Janet Mack

Reflections on the theoretical underpinnings of the general‐purpose financial reports of Australian government departments

Purpose – The purpose of this paper is to determine the appropriateness of a general-purpose financial reporting model derived from a “decision-useful” framework for government departments. Design/methodology/approach – This research in this paper uses a survey methodology to access users of government department general purpose financial reports and is innovative because it has directly studied actual users across the entire public sector. Findings – The findings of this paper indicate that general-purpose financial reports are used to satisfy financial accountability and public accountability rather than decision making – indicative of users having an accountability focus rather than a “decision-useful” focus. This provides systematic empirical evidence against the current financial reporting model used internationally in the public sector. Research limitations/implications – The paper has important implications for policy makers since the choice of an accounting framework has the capacity to affect the information content of reports – what is reported and how it is measured, and thus have a direct impact on the operations of government. The paper argues that it is crucial that public policy regulators re-examine the financial reports provided to stakeholders. Originality/value – The research in this paper is original in that it has, for the first time, systematically reviewed all of the three elements of the public sector general-purpose financial reporting model as well as directly accessing users. The authors can categorically argue for the abandonment of the model in favour of one, which is better suited to the public sector.

Is there an audience for public sector annual reports: Australian evidence?

Purpose – The purpose of this research is to investigate the role and importance of the annual report as a source of information about public sector entities.Design/methodology/approach – This research uses a survey methodology to access users of public sector annual reports and is innovative because it has directly studied actual users across the entire public sector.Findings – The findings of this research indicate that the annual report is an important source of information about public sector entities but it is not the most important source of information. This study also found that the annual report is not regarded as equally important across all public sector entity types. Differences in the importance attached to the annual report by different stakeholder groups were also noted.Research implications/limitations – These findings have important implications for policy makers with respect to the information content of public sector annual reports. In particular the blanket approach to legislative requ...

An Examination of the Content of Community Financial Reports in Queensland Local Government Authorities

Annual reports, including general purpose financial statements, have been adopted as a key mechanism by which public sector entities discharge their accountability. However, there is concern about the complexity of public sector general purpose financial statements and consequently their effectiveness as an accountability mechanism. In Australia, the Queensland government has moved to address this issue in local government authorities by introducing a Community Financial Report as a means of simplifying the financial statements. A feature of this initiative was the lack of prescription given to local government authorities in the preparation of this report. This paper examines the form and content included in Community Financial Reports and also uses a disclosure index to determine the level of disclosure in the reports. The results of this research show that the form and content of the Community Financial Reports varied considerably. There was no definitive style, with each report being unique. The disclosure index revealed low levels of disclosure by local government authorities in the first year of the report as well as a lack of analysis of the Statements of Financial Performance, Position and Cash Flows. As well, there was a significant difference in the disclosures made by rural local government authorities compared with urban local government authorities. The results of this research will be of interest to local government authorities and local government regulators as they aim to provide useful, understandable information for stakeholders.

The Influence of Regulation on the Publication of Consolidated Statements

The impact of regulation on the publication of consolidated statements by Australian listed companies is examined by reviewing evidence of the first use of consolidated statements by holding companies listed on the Sydney Stock Exchange, excluding companies incorporated elsewhere, and relating that evidence to the chronology of the development of statutory, professional and stock-exchange regulations permitting or prescribing the use of consolidated statements. The findings are that the wider adoption of consolidation accounting has been associated with changes in statutory and other forms of regulation. These findings contradict the conclusions of earlier studies (Whittred, 1986, 1987, 1988), namely that regulation was of minimal influence, and that the adoption of consolidation accounting was explainable by ‘contracting cost variables’. Major flaws identified in these earlier studies were an apparent failure to recognize that Sydney listed companies may have been subject to regulations established in other jurisdictions, and a crucial misinterpretation of the history of Australian stock exchange listing rules, which led to the misidentification of listed companies as having adopted consolidation ‘voluntarily’. The findings also underline comments made previously in critiques of other papers which have tested hypotheses incorporating agency or contracting costs. While historical analysis can assist the exercise of judgment in the classification of events, those who rely on historical evidence in the development of theories and in framing hypotheses should use that evidence with care, having regard to pertinent contextual factors.

