Australian Accounting Review最新文献

Attention deficit hyperactivity disorder (ADHD) is a neurodevelopmental condition that can affect professional scepticism, a critical aspect of effective auditing. This study examines the impact of ADHD, assessed using the Integrated Visual and Auditory-2 Continuous Performance Test, on the professional scepticism of external auditors. Results indicate a negative association between ADHD and professional scepticism, suggesting that higher levels of ADHD reduce sceptical tendencies. However, the study finds that job satisfaction significantly mitigates the adverse effects of ADHD on professional scepticism. Specifically, findings from the Johnson-Neyman analysis reveal that high job satisfaction mitigates the adverse impact of ADHD on scepticism. This study highlights the need for audit firms to consider ADHD-related challenges. It emphasises the importance of creating a supportive work environment to sustain professional scepticism, which is vital for enhancing audit quality and effectively managing cognitive diversity in the workforce.

This paper investigates the effect of societal trust on information communication between managers and outside investors, focusing on income smoothing as a communication channel. Using a large cross-country sample, we find that firms in more trusting countries are less likely to use income smoothing to signal their private information (‘informational smoothing’). This finding suggests that societal trust attenuates investors’ concern of moral hazard and diminishes their demand for firms’ private information, while managers respond to this change in information demand by reducing the extent of informational smoothing. We also find that the negative impact of societal trust on informational smoothing is less pronounced in countries with stronger formal institutions, indicating that trust serves as a substitute for formal institutions. Overall, this study enhances our understanding of the different impacts of societal trust on various forms of information communication tools and the variations in the informational aspects of income smoothing practices worldwide.

This paper examines the implications of the proposed merger of the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board (AuASB) and the Financial Reporting Council (FRC) into a single entity. The merger is designed to improve efficiency, consistency and the adoption of new sustainability standards. During a panel discussion at the AFAANZ Annual Conference, experts analysed the potential impact of the merger on standard-setting practices, highlighting the need for robust justification and increased transparency. The study highlights the complex interplay of regulatory, national and international contexts shaping this remarkable restructuring.

The articles in this ‘bumper’ final issue of Australian Accounting Review for 2024 focus on decision-making by companies, showing the importance of good governance frameworks and practices to guide corporate leaders, committees and regulators.

The decisions explored in five academic articles cover a range of areas: climate-related risk disclosures, regional labour adjustments, the quality of audits, financial restatements following CEO dismissals and the disclosure of intangible assets in financial reports. The issue concludes with a discussion of how reporting and disclosure standard-setting itself should be governed.

In contrast, the last two academic articles in this issue highlight circumstances where good governance has made a difference. Gao et al. (2024) confirm the link found in the previous literature between poor performance and CEO dismissals, noting that good performance offers the CEO some protection in the event of financial restatements. Significantly, they find an increasing trend over the period 2000–2018 for CEOs to be dismissed as a result of financial restatements, which they link to more ethical governance.

The reporting of intangible assets is an area in which entities exercise a fair amount of discretion, and better guidance for the Board of directors would make corporate governance oversight of entities’ reporting and disclosure more effective. Mehnaz et al. (2024) document the diversity of reporting and disclosure practices by listed companies and public sector entities in New Zealand. They note how intangibles are categorised and reported and whether they are capitalised, concluding that there is a need for improved disclosure criteria for recognised and unrecognised criteria.

The final article in this issue documents the key issues from a recent topical debate on standard-setting. While the context is a particular change in Australia, the issues are relevant to the governance of standard-setting in any country and developments in New Zealand are highlighted for comparison. In Bradbury et al. (2024), four well-known commentators on standard-setting in Australia and New Zealand with academic, professional and standard-setting expertise present their views on the merits of the recently proposed merger of the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board (AuASB) and the Financial Reporting Council (FRC) into a single entity.

We hope that you enjoy reading this issue as much as we have enjoyed compiling it.

