Jamie Pratt

The use of financial accounting choice to support aggressive tax positions: Public and private firms

This paper describes one reason tax considerations might affect a firms financial accounting choices. If the appropriate financial accounting and tax treatments are ambiguous and the firm has chosen an aggressive tax treatment, we propose that management may choose a financial accounting method that conforms to the tax choice (i.e., conformity) in an effort to increase the probability that the Internal Revenue Service (IRS) will allow the tax treatment. In such cases management is using financial accounting methods to increase expected tax savings and cash flows. 1

Organizational culture in public accounting: Size, technology, rank, and functional area☆

Abstract This study examines the nature of organizational culture in public accounting and demonstrates that different aspects of culture exist across and within public accounting firms. Organizational culture is defined in terms of values shared by members of an organization (or organizational sub-unit) that manifest themselves in the practices of that organization. Practices particularly important to the development and maintenance of culture include selection and socialization. The hypotheses state that different aspects of organizational culture vary across public accounting firms of different size and technology, and public accountants of different rank and functional area. These hypotheses are tested and largely supported with responses to a paper and pencil instrument, the Values Survey Module (Hofstede, Institute for Research on Intercultural Cooperation, 1982), which was completed by 338 public accountants across the United States. Implications for accountants and future research are also discussed.

Misstatement Direction, Litigation Risk, and Planned Audit Investment

This study reports the results of an experiment showing that auditor assessments of litigation risk and planned audit investments are higher when potential errors overstate financial performance than when those errors understate performance. This result is much stronger in the presence of high levels of litigation risk in the client’s industry. These results suggest that in industries where litigation risk is high audited financial statements may contain more unintentional material understatement errors than overstatement errors. Thus, litigation risk—through its effect on auditors—may encourage financial statements that understate firm performance

The interaction between national and organizational culture in accounting firms: An extension

Abstract Soeters & Schreuder ( Accounting, Organizations & Society , pp. 75–85, 1988) examined the interaction between national and organizational culture in accounting firms operating in The Netherlands. This paper is an extension of that research in that we examine the impact of national and organizational culture on British and Australian chartered accountants. U.S. public accountants are also used in the research design as a comparison group. The results show a strong interaction between national and organizational culture for accounting firms operating in the U.K., but are inconclusive for firms operating in Australia. Implications of these results and recommendations for future research are also discussed.

Relationships between leader behaviors and audit team performance

Abstract This study considers the nature and importance of leadership in the audit process. The relationships between audit team performance and leader behaviors, which are practised by in-charge auditors to supervise staff assistants, are examined in a field experiment. The results identify a number of leader behaviors which relate, either directly or through some intermediary factors, to audit team performance. For example, high performing audit teams tended to be supervised by in-charge auditors who allowed staff innovation, were considerate to the staffs personal needs, administered frequent positive reinforcement, relied heavily on time budgets, assigned a small number of tasks per staff member and administered negative reinforcement infrequently. These and other results appear to have implications for practicing auditors as well as future research in the area.

Determinants of leader behavior in an audit environment

Abstract Although leader or supervisory behaviors are generally thought to have a significant effect on subordinate performance, motivation and job satisfaction, the variables which affect an auditors approach to supervision have not been investigated. In this paper we examine two categories of variables (situational variables and leader-person variables) which determine an auditors use of key leader behavior. The determinants of leader behavior are examined in the context of an audit team composed of an accountant in charge (leader) and one or more staff assistants (subordinate). The results of our empirical tests provide some evidence that leader behavior is related to three variables: (1) the match between the accountant in charges perception of the complexity of the task assigned to the staff assistant and the staff assistants job experience, (2) the staff assistants intolerance of ambiguity and (3) the accountant in charges personality dominance.

The Evaluation of Performance in Firms of Chartered Accountants

Abstract In this paper, the results are reported of a survey of the performance evaluation practices of six UK offices of four firms of chartered accountants. The objective of the study was to identify the variables which seemed likely to affect the perceived performance of chartered accountants in the UK. The study was conducted in three stages. First, a model was specified which identifies perceived performance as a function of perceived effort, perceived ability and perceived luck. Second, using a modified form of Vrooms expectancy model of motivation, the determinants of effort were identified. Finally, four work value factors were empirically derived and conceptually related to each of the variables in the model of performance and effort. The results suggest that two of the work value factors (the desire for a better quality of life and the desire to avoid uncertainty) may be particularly important.

A classification scheme for financial accounting research

Abstract This article uses a framework of the policymaking process to summarize and integrate the existing financial accounting research. The framework is first described and then used to identify and integrate six major research perspectives that have emerged in financial accounting. Special emphasis is given in the article to explaining the motivation and evolution of financial accounting research on economic consequences. The framework could best serve as the basis for an outline in a seminar designed to introduce financial accounting research to accounting doctoral students.

The economics of external reporting: Three frameworks for the classroom

Abstract In this paper three frameworks are presented that can be used by accounting instructors to explain some of the economic issues surrounding the external reporting process. The first framework explains accounting numbers in terms of the relationships among capital providers, managers, and auditors. The second framework explains external reporting in terms of its role in determining capital market allocations. The third framework focuses on the policymaking process and the notion of “economic consequences.” In each case the framework is first described and then some suggestions are provided on how it might be used in the classroom. The frameworks have been developed for use in introductory, intermediate, and advanced accounting courses at both the undergraduate and graduate level.

The Use of Multidimensional Scaling in the Measure of Conceptual Level

This research attempts to improve the procedure utilized by Schroder, Driver and Streufert (1967) for using multidimensional scaling in the measure of conceptual level. A series of monte carlo simulation runs and a laboratory experiment highlight potential incongruities related to the degree of error in the input data required by the Schroder et al. process. Accordingly, several methodological recommendations are made and briefly evaluated.