Kathleen Herbohn

The Horse Has Bolted: Revisiting the Market Reaction to Going Concern Modifications of Audit Reports

This paper examines what value is added by an audit report through an investigation of the information content for first-time going concern modifications (GCMs). Consistent with prior research, we find no evidence of a short-term market reaction to the public announcement of a first-time GCM. We document a significant adverse medium-term market reaction in the 12 months prior to a first-time GCM announcement, but find no evidence of a persistent market underreaction in the 12 months following the announcement. These results are consistent with an audit opinion fulfilling an attestation function and confirming the deteriorating financial condition of a firm.

Corporate social responsibility: the link between sustainability disclosure and sustainability performance

This paper explores the relation between sustainability performance and sustainability disclosure within the Australian extractive industries. The study utilizes Ullmanns (1985) stakeholder framework, which depicts sustainability disclosure and performance as two components of management strategy for dealing with stakeholder demands. Consistent with this framework, we predict a positive performance–disclosure relation. Extending prior research that has utilized problematic environmental performance indices such as CEP indices or toxic emissions levels, we develop a sustainability performance index based on the International Finance Corporations Measuring Sustainability Framework (2001). Using data from 339 mining and energy firms listed on the Australian Securities Exchange in 2006, we find that corporate sustainability performance is strongly associated with disclosure as expected. Sustainability disclosure is also greater for firms with a proactive communication strategy as manifested through press release activity. Finally, asset age and firm size are both positively associated with sustainability, consistent with predictions from the stakeholder framework.

Lessons from small-scale forestry initiatives in Australia: the effective integration of environmental and commercial values.

Due to growing environmental awareness and increasingly difficult economic conditions, much small-scale forestry policy is characterised by the often competing objectives of generating adequate commercial returns on the one hand, and on the other, achieving of environmental benefits (e.g. reforestation of degraded farm land). Within the current paper we outline the small-scale forestry initiatives that have been launched in Australia at the national, state and regional levels to develop a viable forestry sector that successfully balances commercial and environmental considerations. The initiatives include national reforestation schemes, joint ventures, sharefarming schemes, trust arrangements and regional programs supported by federal, state and local governments. From this review, it is evident that all of the initiatives — encompassing schemes with solely conservation objectives to those marketed from a purely commercial perspective — result in some environmental benefits (e.g. restoration of degraded land, provision of wildlife habitats). However, at this stage a particular program has not emerged from the confusing tapestry of often overlapping forestry initiatives in Australia as the most viable approach to the development and maintenance of multi-use forestry, private sector forestry.

Market's Perception of Deferred Tax Accruals

This study investigates the value relevance and incremental information content of deferred tax accruals reported under the ‘income statement method’ (AASB 1020 Accounting for Income Taxes) over the period 2001–2004. Our findings suggest that deferred tax accruals are viewed as assets and liabilities. We document a positive relation between recognized deferred tax assets and firm value using the levels model, while the results from the returns model suggest that deferred tax liabilities reflect future tax payments. The balance of unrecognized deferred tax assets provides a negative signal to the market about future profitability, particularly for companies from the materials and energy sectors and loss-makers.

International Accounting Standard (IAS) 41: What are the implications for reporting forest assets?

This paper investigates the implications of International Accounting Standard 41 (IAS 41) for European Union (EU) entities reporting on material holdings of forest assets. To all intents and purposes, Australia has been a test for IAS 41 because of the close similarities between IAS 41 and the relevant Australian regulation on forestry that has been operational for the last four years. The Australian reporting experience is used to identify potential implications for EU reporting entities. Evidence suggests that constituents’ key concerns with IAS 41 relate to the measurement of biological assets at fair value and the inclusion in income of unrealised gains or losses from measuring these assets at fair value. These concerns are borne out by the Australian experiences. Evidence is presented that suggests that compliance with IAS 41 will allow statement preparers a choice of methods to determine the fair value of timber assets. Additionally, it seem likely that the recognition of unrealised gains and losses from timber assets from changes in fair value and the harvest of agricultural produce will markedly affect income statements, introducing greater volatility into reported income. The impact has been greater for government departments. The median timber gain expressed as a percentage of net profit ranged from 44.5% to 79.9% in individual years. An unresolved issue has been identified — do such accounting procedures reflect the nature of investment in forestry?

