Carolyn Windsor

Some Cross-Cultural Evidence on Ethical Reasoning

This study draws on Kohlbergs Cognitive Moral Development Theory and Hofstedes Culture Theory to examine whether cultural differences are associated with variations in ethical reasoning. Ethical reasoning levels for auditors from Australia and China are expected to be different since auditors from China and Australia are also different in terms of the cultural dimensions of long term orientation, power distance, uncertainty avoidance and individualism. The Defining Issues Tests measuring ethical reasoning P scores were distributed to auditors from Australia and China including Hong Kong and The Chinese Mainland. Results show that auditors from Australia have higher ethical reasoning scores than those from China, consistent with Hofstedes Culture Theory predictions.

Can the financialised atmosphere be effectively regulated and accounted for

Dr Patty McNicholas Department of Accounting & Finance Monash University, Clayton 3800 Melbourne, Australia Email:patty.mcnicholas@monash.edu Ph: 613 99052392 and Professor Carolyn Windsor School of Accounting Bond University, Gold Coast Queensland, Australia Email: cwindsor@bond.edu.au Ph: 617 55951560

Remuneration committee independence and CEO remuneration for firm financial performance

Purpose - – As a result of the Australian Government Productivity Commissions recommendation to mandate remuneration committee independence for ASX300 companies, this study aims to investigate whether voluntary remuneration committee independence aligns chief executive officer (CEO) total pay and bonuses with firm financial performance. Design/methodology/approach - – A series of hypotheses test the research question using multiple regressions for a sample of 143 ASX300 companies during 2001. This time was prior to strengthen corporate governance regulation, but after mandated executive remuneration disclosure, thus capturing varying levels of voluntary remuneration committee independence. Findings - – This study shows firm size is an influential factor in the relationship under investigation. ASX300 large firm remuneration committees link CEO total remuneration and bonuses to firm financial performance. Smaller ASX firm remuneration committees do not link either type of CEO remuneration to performance despite remuneration committee independence. Findings are mixed for medium-sized ASX300 firms. Research limitations/implications - – Limitations include the necessary time restriction to 2001 for sampling the ASX300 firms. The implication of this studys findings is that the proposed public policy for mandatory remuneration committee independence is not universally effective in linking CEO remuneration to firm financial performance for ASX300 firms. Originality/value - – This study contributes to the limited research on voluntary remuneration committee independence in relation to CEO remuneration and firm financial performance in the Australian context.

The Efficacy of Auditors’ Going‐Concern Opinions Compared with a Temporal and an Atemporal Bankruptcy Risk Model: Analysing U.S Trade and Service Industry Failures 1974 ‐ 1988

Conflicting results have emerged from several past studies as to whether bankruptcy prediction models are able to forecast corporate failure more accurately than auditors’ going‐concern opinions. Nevertheless, the last decade has seen improved modelling of the path‐to‐failure of financially distressed firms over earlier static models of bankruptcy. In the light of the current crisis facing the auditing profession, this study evaluates the efficacy of auditors’ going‐concern opinions in comparison to two bankruptcy prediction models. Bankrupt firms in the U.S. service and trade industry sectors were used to compare model predictions against the auditors’ going‐concern opinion for two years prior to firm failure. The two models are the well‐known Altman (1968) Multiple Discriminant Analysis (MDA) model that includes only financial ratio variables in its formulation and the newer, temporal logit model of Cybinski (2000, 2003) that includes explicit factors of the business cycles in addition to variables internal to the firm. The results show overall better bankruptcy classification rates for the temporal model than for the Altman model or audit opinion.