This study explores the complexity of recognising specialisations in accounting by articulating the paradox of the knowledge–specialisation conundrum when claims of higher levels of expertise among specialists threaten the general warrant of competence of the non-specialist. Embedded in the notions of professionalisation in which professional status is sought and achieved, this study provides a discursive analysis exploring the elements of formal specialist recognition within a large and established accounting profession. The analysis in this study suggests that institutionalising the recognition of specialisations poses two significant risks to the unity of the profession: the risk that the general warrant of competence linked to non-specialists could be seen as accountants of a lesser quality and the risk created to the profession from intra-professional boundary ambiguity and conflict. Overall, this study brings to the fore the underexplored issues linked to understanding and recognising specialisations in accounting.

This study re-examines the relationship between CEO dismissals and financial restatements using a new, comprehensive dataset covering S&P 1500 firms from 2000 to 2018. This dataset offers several advantages over previous research: it provides precise data on CEO dismissals, enables large-sample analysis and includes detailed reasons for executive departures. Our findings confirm a positive relationship between financial restatements and CEO dismissals, with a heightened likelihood of dismissal in recent years reflecting increased board attention to ethical issues. Additionally, restatements are revealed to amplify the negative impact of weak financial performance on CEO turnover, as CEOs of poorly performing firms face a higher risk of dismissal after a restatement, whereas strong financial performance generally offers protection. Furthermore, we explore how board characteristics affect this relationship and reveal significant heterogeneity in board responses. Specifically, female board representation, directors’ financial expertise, CEO–board connections, directors’ experience with prior fraud incidents, and multiple directorships all moderate the likelihood of CEO dismissal following restatements. These findings provide new insights into the complex interplay among financial performance, ethical governance and board dynamics in CEO turnover decisions.

We explore whether CEOs’ hometown identity involves labour adjustment decisions. We document that local CEOs, with their hometown ties, reduce employment to a lesser degree following sales downturns than nonlocal CEOs. This finding suggests that local CEOs’ strong local attachments motivate them to prioritise employee interests and build good reputations, which create private benefits or reserve future career paths in their hometowns. Our findings are more pronounced in areas where local connections are highly valued, thus supporting our argument. We further find that the retention efforts of local CEOs are related to low future performance. We extend the cost stickiness literature by documenting that CEOs’ place attachment influences resource adjustment decisions, particularly regarding labour, which eventually influences subsequent performance.

Due to their primary responsibilities over the financial reporting process, chief financial officers (CFOs) accumulate critical knowledge, and therefore power, within organisations. We examine whether such powerful CFOs use their influence to increase or decrease audit quality. Using a wide range of proxies for audit quality and a comprehensive measure of CFO power, we find that powerful CFOs are associated with lower levels of audit quality, suggesting that powerful CFOs pursue an agenda of self-interest. Our results are robust to alternative specifications of our variables, including endogeneity. As a result of our findings, we contribute not only to the academic literature but also provide useful research outcomes, such as aiding with legislation to strengthen corporate governance structures within firms to monitor such powerful CFOs.

This study examines the association between a firm's economic situation and the use of pictorial content in its annual reports. In other words, we shed light on whether firms in a specific economic situation intentionally choose particular picture content for the illustrations in their annual reports. We argue that the content of pictures can be used as an additional disclosure instrument to highlight signals beyond objective financial data, that is, an attempt to moderate readers’ decision-making processes. Corporate disclosure can be designed at multiple levels of corporate communication to influence addressees’ perceptions. We analyse 4770 annual reports from FTSE-350 firms between 2000 and 2021 using Google Vision API's artificial intelligence to examine if this special form of corporate disclosure is affected by corporate economic performance. Our findings suggest that decisions about pictorial elements in annual reports are associated with firms’ economic situation. Our paper contributes to the integration of communication theory, behavioural finance and voluntary disclosure theory to comprehend the use of pictorial information in annual reports. This study broadens the rare evidence regarding information design choices in annual reports with a particular focus on picture usage. By acknowledging the interdependence between framing and voluntary disclosure, researchers and practitioners can refine communication strategies and interventions to promote honest and successful financial disclosure whilst also considering the various communication theory factors involved.