Women and the Prospects for Partnership in Professional Accountancy Firms

This paper examines three possible reasons (stereotypical discrimination, structural obstacles and employees preferences) for the lack of women partners in professional accountancy firms in Australia, UK and New Zealand. Data are collected from an experimental survey and interviews of current partners. Whilst womens perceived preferences and organisational structural barriers contributed strongly to the lack of women partners in all sizes of firms, traditional stereotypical discrimination against women at the partnership decision point was only displayed in metropolitan large non-Big 4 firms, and it is suggested that this is related to intense competitive pressure and a constrained partnership resource.

Job satisfaction dimensions in public accounting practice

This paper investigates gender differences in reported job satisfaction and career choices revealed by a postal survey of accountants from the Queensland Division of the Institute of Chartered Accountants in Australia. Of particular interest are levels of satisfaction with remuneration and promotion. Two moderating factors of career age and firm size are also considered. Consistent with prior research, female accountants reported dissatisfaction with their opportunities for promotion. However, unlike prior research there was no evidence of a gender effect in remuneration levels, and in reported satisfaction with remuneration. Nor were there differences in satisfaction across age bands, and public accounting firms of different size. The link between satisfaction levels of female accountants and their career choices of leaving their current employer, moving to parttime employment, or leaving the accounting profession was also investigated. Consistent with a large body of organisational and accounting research, low levels of job satisfaction were associated with higher turnover intentions for female accountants.

Forestry Managers’ Perceptions of the Feasibility of Incorporating Non-Market Value Estimates into Financial Environmental Reporting

There is currently considerable interest in environmental economic valuation methods because of their importance in policy development and litigious issues. Several accountants have recently advocated these valuation techniques within accounting and reporting frameworks. Environmental accounting can incorporate financially quantified environmental externalities into conventional reporting systems, so that financial statements communicate the commercial and environmental performance of an organisation to its stakeholders to allow more fully-informed decisions. This paper examines the feasibility of developing a financial environmental reporting system for an Australian public sector forestry organization. Data collected with the assistance of the organization were analysed using descriptive and inferential coding. Reactions of forest managers to the introduction of environmental reporting, and their implementation experience, were examined. Potential barriers to the reporting system include a lack of funding, internal resistance to economic valuations due at least in part to low knowledge levels in relation to non-market valuation methods, stakeholder resistance, and the absence of recognised environmental indices against which to report. Potential benefits include capacity to report on sustainability of forest management, and information with which to negotiate settlements with powerful stakeholders and to seek funding for public-good components of operations.

Policy Review - An Alternative Approach to Accounting for Natural Resources: The Case of Multipurpose Forestry in Australia

Accounting reports represent one of the most widely used forms of communication on an organizations performance to its stakeholders, including existing and potential investors, regulatory agencies, and lobby groups. However, these reports often present only a partial picture of an organizations performance because nonmarket, unpriced events relating to the management of natural resources are not taken into consideration. Consequently, reliance on these reports can lead to poorly informed decisions regarding use of resources controlled by organizations. In this article, an alternative reporting framework for organizations managing natural resources is proposed, which incorporates the data management and communication skills of the accountant, and the resource valuation techniques of the economist. The proposed reporting framework is illustrated with reference to a multipurpose reforestation program in Australia, and practical issues associated with its application are discussed.Accounting reports represent one of the most widely used forms of communication on an organizations performance to its stakeholders, including existing and potential investors, regulatory agencies, and lobby groups. However, these reports often present only a partial picture of an organizations performance because nonmarket, unpriced events relating to the management of natural resources are not taken into consideration. Consequently, reliance on these reports can lead to poorly informed decisions regarding use of resources controlled by organizations. In this article, an alternative reporting framework for organizations managing natural resources is proposed, which incorporates the data management and communication skills of the accountant, and the resource valuation techniques of the economist. The proposed reporting framework is illustrated with reference to a multipurpose reforestation program in Australia, and practical issues associated with its application are discussed.

Using a balanced scorecard to improve the management of natural resources: experiences from Baden-Wurttemberg

The balanced scorecard approach is a strategic performance management tool to assist managers’ decisions by guiding the selection of performance measures that reflect desired strategic goals. While typically implemented in the private sector, it has potential application to the public sector, particularly to the management of natural resources. This article investigated the experiences of a public-sector organization, the State Forest Service of Baden Württemberg, in implementing a balanced scorecard. Data were collected from interviews with senior managers and a questionnaire survey of middle managers from the organization. Overall, the results show the underdevelopment of less traditional performance measures, the need for organizational commitment to collection of such measures, and support for an iterative process to develop meaningful measures. The results also support the relationships hypothesized in the conceptual model regarding desired outcomes and the capacity of existing information systems, and the receptivity of managers to change.