Brendan O'Connell

Costs Associated With Going-Concern-Modified Audit Opinions: An Analysis of the Australian Audit Market

This article examines the potential costs to Australian auditors and their clients from the issuance of first-time going-concern-modified audit opinions. We examine the population of Australian companies receiving a first-time going-concern-modified audit opinion during the period 1994-97 and a matched sample of financially distressed firms receiving a clean audit opinion. Results indicate that auditor switching is positively associated with receipt of a going-concern-modified opinion. However, we find no empirical evidence that there is a self-fulfilling prophecy of increased probability of company failure following the issuance of a going-concern-modified opinion for the Australian companies in our study. Our analyses of lost audit fees indicate that auditors issuing first-time going-concern-modified audit opinions lost proportionately more fees by losing clients (through switching or company failure) than firms not issuing a going-concern-modified opinion to financially stressed clients.

Social moderation, assessment and assuring standards for accounting graduates

Evidencing student achievement of standards is a growing imperative worldwide. Key stakeholders (including current and prospective students, government, regulators and employers) want confidence that threshold learning standards in an accounting degree have been assured. Australia’s new higher education regulatory environment requires that student achievements are benchmarked against intended programme learning outcomes, guided by published disciplinary standards and a national qualifications framework, and against other higher education providers. Here, we report on a process involving academics from 10 universities, aided by professional practitioners, to establish and equip assessors to reliably assure threshold learning standards in accounting that are nationally comparable. Importantly, we are learning more about how standards are interpreted. Based on the premise that meaning is constructed from tacit experiences, social interactions and intentional reflection on explicit information, we report outcomes of three multi-part calibration interventions, situated around judgements of the quality of the written communication skills exhibited in student work and their related assessment tasks. Qualitative data from 30 participants in the calibration process suggest that they perceive that the process both assists them both in developing a shared understanding of the accounting threshold learning standards and in the redesign of assessment tasks to more validly assess the threshold learning standards.

A Programme to Expose Students to Senior Executives in the World of Accounting: An Innovative Learning Method

This paper deals with one well-tested means of providing inspiration through a carefully planned International Study Tour (IST) that has, at its core, site visits to world class global organisations. During these visits, students are addressed by senior personnel of those organisations. The esprit de corps inculcated by the intense and exciting nature of the IST and the high quality of the host organisations combines to produce a highly productive educational outcome. In this analysis of an important learning method, we analyse the feedback of IST participants to evaluate the learning benefits of participating in an IST, and provide a comprehensive template of how to operate such a programme. Our findings suggest that the IST provides students with a global and life experience that has no equal in the classroom. Through this paper, we aim to inspire other academics to implement a similar programme at their universities.

Perceptions of earnings management: the effects of national culture

Manipulating, or “managing,” reported earnings is a temptation faced by every accountant and corporation around the world. This study investigates whether national culture influences perceptions of the acceptability of earnings management. Participants from eight countries evaluated 13 vignettes describing various earnings management practices (Merchant & Rockness, 1994). Our results demonstrate considerable variation in perceptions across nations to the earnings management scenarios, providing strong evidence that the practice of earnings management was not perceived similarly in all countries. Using Hofstedes (1991) cultural indices, we find that the differences in aggregate perceptions across countries were not closely associated with any of the cultural dimensions examined. We do, however, find that perceptions of earnings manipulations involving the timing of operating decisions were associated with both the Power Distance Index and the Masculinity Index.

Understanding the responses of professional accounting bodies to crises: The case of the Australian profession in the 1960s

Purpose - The purpose of this Australian case study, set in the 1960s, is to comprehensively examine the responses of the two major professional accounting bodies to a financial/corporate/regulatory crisis necessitating the defence of the professions legitimacy. Design/methodology/approach - This historical paper draws on surviving primary records and secondary sources and applies the perspectives on the dynamics of occupational groups and the legitimacy typology of Suchman. Findings - While the history of the accounting profession has been characterized by intra-professional rivalries, this case study illustrates how such rivalries were put aside on recognising the power of collectivizing in defending the professions legitimacy. Based on the available evidence, pragmatic legitimacy is shown to have been a key focus of attention by the major accounting bodies involved. Research limitations/implications - The paper may motivate similar studies in Australia and elsewhere, thus potentially contributing to developing a literature on comparative international accounting history. The evidence for this historical investigation is largely restricted to surviving documents, making it necessary to rely on assessments of the key sources. Originality/value - In addressing responses to crises in defending the legitimacy of the profession as a whole, the paper makes an original contribution in exploring the relationship between literature on the dynamics of occupational groups and on legitimacy management.

Pacioli's forgotten book: The Merchant's Ricordanze

ABSTRACT Double entry bookkeeping emerged by the end of the 13th century and was adopted by, for example, the Datini of Prato during the 1380s. In the transition from single to double entry evident in the Datini Archives, initially accounting records were kept in an account book called a Ricordanze. Record books of this name were typical of Tuscany and, when such books were first used in Tuscany, businessmen began to use them also as a form of personal diary and autobiographical record. Others not in business followed suit and maintained purely personal biographical diaries of the same name. For those in business, the Ricordanze thus developed into a hybrid: partly autobiography and personal and, partly, a place to record matters relating to his business, including details of transactions and of other matters he did not wish to forget, such as promises, obligations, and conditional agreements. As revealed in the Datini archives for the 14th and 15th centuries, use of a Ricordanze for this purpose was disc...

