Accounting Organizations and Society最新文献

We examine whether the desire to maintain sociopolitical legitimacy with critical stakeholders affects sales targets set by Chinese firms. Drawing from institutional theory, we argue that enterprises owned by local government (local-SOEs) feel greater pressure to maintain their legitimacy with the local government relative to private firms (non-SOEs), leading to a stronger association between the provincial GDP target (a legitimate benchmark) and firm-level targets. Results from manually collected data support this conjecture and are robust to alternate measures and samples. Increases in the demand for legitimacy -- measured using exogenous shocks and sample characteristics -- strengthen the association. Finally, changes in the coverage in the official press and changes in target achievement rates document the real effects of this strategy. Our findings demonstrate the effects of institutional pressures on corporate decisions and enrich our understanding on the socially constructed as well as instrumental rationality role of management accounting.

Consulting services have returned to prominence among Big 4 accounting firms in the United States. I find that this shift did not happen unexpectedly, but as a result of changes in audit firm leadership and culture. Specifically, I document that the U.S. Big 4 firms have recently appointed an increasing percentage of advisory office managing partners (OMPs). Using a generalized difference-in-differences design, I find an increase in non-audit services (NAS) and decrease in audit quality among audit clients following advisory OMP appointments, particularly after an audit predecessor. Additional analyses suggest that consulting firm acquisitions, office-level NAS, and non-audit hiring practices also increase following advisory OMP appointments. Importantly though, I find that the NAS and audit quality effects following advisory OMP appointments are stronger when these other initiatives have not yet materialized in the office and appear somewhat muted when these shifts have already occurred. Consistent with expectations, supplemental tests reveal that the effects of advisory OMP appointments are more pronounced in small audit offices and when clients purchase more NAS or have weaker audit committee oversight. Overall, these results suggest that OMP appointments play a prominent role in setting culture and executing strategy within an audit office.

Recent regulatory and professional developments have increased the frequency with which public accountants interact with professionals from other accounting firms. Archival findings in accounting indicate that when the same firm provides both audit and non-audit tax services, audit quality is better than when different firms provide these services, which is attributed to differential communication of audit knowledge, or a “knowledge spillover” effect that occurs between professionals from the same firm. However, empirical research that examines how information is communicated across engagement teams is limited. Using social identity theory, we predict that the communication decisions of accounting professionals could be biased when multiple firms perform accounting services and that this has potential negative implications for audit quality. We conduct an experiment in settings where professional services are split across different accounting engagement teams and find that both tax and audit professionals are more likely to disclose information about possible financial statement errors to auditors from their own firm compared to those from a rival firm. We also find that tax professionals are more willing to communicate errors to a client when another firm is responsible for the error compared to their own firm, but we do not observe this effect for auditors. We believe that these results have important implications for audit quality and provide new insights into the effects of inter-firm collaboration of accountant knowledge sharing.

Examining the implementation of ISA 700 (UK and Ireland) provides unique insights into auditors’ word choice and tone when creating expanded audit reports. Focusing on the first two years of ISA 700 implementation, I evaluate readability and tone to determine if ISA 700 audit reports are associated with greater reading ease and increased risk discussion. I find that ISA 700 audit reports are easier to read and better reflect the risk-related nature of the audit. Results show that improvements are concentrated in the initial year of implementation. Additionally, audit reports include more general versus discipline-specific terms noted in management-developed communications. Using an information readability metric, I find that post-ISA 700 audit reports are readable even when more risks are disclosed. Overall, these results show that expanded audit reports can be crafted in a manner that is easier to understand while communicating the underlying risks in a financial statement audit.

