Accounting Organizations and Society最新文献

Motivated by ongoing dialog at the national level on racial (in)equality, we examine the relations between audit partner ethnicity (audit partners of Asian, Black, or Hispanic origin) and three salient audit phenomena. Specifically, we examine whether there is a difference in financial reporting quality between the clients of ethnic minority audit partners (EMAPs, hereafter) and those of White partners, whether EMAPs face a different work environment than their White counterparts, and how EMAPs are treated in the audit firm. We find that clients of EMAPs, on average, have earnings that are more predictive of future cash flows, have smaller unsigned discretionary accruals, and are less likely to receive a comment letter from the U.S. Securities and Exchange Commission than clients of White partners. We also find weak evidence that clients of EMAPs have more persistent earnings, lower signed discretionary accruals, and higher audit fees. We do not find evidence of differences in restatement likelihood between the clients of EMAPs and those of White partners. Overall, these results provide some evidence that clients of EMAPs have higher financial reporting quality. Next, we find that, compared to White partners, EMAPs are more likely to work in offices that are smaller, earn lower audit fees, are non-Big 4, and have no prestigious clients. Finally, we find that EMAPs are more likely to be in charge of engagements with clients whose top management (but not whose audit committee) has ethnic representation. We find no evidence that EMAPs are less likely to be engaged with prestigious or important clients. However, we find that, following a financial restatement, EMAPs are more likely than White audit partners to be replaced. Collectively, our findings suggest that even though EMAPs 1) tend to work in less desirable offices, 2) have a client alignment that is affected by ethnic representation in the client's top management, 3) face more severe consequences after audit failure, they are associated with some properties of higher audit quality. This study is one of the first to broadly examine important aspects of the work of EMAPs. We believe that our findings will be of interest to audit firms, audit clients, other related parties, and society at large, especially given audit firms' efforts to improve ethnic diversity.

We investigate how emotion-understanding ability, a component of emotional intelligence, and tournament incentives jointly influence supervisors' propensity to acquire information about their subordinates' trustworthiness and tailor their control decisions to this information. We predict and find that when receiving piece-rate incentives, high emotion-understanding supervisors are more likely than low emotion-understanding supervisors to acquire subordinate-type information and use it in their control decisions. In addition, relative to piece-rate incentives, tournament incentives increase supervisors’ propensity to acquire subordinate-type information more for low emotion-understanding supervisors than high emotion-understanding supervisors. Taken together, our results suggest that hiring high emotion-understanding supervisors and giving supervisors tournament incentives are at least partial substitutes in motivating supervisors to acquire and, thus, use subordinate-type information in their control decisions. Our results offer important insights into the process through which supervisors make discretionary control decisions and contribute to the understanding of the forces that shape managerial controls within organizations.

The integration of acquisitions is often complicated by cultural differences between the acquiring and acquired firms. An important path through which cultural differences can impact acquisition performance is through employee resistance. We assemble detailed survey data to examine how acquiring firms' use of integration controls moderates the impact of employee resistance following from cultural differences on acquisition performance. Our findings confirm that cultural differences between acquirer and target are associated with initial employee resistance, which in turn depresses acquisition performance. Managers’ use of integration controls moderates the effects of employee resistance on acquisition performance. Specifically, while use of task integration controls is positively associated with performance, it also amplifies the detrimental effects of resistance. In contrast, use of sociocultural integration controls helps to reduce these effects. Our findings thus indicate that in the presence of cultural differences, sociocultural integration gains importance to reduce initial employee resistance, which can enhance the effectiveness of subsequent task integration efforts.

In levers of control (LoC) research, empirical and conceptual ambiguities have hampered the establishment of a coherent body of knowledge. Mixed findings, variability in the approaches to account for the levers’ combined use, and variability in conceptual choices (e.g., the conceptualization of interactive and diagnostic control) have caused this unsatisfactory state. In response, we validate and extend theory on the LoC framework by meta-analytically synthesizing quantitative evidence from 58 independent samples and 10,374 observations. We develop two models of the combined use of the levers, which portray their simultaneous use and mutual relationships, and relate them to capabilities and performance. For theory validation, we uncover stylized facts that demonstrate that organizations use the four levers in combination, not in isolation. Moreover, following the logic of the resource-based view, the levers are related to performance via capabilities. These relationships are robust to moderating influences of the dimensions and conceptualization of interactive control and managers’ hierarchical level. For theory extension, we systematically uncover the need to complement the resource-based view with other theories and offer related suggestions. Our moderator analyses identify boundary conditions that limit the generalizability of the LoC framework. For example, surprisingly, the conceptualization of diagnostic control emerges as a boundary condition. On a general level, our findings might serve as an inspiration for better appreciating future survey-based knowledge creation in management control research and also provide researchers from other disciplines with a more comprehensive understanding of the enhancement of capabilities and performance.

