Frank Clarke

Corporate Collapse: Regulatory, Accounting and Ethical Failure

Outlined below are some underlying ideas pursued in our Corporate Collapse: Accounting, regulatory and ethical failure, which first appeared in 1997, revised in 2003, followed by a Chinese translation in 2006. Primarily case-based, it examined material over many decades in several countries, but mainly concentrated on Australian causes celebres. Also detailed is our later book Indecent Disclosure: Gilding the corporate lily, published in 2007—it is theme based, reviewing similar material, but post-2000. Very little had changed during the 10 years interregnum, despite regulators’ and governments’ promises of rigorous corporate reforms. Both books were set against a background of repeated official inquiries into discrepancies between what corporations had disclosed about their trading affairs and their actual financial outcomes. The matters in focus have been concerns over many decades. They continue to be, as regulatory reforms have been piecemeal and ill-directed. The recent global financial crisis (GFC) revealed behavior suggesting that it is more likely the ‘truth’ that under the present regulatory regimes many corporations habitually ‘gild the lily’.

Scholarship in university business schools – Cardinal Newman, creeping corporatism and farewell to the “disturber of the peace”?

This paper was stimulated by the chilling vision of the corporate university described by Moore and touted by numerous others. It exposes the ways in which Newman’s The Idea of a University will be abrogated and transformed by corporate universities. Fundamental issues are raised about the nature and purpose of universities and about the roles of its professors and schools of business, especially in a world characterized by “the triumph of the market”. An urgent plea is proferred for broader debate about the place of Corporate Universities in business higher education.

Reporting on the state of infrastructure by local government

The Australian accounting profession has advocated that infrastructure should be accounted for by reporting it at current written down replacement values, on the basis that these financial disclosures would provide relevant information to stakeholders. While local councils are required to apply the profession’s asset valuation and accrual standards in preparing general purpose financial reports, the State of New South Wales has gone further by requiring local councils to also present information about the physical condition of infrastructure, together with estimates of the cost of bringing that infrastructure to a satisfactory condition, and the annual costs of maintaining infrastructure at that standard thereafter. This paper examines how this information was reported for 1995‐96. Analysis of reporting practices suggest that while there are some anomalies and uncertainties surrounding the rating of physical condition and the concept of “satisfactory condition”, the disclosures provided by NSW local government are more informative and arguably more relevant to external stakeholders and those responsible for asset management in local government than the information currently prescribed by accounting standards.

Use of CCA in the Public Sector: Lessons From Australia’s Experience With Public Utilities

The background to the widespread adoption by Australian public trading enterprises of a deprival value variant of current cost accounting reflects successive efforts to establish demanding rate of return targets, or to legitimise price increases, or to monitor the financial performance of PTEs on a national basis. The experience of three public utilities in implementing CCA is reviewed. This experience suggests that CCA valuation of infrastructure (using deprival or optimized deprival values) is unable to deliver financial data to permit valid cross-sectional and longitudinal comparisons of performance. Issues raised during the 1970s and 1980s debates about CCA were either ignored or overlooked.

The R.J. Chambers Collection: An "Archivist's" Revelations of 20th Century Accounting Thought and Practice

A major, unique accounting archival source, the R.J. Chambers Collection comprises both hard copy and, utilizing cutting-edge search technology, internet accessible materials. From his academic beginnings, Chambers was an orderly person, an archivist of the extensive and varied evidence that underpinned his proposals for accounting reform. Opening research areas for accounting biography, the development of accounting thought, the history of accounting institutions, prosopography, public sector accounting history, and comparative international accounting history are foremost amongst the myriad justifications for seeking to unravel the accounting history “lodes” in archives such as the Goldberg, Chambers, and Briloff Collections [Potter, 2003]. The archiving of the meticulously kept Chambers papers from 1947–1999 provides an opportunity for unfolding the background to events previously withheld from accounting history scholars. Professional episodes in relation to inflation accounting, standard setting, pro...

Bookkeeping and accounting control systems in a tenth-century Muslim administrative office

An integrated accounting system existed in Muslim administrative offices of the tenth century. Evidence suggests that some modern-day-like bookkeeping and accounting control procedures may have been practised. It is reasonable to believe that Italian traders were educated in the use of sophisticated business methods by their Muslim counterparts. Importantly, the accounting system used in Muslim administrative offices was consistent with the preconditions for employing modern-day bookkeeping and accounting control procedures. The Muslim accounting system described here separated record and custodial functions, closed accounts monthly and audited them, and maintained an elaborate system of vouchers and documents of authorization to enhance internal control. Conjecture that the Muslim world contributed to the development of European accounting is justified and worthy of further research.