The unprecedented contagion of the SARS-CoV-2 virus, causative of COVID-19, has spawned watershed economic, social, ethical, and political upheaval—catalyzing severe polarization among the global populace. Ostensibly, to demonstrate the most appropriate path towards responding to the virus outbreak, public officials in the United States (“U.S.”), representing both Democratic and Republican parties, stand accused of unduly influencing COVID-19 records in their respective jurisdictions. This study investigates the role political partisanship may have played in decreasing the accuracy of publicly reported COVID-19 data in the U.S. Leveraging social identity theory, we contend that public officials may have manipulated the reporting records in accounting for COVID-19 infection cases and deaths to validate the effectiveness of political party objectives. We employ Benford's Law to assess misreporting and evaluate the integrity of county-level COVID-19 reporting data through the construction of four distinct political party classifications. Specifically, we cross the county voting majority for the 2016 presidential candidate for each U.S. state (Democratic and Republican) with the 2020 gubernatorial political party (Democratic and Republican) in which each county resides. For the sample period of January 21, 2020 through November 3, 2020 (Election Day), the study's results suggest that the reported COVID-19 infection cases and deaths in the U.S. violate Benford's Law in a manner consistent with underreporting. Our analysis reveals that Democratic counties demonstrate the smallest departures from Benford's Law while Republican counties demonstrate the greatest departures.

We investigate the effect of managers' rank & file employee coordination costs on real activities manipulation (RAM). We identify exogenous variation in managers' rank & file employee coordination costs using the adoption of 99 wrongful dismissal laws across 47 U.S. states between 1970 and 1999. We first find that RAM declines when managers' rank & file employee coordination costs increase. We further document that managers’ rank & file employee coordination costs reduce decentralized RAM but affect neither centralized RAM nor centralized accrual-based earnings management, both of which are less likely to require rank & file employee coordination. Event-time tests corroborate and document the validity of the parallel trends assumption in our setting. Cross-sectional tests document predictable variation in our main result across firms and over time. Consistent with rank & file employee coordination costs constraining RAM, managers miss earnings thresholds more often after rank & file employee coordination costs increase. Our nuanced inferences inform the literature investigating factors that constrain RAM and the extent to which rank & file employees determine firm outcomes.

This paper studies the identity transitions of East German audit recruits during the fundamental ideological, economic, and societal change brought about by the reunification of Germany in 1990. Integrating the identity work literature with key concepts from Pierre Bourdieu and Erving Goffman, we build on semi-structured interviews with two groups of recruits—university graduates and former state auditors—to explore and theorize the marked differences observed in these recruits' transition processes. In line with wider processes of territorial stigmatization, we argue that the West German audit firms pragmatically instrumentalized their local personnel, seeking to deploy them without intending to integrate them into the profession. In turn, the audit recruits met with this exertion of symbolic violence by managing a ‘spoiled identity’. The university graduates found it easier to recognize and accumulate legitimate forms of capital, thereby submitting themselves to the inculcation of the profession's socialization process, which ultimately yielded their institution into the profession. In contrast, the former state auditors' local knowledge and access to client networks provided immediately useful capital to the West German firms, which, however, sought to retain a status differential vis-à-vis these recruits. As a result of such strategies of condescension, the former state auditors maintained key aspects of their identity as a salient part of their self-conception. We further highlight the role of the local audit offices in the recruits' transition processes, as they evolved from flexible spaces, which allowed for experimentation and improvisation, into more structured units. This process embedded professional values and practices, thereby creating localized office identities.

We examine whether combinations of trust-centric controls promote knowledge sharing behavior, and, in turn, team performance. Using multi-source data from 138 business unit management teams (534 total respondents), we find that in-team clan control and in-team monitoring are positively associated with team performance via knowledge sharing, while the relative emphasis on team-based incentives is not. We also find that team-based incentives and in-team clan control are substitutes, while in-team monitoring complements both team-based incentives and in-team clan control. These results show that trust-centric controls can encourage knowledge sharing; moreover, in-team monitoring is important to getting the most benefit from using team-based incentives or in-team clan control. However, firms can make substitution choices between in-team clan control and team-based incentives as they both encourage a shared purpose.