter-organisational relationships. Methodology and field studies Field research took place in public and not-for-profit health care organisations and a municipality in Finland from 2008 to 2013. Data were gathered by document analysis, interviews, participation in meetings and observations. Findings The findings are explained in four different essays that show that institutionalisation of competitive tendering, governance and budgetary policies cannot be taken for granted to lead to accountability among institutional actors. The ways by which institutional actors think and act can be influenced by other institutional mechanisms, such as inter-organisational circuits of power and intraorganisational governance policies, independent of the institutional change process. The relevance of institutionalised management accounting policies in negotiating relationships between two or more organisations depends on processes and contexts through which institutional actors use management accounting information as a tool of communication, mutual understanding and power. Research limitations / implications The theoretical framework used can be applied validly in other studies. The empirical findings cannot be generalised directly to other organisations than the organisations analysed. Practical implications Competitive tendering and budgetary policies can be institutionalised to shape actions of institutional actors within an organisation. To lead to accountability, practitioners and policy makers should implement governance policies that increase the use of management accounting information in institutional actors’ thinking, actions and responsibility for their actions. To reach a negotiated order between organisations, institutionalised management accounting policies should be used as one of the tools of communication aiming to reach mutual agreement among institutional actors.

Auditing and accounting handbook,

Mode of access: Internet.

The impact of authority advice and accountability on auditors' decision to recognise norm-violating transactions.

Auditors face the difficult responsibilty to approve companies' financial accounting information reliably. They are trained to work according to accounting standards that are designed to help them in their decision making. Yet, auditors do not work in a social vacuum and are thus subject to various influences. One important source of influence at work is authority figures (e.g., experts, supervisors). On this background, we examined within two studies the impact of (1) authority advice to comply with accounting standards or to additionally maximize profits and (2) of participants' accountability for their decision. In Study 1, (n = 184 accounting students), participants who were advised by an authority to comply with accounting standards had a lower probability to recognise transactions that violated those standards than participants who were advised to comply but also to maximise profit. However, holding participants accountable for their decision reduced the difference between the two groups. In Study 2, (n = 58 managers), we again found an interaction between authority advice and accountability. But unlike the first study, participants only showed a lower probability to recognise transactions that violated accounting standards when they were held accountable and when the authority only advised them to comply with the standards. We discuss our results in light of unethical decision making and different norms or pressures to which managers may be exposed but students may not.