The changing face of regulators' investigations into financial statement fraud

Purpose - This paper builds on the Committee of Sponsoring Organizations (COSO) Report, which examined US Accounting and Auditing Enforcement Releases (AAERs). The purpose of this paper is to provide valuable insights into the characteristics and realities of financial statement fraud in the post-Enron regulatory environment. Design/methodology/approach - This paper analyses a sample of AAERs from 2002 to 2005. It also provides case studies of an additional five high-profile case studies from that period. Findings - This paper finds evidence of changes in Securities and Exchange Commission (SEC) enforcement activities since the COSO Report. Specifically, it is found that enforcement activities have increased substantially post-Enron and the companies subject to AAERs are, on average, much larger, more profitable and the frauds are more substantial than those exhibited in the COSO Report. These findings suggest that the SEC has become more aggressive at pursuing larger companies for financial statement fraud in the post-Enron environment. Research limitations/implications - This paper relies on AAERs as the source of analysis of financial statement fraud, its findings must be viewed in light of the limitations of using these documents. Specifically, the prevailing prosecutions agenda of the US SEC may be reflected in these results. Practical implications - The study findings are of great practical relevance to accounting regulators and practitioners as they provide valuable insights into the nature and characteristics of financial statement fraud. Originality/value - The paper provides empirical evidence concerning the changing face of financial statement fraud enforcement and provides a more in-depth comparison of fraud than possible with most previous studies that have tended to focus on quantitative measures. This is possible because the present investigation utilises qualitative data from AAERs to supplement quantitative findings. Its originality is also due to the use of institutional theory which is not commonly applied in the corporate governance field.

Using technology to improve peer review and collaborative conversations to benchmark academic standards

In 2010 the Australian government commissioned the Australian Learning and Teaching Council (ALTC) to undertake a national project to facilitate disciplinary development of threshold learning standards. The aim was to lay the foundation for all higher education providers to demonstrate to the new national higher education regulator, the Tertiary Education Quality and Standards Agency (TEQSA), that graduates achieved or exceeded minimum academic standards. Through a yearlong consultative process, representatives of employers, professional bodies, academics and students, developed learning standards applying to any Australian higher education provider. Willey and Gardner reported using a software tool, SPARKPLUS, in calibrating academic standards amongst teaching staff in large classes. In this paper, we investigate the effectiveness of this technology to promote calibrated understandings with the national accounting learning standards. We found that integrating the software with a purposely designed activity provided significant efficiencies in calibrating understandings about learning standards, developed expertise and a better understanding of what is required to meet these standards and how best to demonstrate them. The software and supporting calibration and assessment process can be adopted by other disciplines, including engineering, seeking to provide direct evidence about performance against learning standards.

Strategic manoeuvres and impression management: communication approaches in the case of a crisis event

Abstract This historical study examines the actions of the Australian former asbestos company, James Hardie, when faced with a potentially ruinous corporate scandal between 2001 and 2007. The company became vilified as public awareness grew of the damage to public health its use of asbestos had caused. In response, it set-up a knowingly underfunded compensation fund supported by a strategy of misinformation and denial. Its actions are analysed using Oliver’s typology of strategic responses and theories of crisis management and crisis communications, providing insights into the company’s motivations for adopting strategies that took it to the brink of financial collapse.

Prominent themes in accounting education scholarship

This dedicated issue of Accounting Education: an international journal features a selection of papers presented at the RMIT 3rd Annual Accounting Educators’ Conference held in Melbourne Australia, November 2012. In all, 22 papers were presented at the Conference with authors drawn from many Australian States and overseas. This Conference is sponsored by CPA Australia, supported by AFAANZ and was themed the ‘Changing Nature of Accounting Education, Compliance, Governance and Accountability’. These papers were judged to be the best papers presented by a panel consisting of the two guest editors of this dedicated issue together with one Associate Editor, Greg Stoner, and the editor of this journal, Alan Sangster. In all, the authors of eight papers were invited to submit their revised papers to undergo a process of double, blind review. The following is a critique and summary of the six papers that were accepted for publication. The first paper of this dedicated issue is by the keynote speaker at the Conference, Christine Helliar (Helliar, 2013). She argues that as accounting education is socially constructed it is quite diverse globally reflecting differing historical, social, economic, political and cultural contexts. It follows from this that it is a great challenge for accounting education to move towards a single global model. She contends that the best way might be to move forward the adoption of similar learning objectives built around constructivist, experiential and situated learning approaches. If this was to be the case then the International Education Standards (IES) of the International Accounting Education Standards Board (IAESB) should be reworked to embed these three learning approaches and that the International Federation of Accountants Council (IFAC) and the IAESB should adopt various strategies to gain pragmatic legitimacy for its education standards. She acknowledges the many challenges ahead such as the likelihood that some constituencies are somewhat disinterested in the IES at present. The next three papers by Sin and McGuigan (2013), Dale-Jones, Hancock and Willey (2013) and Daff (2013), while quite diverse, all have a focus on so-called ‘graduate attributes’. In doing so, their collective focus is aligned to the theme of the conference in terms of the changing nature of accounting and education and evolving aspects of accountability for graduate outcomes. Clearly, calls from employers and other stakeholders for accounting graduates to possess better generic skills such as communication and judgment have resonated with accounting education scholars who are increasingly focusing on this area. One should also recognize that universities, as public institutions in many cases, are subject to similar institutional pressures to many other public entities. The rise of so-called ‘new public management’ means that they have to be able to demonstrate Accounting Education: an international journal, 2013 Vol. 22, No. 6, 507–509, http://dx.doi.org/10.1080/09639284.2013.847318