Narcissism in the general population has risen over time; thus, it is likely that firms will hire a greater proportion of more narcissistic employees into their ranks. In two experiments, we examine whether and how narcissism impacts employees’ contract preferences and performance depending on the contract frame. When contracts are assigned, more narcissistic employees perform worse than less narcissistic employees under a penalty-framed contract and no different from less narcissistic employees under a bonus-framed contract. When employees have contract choice, more narcissistic employees prefer bonus-framed contracts over penalty-framed contracts while less narcissistic employees are relatively indifferent between them. Even so, this preference does not appear to impact performance as more narcissistic employees continue to perform worse than less narcissistic employees under a penalty-framed contract and no different from less narcissistic employees under a bonus-framed contract in our condition with contract choice. Therefore, narcissism is an important individual characteristic to consider when designing incentive contracts.

Survey evidence and academic research raise the possibility that audit regulation can impact not only the information contained in external financial reports but also the internal information used by management. We investigate this possibility by examining the improvement in management forecast accuracy around initiation of the Public Company Accounting Oversight Board's (PCAOB) international inspection program. Consistent with managers having improved information, we find that managers issue more accurate forecasts following PCAOB inspection access. Multiple additional analyses support that an improved information environment is the mechanism underlying our results, and this effect is distinct from, and incremental to, any effects of PCAOB inspection on external reporting quality. Our study provides evidence that audit regulation benefits an important internal stakeholder—managers.

Three experiments examine how the use of masculine language in professional guidance affects assessments of the equity and inclusion of historically marginalized gender and sexual orientation groups in the accounting profession. Experiment 1 manipulates the pronouns used in auditing standards as masculine vs. gender-inclusive, and finds that masculine pronouns reduce accounting professionals' assessed equity and inclusion of women and LGBTQ+ people in the audit profession. Participant gender also has an effect, with women making lower overall equity and inclusion assessments. In Experiment 2, college students read a neutral-language accounting job ad as well as professional guidance that uses masculine vs. gender-inclusive pronouns, and assess the accounting profession's equity and inclusion of women and LGBTQ+ people. Masculine pronouns reduce students' equity and inclusion assessments, and this effect is stronger for women and LGBTQ+ participants. In Experiment 3, LGBTQ+ and non-LGBTQ+ U.S. residents assess the equity and inclusion of LGBTQ+ people in accounting. Pronouns have a stronger effect on LGBTQ+ than non-LGBTQ+ participants. Further, for LGBTQ+ participants, the effect of pronouns is not conditioned on participant gender; however, pronouns affect non-LGBTQ+ women's, but not non-LGBTQ+ men's, assessments of LGBTQ+ equity and inclusion.

With advances in technology (e.g., secure cloud storage and video conferencing), audit firms have increasingly been using geographically distributed auditors to staff engagements to improve resource utilization. However, such benefits may come at a cost if geographically distributed teams underperform co-located teams. To explore factors that could influence the relative effectiveness of distributed and co-located teams, we conduct an experiment to examine how team member proximity (distributed versus co-located) and assignment length (temporary versus continuing) jointly affect auditor judgment when subordinate auditors are given client-favorable guidance from their supervisor. Relying on the impression management and persuasion literatures, we predict and find that distributed auditors are less influenced by their supervisor's directional preferences than co-located auditors when they are on temporary assignment. As such, despite concerns about the effectiveness of distributed teams, we identify a setting in which it can be beneficial to utilize distributed auditors over co-located auditors. However, we also predict and find that distributed auditors tend to react more like co-located auditors when on continuing assignment. Further, we find that while distributed auditors on continuing assignment are more influenced by their supervisor's directional guidance than distributed auditors on temporary assignment, the opposite is true of co-located auditors.

We examine the effect of providing risk management disclosures alongside risk disclosures on investors' stock valuation judgments, and how risk disclosure tone influences this effect. In practice, risk management disclosures are mandated in some settings but not others although conceptually, disclosing both the risk and how it is managed offer investors the most holistic understanding of firm risk. We find that without risk materialization, risk management disclosures have a positive effect on judgments when the risk disclosure tone is positive. Also, investors provide lower (higher) stock valuations when a positive versus negative tone is used in the absence (presence) of risk management disclosures. However, with the negative news of risk materialization, risk management disclosures and tone no longer have an effect on investors’ judgments. Our findings have implications for managers and regulators, as investors may penalize firms that provide risk disclosures, even if these risks have been properly managed.