Ian Fraser

Embedding risk management: structures and approaches

Purpose – The paper aims to report research into ways by which companies identify risks and embed risk management and control procedures and also to report on interactions between internal audit and audit committees and their contributions to risk management.Design/methodology/approach – The first section of the paper comprises a review of the literature on risk management and the roles played by internal audit and audit committees. The paper then reports the results of a series of interviews with officers in UK plcs and external auditors on the issues identified from the literature.Findings – There was agreement that, while parent boards have ultimate responsibility, the ownership of risks must reside with management at lower levels. Companies tended to adopt a multi‐procedural approach to developing consistent risk management procedures. Internal auditors were believed to have a role to play but concerns were expressed about expertise and independence. The paper recommends a split of the internal audit ...

Transparency of Risk and Reward in U.K. Public-Private Partnerships

PublicPrivate Partnerships (PPPs) are an increasingly common mechanism for the renewal of public sector infrastructure, although in the United Kingdom, these have been criticized as representing poor value for money. An inherent assumption of much of this criticism is that a corollary of detriment for the public sector is benefit for the private sector. This paper highlights the difficulty of objectively verifying the many criticisms and assumptions regarding risk and reward associated with PPPs. Public and private sector disclosure policies and systems are analyzed and we conclude that neither sector practices openness and transparency. This results in a democratic accountability deficit in the public sector and a lack of meaningful data being made available to stakeholders in private companies.

The future of the external audit function

Purpose - The purpose of this paper is to provide an overview of the challenges and opportunities currently facing external auditors at a time of economic and financial crisis. Design/methodology/approach - The paper has a particular focus on the other contributions to this special issue of Findings - The paper puts forward various suggestions for future academic research that might improve auditing practice. Also, the principal aim of this special issue has been to spotlight differing perspectives on some of the perennial problems which have plagued auditing for generations and to suggest possible ways forward. Practical implications - Various suggestions for future academic research that might improve auditing practice are put forward in the paper. Originality/value - Major contemporary issues facing the auditing profession (or industry) are summarized. The paper highlights the diversity of value stances that exists in the audit academy and may (together with the other papers forming part of this special issue) be useful for introducing university students studying auditing at intermediate or advanced levels to a variety of current auditing issues and debates.

The accountant's social background and stereotype in popular culture: The novels of Alexander Clark Smith

Purpose - The paper aims to explore the social origins of Scottish chartered accountants and the accounting stereotype as portrayed in popular fiction. Design/methodology/approach - The detective novels of the Scottish chartered accountant Alexander Clark Smith are used as a lens through which to explore the social origins of accountants and the changing popular representations of the accountant. Findings - The novels contribute to our understanding of the construction of accounting stereotypes and of the social origins of Scottish accountants. They suggest that, while working class access to the profession was a reality, so was class division within it. In addition, Smith was ahead of contemporary professional discourse in creating a protagonist who combines the positive aspects of the traditional stereotype with qualities of a private-eye action-hero, and who uses accounting skills to uncover corruption and address (social) wrongs. However, this unconventional portrayal may have been incongruent with the image the profession wished to portray. The public image (or stereotype) portrayed by its members would have been as important in signalling and maintaining the professions collective status as the recruitment of its leadership from social elites. Originality/value - Smiths portrayal of accountants in personal and societal settings at a time of profound social change, as well as his background in the Scottish profession, provide a rich source for the study of social origins of Scottish chartered accountancy during the first half of the twentieth century. Further, Smiths novels are of a popular genre, and innovative in the construction of their hero and of accounting itself; as such they merit attention because of their potential to influence the construction of the accounting stereotype(s) within the popular imagination.

IFRS Mandatory Disclosures in Malaysia: The Influence of Family Control and the Value (Ir)Relevance of Compliance Levels

Abstract We examine the effect of family control on IFRS mandatory disclosure levels, and the valuation implications of these disclosure levels, for Malaysian companies. We find that family control is related negatively to disclosure and that compliance levels are not value relevant. These findings suggest that agency theory predictions and theories linking common law legal systems to high quality financial reporting require refining in certain national contexts. Where Type 2 agency problems dominate, institutional arrangements intended to enhance financial reporting quality aimed at mitigating Type 1 problems in developed markets may have limited effect in less developed jurisdictions.

Do the financial statements of intangible-intensive companies hold less information content for investors?

This study uses the event study method to compare the information content of annual accounting releases in sectors that differ in respect of the proportion of market value that may be attributed to intangibles. The results demonstrate that there are differences between industrial sectors in the share price reaction to accounting events and that this reaction appears to be much less significant in sectors where the investment in intangible assets is relatively high.