Do Not-For-Profits Need Their Own Conceptual Framework?

This paper raises the issue of whether not-for-profit (NFP) organisations require a conceptual framework that acknowledges their mission imperative and enables them to discharge their broader accountability. Relying on publicly available documentation and literature, it suggests that current conceptaul Frameworks for the for-profit and public sectors are inadequate in meeting the accountability needs of broader NFP-specific accountability and the formulation of NFP-appropriate reporting practice, including the provision of financial and non-financial reporting. The paper thus theoretically challenges existing financial reporting arrangements and investes debate on their future direction.

The legitimising processes of a new regulator: The case of the Australian Charities and Not-for-profits Commission

Purpose - – The purpose of this paper is to strengthen the theoretical understanding of the processes through which a new regulator seeks to gain legitimacy within an existing regulatory space. The authors do this by investigating the case of the Australian Charities and Not-for-profit Commission (ACNC). Design/methodology/approach - – Synthesising legitimacy theory with the concept of regulatory space, the authors analyse formal public discourse surrounding the establishment and operations of the ACNC. Findings - – Regulation is essentially a context-bound political process in which a new regulator needs to establish legitimacy to ensure its survival. It must convince its constituents that it has developed processes to operate effectively and professionally in addressing constituents’ needs, to bargain authoritatively with other regulators in establishing its operational boundaries, and to engage politically with government and constituents. Over a relatively short time, the ACNC built legitimacy, despite the political threats to its formal regulatory authority. Research limitations/implications - – The conclusions are based on the analysis of one case. There is scope for further investigations of the processes by which new regulators establish their legitimacy in different contexts. Practical implications - – The potential for a political threat to the authority of a new regulator, and the difficulty of achieving regulatory reform, particularly in a federated system such as Australia, highlight the necessity for a new regulator to develop a compelling discourse of legitimacy. Originality/value - – The authors synthesise regulatory space and legitimacy perspectives, contributing to an understanding of the processes of regulation.

Auditor obligations in an evolving legal landscape

Purpose - – The purpose of this paper is to look at auditor obligations to their clients and potentially to third parties such as investors, with a focus on the quality of financial disclosure in an evolving legal framework. Design/methodology/approach - – The article outlines and compares established and emerging trends relative to information disclosure and contractual performance in parallel contexts where information asymmetry exists. In particular, this article considers the disclosure regime that has evolved in the insurance industry to address the substantial imbalance in the level of knowledge possessed by the insured in comparison to the prospective insurer. Abductive reasoning is used to identify causal constructs that explain the data pattern from which the theorised potential for judicial revision of the interpretation of “true and fair” in line with “good faith” in legal regulation is derived. Findings - – The authors conclude that there is little doubt that a duty of good faith in relation to auditor-company contractual dealings and potentially a broader good faith duty to third parties such as investors in companies may be on the horizon. Originality/value - – In the context of stated objectives by organisations such as the International Federation of Accountants to reconcile ethical and technical skills in the wake of the global financial crisis, there is an increased need to rebuild public and investor confidence in the underpinning integrity of financial reporting. This paper offers a perspective on one way to achieve this by recognising the similarities in the information asymmetry relationships in the insurance industry and how the notion of “good faith” in that relationship could be useful in the audit situation.

Women in leadership: an analysis of the gender pay gap in ASX-listed firms

This study provides evidence that after several decades of fighting for equal pay for equal work, an unexplained gender pay gap remains amongst senior executives in ASX-listed firms. After controlling for a large suite of personal, occupational and firm observables, we find female senior executives receive, on average, 22.58 percent less in base salary for the period 2002–2013. When executives are awarded performance-based pay, females receive on average 16.47 percent less in cash bonus and 18.21 percent less in long-term incentives than males. The results are robust to using firm fixed effects and propensity-score matching. Blinder–Oaxaca decomposition results show that the mean pay gap cannot be attributed to gender differences in attributes, including job titles. Instead, the results point to differences in returns on firm-specific variables, in particular firm risk.