Pacioli's double entry -- part of an intellectual and social movement

ABSTRACT Our research contains unashamedly speculations about Pacioli, and his Renaissance heroes. It seeks to codify prior research which has speculated on many aspects of Fra Luca Paciolis (1445–c.1517) life. Regarding teaching, not surprisingly, most students are less than enthused by the experience of being taught double-entry bookkeeping (DEB) as a mechanical exercise. The focus on control in many research papers has misplaced emphasis on the origins of DEB, generally ignoring the socio-economic and intellectual contexts in which it was forged. This study speculates on DEBs intellectual foundations, namely perspective, proportionality, harmony, order and balance captured in the Venetian form of DEB. By emphasising DEBs recourse to these aspects, it is placed in Renaissance Italys fifteenth- and sixteenth-century intellectual and social movement. Academics including Bryer have suggested that a broader notion of financial accountability is appropriate. We concur. Accountability is generally a missing dimension in DEB teaching and related research. A major complaint in the aftermath of the Global Financial Crisis (GFC) levelled at the banks, and their shadow banking arms in particular, is that their group accounting failed ‘to tell it how it actually was’ – that is, it failed to truly account. Companies were unaccountable. The ‘morality’ of audited accounting with a lack of corporate accountability, namely its recourse to truth, balance, proportionality of the kind the Renaissance players sought, was certainly absent during the GFC.

Corporate Governance: A Case of ‘Misplaced Concreteness’?

Whiteheads notion that if you say something for long enough, it will be believed, aptly describes the development of the latest corporate governance regimes. Curbing managerial opportunism is the current focus, but the regimes contain only more of what has failed in the past. Inexplicably, at a time when reformers are declaring their allegiance to principles over rules, long-standing principles are being by-passed and more rules imposed. Whereas much of what the rules address is contestable, the frequency with which it is proclaimed has been seductive – it is being accepted as if it were true, not by virtue of either convincing evidence or argument, but through the power of repetition. Stock options in executives remuneration packages are to be expensed, not because they satisfy expensing criteria, but because of the penetration of the mantra that they are expenses; independence is being accepted as the consequence of not being in particular relationships, not because that will change ones state of mind, so much as it will appear likely to have done so; and impairment calculations are being declared superior to conventional amortization techniques, not because of any demonstration that they better indicate the decrease in the market price of a physical asset, but because of the repetition of the impairment litany. Corporate governance is being perceived as a set of processes, rules to be complied with, rather than the desired outcome of them – that is, the authority exercised with probity and unquestionable integrity over corporations’ affairs, for the public good. There is a less than clear explanation of whether or how the separate governance processes mesh with one another. The governance miasma confuses rather than clarifies corporate activity. Underpinnings of the mechanisms in the governance regimes have achieved a false status of concreteness. Contrary to the universal indoctrination, the case is stronger for fewer, rather than more, governance rules.

Chambers on Price and Price‐Level Variations: Exiting Intellectual Grooves

From early in his enquiry, Chambers perceived the price variation problem in accounting to not be a separate phenomenon related to inflation or deflation, but to be the failure in conventional accounting to incorporate the full financial effects of the medium, money, in which its calculations were made and its output expressed. He absented himself from the inflation accounting focus early in the 1950s and set about an enquiry into the nature and meaning of monetary calculation and measurement, within a framework of accounting functioning to provide indications of the wealth and progress of firms. Accordingly, when the substantial literature on the topic and the report of governmental enquiry into accounting and inflation emerged during the early 1970s he addressed the various proposals by drawing upon his theory of Continuously Contemporary Accounting (CoCoA) with devastating effect.

Incentives for Non-Disclosure by Corporate Groups

A regulatory approved deed of cross guarantee (the deed) was introduced into Australia in December 1991, relieving participating companies within a group from having to prepare, have audited, and file financial statements. We examine the characteristics of firms that obtain relief from filing (and therefore disclosing) separate financial statements of closed-group companies by adopting the deed. This is the first attempt to analyse adoption using large-scale archival data. The results support the survey evidence in Dean and Clarke (2005), thus providing triangulation on their work. In particular they support the view that the decision to adopt the deed is a function of strategic factors as well as accounting and auditing cost savings. Those strategic factors were not in focus when regulators first introduced a deed of indemnity in 1985, nor when the original indemnity was modified to become a deed of cross guarantee in 1991 or when it was further modified in 1998. Further, evidence is provided to test the conflicting ideas arising from the analytical literature and the mixed results in the empirical, voluntary disclosure literatures. That evidence suggests that non-disclosure arises when firms are in a more competitive industry and, in particular, when there is ability to retain non-disclosure at the consolidated level (i.e., where the number of segments is high). Other factors supporting non-disclosure are leverage and the proportion of foreign operations (proxying for deed complexity). The proportion of outside directors (a proxy for legal liability) and the number of shares outstanding (a proxy for agency costs of equity) are not associated with the decision to adopt the deed.