A Commentary on ‘A Role for the Compulsory Study of Literature in Accounting Education’

We share the enthusiasm of Lister (2010) for literature. Original and fresh thinking is to be welcomed. We are less convinced by some of Lister’s specific arguments for incorporating literature in accounting education. Lister suggests that interdisciplinary links in education can foster marketable skills in graduates. Teaching literature, he argues, addresses the limitations of a technical, skillsbased and vocational accounting education which, inter alia, seeks to reduce ambiguity. Literature, however, exposes students to ambiguity, and engaging with ambiguity encourages innovative, creative and original thinking. We believe that the suggestion that accounting aims to reduce ambiguity is simplistic. Ambiguity is intrinsic to (even) mainstream accounting. Accruals, provisions, asset lives and realisable values, as well as concepts such as materiality, fair value, fair presentation and substance over form are all ambiguous and require judgement. Students learn that different accounting policies and assumptions lead to dramatically different results. Contemporary accounting standards (arguably) involve a principles-based approach, not one based on unambiguous rules. Students engaging fully with these issues will not see accounting as merely a technical skill, but will recognise and be equipped to deal with its complexities. Additionally, students are introduced increasingly to critical and interdisciplinary accounting research, which achieves many of the objectives desired by Lister, widening students’ horizons and broadening their education. This goes further than Lister’s suggestions, exposing students not only to literature, but also to other disciplines – including sociology, economic and social history, politics and law – pertinent to a rounded education. It even experiments with ‘new aesthetic forms’ (p. 9); as, for example, in the poetry published in Critical Perspectives on Accounting or the ‘Literature and Insights’ in Accounting, Auditing and Accountability Journal. Thus, far from being merely technical Accounting Education: an international journal Vol. 19, No. 4, 351–354, August 2010

Business risk auditing: A regressive evolution?-A research note

Abstract Business risk auditing (BRA) has been much publicised as revolutionary. The essence of the phenomenon, and the actual impact on practice, however, are unclear. This note revisits some pre-BRA interview evidence investigating auditor engagement with business risk. The evidence suggests that, pre-BRA, big-six auditors were already familiar with concepts of business risk although they were uncertain as to how precisely business risk informed the audit process. This suggests that BRA was evolutionary, rather than revolutionary, change and that the engagement of recent international standards with business risk is not significantly different from that of big-six auditors pre-BRA. The BRA era in audit methodology might be conceptualized as one of regressive evolution.

Measuring the cultural value of the Royal Scottish Academy New Contemporaries Exhibition as a platform for emerging artists

In our analysis of the cultural value of the Royal Scottish Academy New Contemporaries Exhibition, we assessed the institutions role in shaping emerging artists’ careers, as well as wider cultural value. Supported by our conceptual framework of value creation, issues assessed included the expected versus experienced value of the exhibition and the individual artworks, price setting, the market mechanism surrounding the exhibition, and its enhancement. The created cultural value is facilitated by high-visibility media exposure and through development of career-enhancing networks. We have generated new insight into cultural value more generally by moving beyond dominant instrumental valuation approaches. We have addressed many of the gaps in understanding the mechanisms behind engagement with contemporary art. We have progressed theory with the assistance of our conceptual framework and supporting qualitative data. Cultural value is expressed in contemporary art through artistic production systems and its cultural messages. Artists’ cultural value is often constructed via the intrinsic worth of their work, rather than from market influences. Cultural value is often personal to the viewer, shared with others and remembered over time. It is also co-created among the other stakeholders involved.

Illegal Acts and the Auditor

Abstract The extent to which auditing standards merely consolidate existing practice, as compared with the extent to which they are innovative and raise standards, is a matter of debate. This paper provides evidence on this issue in respect of the UK auditing standard SAS 120 concerned with the auditor’s responsibilities for client illegal acts. Six case examples of illegal acts were developed and these formed the basis for interviews with forty-three practising auditors. It was found that auditors’ assessments of their ability under current practice to discover specific illegal acts are significantly below their perceptions as to the need for these acts to be discovered. This indicates that auditors believe that their responsibilities in this area of the audit are not being adequately discharged. It was also found that auditor consensus appears to be an important consideration in the shaping of the standard and this is consistent with viewing auditing standards as consolidations of professional practice. However, it was also found that levels of consensus did vary and tended to be less in the case of less familiar illegal acts or those less proximate to the financial statements.