Mattias Haraldsson

Compromise and avoidance: The response to new legislation

Purpose– The aim of this paper is to describe, analyze and explain the level of compliance of accounting practices with legislation and generally accepted accounting principles (GAAP) within the Swedish water and sewerage sector.Design/methodology/approach– The empirical data are based on a document study of the annual full cost accounting reports for the financial year 2010. We obtained complete data from 250 of Swedens 290 municipalities. The data are analyzed by statistical methods. The explanations are based on an institutional theory.Findings– Most of the organizations surveyed in this study had taken measures in line with the new regulations, but none of them had adapted fully to the new requirements. Thus, we suggest that the industry has responded to the new regulation by compromise and avoidance. The statistical analyses show that compliance with legislation and GAAP is associated with legal form, minority governance, fee, tax base, population growth and audit firm.Research limitations/implications– This paper provides insight into the factors that explain compliance with accounting regulation. Future research would benefit from researching the decision process when organizations choose to comply or not to comply with specific accounting regulations in the public sector.Originality/value– Few prior studies focus on the actual compliance of accounting practices at the municipal level in relation to accounting regulation and the factors that explain the level of compliance. Knowledge of the factors that explain compliance to accounting regulation will benefit from future policy decisions on regulation and auditing of public sector accounting

Transparency and accountability lost?: Full cost accounting reporting in the Swedish municipal solid waste business

Purpose The aim of this paper is to explore the causes of variations in financial accounting and disclosure practices in a municipal setting highly influenced by governance reforms – the Swedish municipal waste management sector. This focus is motivated by the claim that recent governance reforms have made the organization of public services delivery more diversified and fragmented, which may have had a negative effect on transparency and accountability. Design/methodology/approach To document the accounting and disclosure practices of the Swedish solid waste management organizations, a questionnaire approach was selected. The study uses a conceptual theoretical framework that complements the basic variables considered to influence public sector financial accounting and disclosure practices with factors such as competition and municipal governance forms. Findings The results show that compliance accounting and disclosure transparency to some extent have different antecedents and that the external environment, including market competition, size and economic input, influences both. The governance forms, on the other hand, only influenced compliance accounting (negatively and positively) and not the willingness to disclose information in general. The overall conclusion is that changes to the economic and institutional context mixed with different municipal governance forms introduces a multiplicity of forces that makes the accounting practices themselves diversified and fragmented and not necessarily only in a “negative” direction. Practical implications From a policy perspective the results indicate that the changing institutional and organizational environment has not been matched by attention to, and regulation of, reporting structures that secure external vertical accountability processes. The general implication for future regulations should therefore be to recognize the influence of different economic and institutional forces and develop accountability models that enable and preserve the benefits of governance reform initiatives without losing accountability and transparency. Originality/value Few prior quantitative studies have theoretically related municipal accounting and disclosure practices to factors such as market competition and popular municipal governance forms (municipal corporation, regional cooperation, outsourcing, etc.). Knowledge of how reforms might influence municipal accounting practices might benefit future policy decisions on accountability models with aim of enable and preserve the benefits of governance reform initiatives without losing accountability and transparency.

When revenues are not revenues: the influence of municipal governance on revenue recognition within Swedish municipal waste management

ABSTRACT This paper explores the influence of municipal governance forms and structures on accounting compliance in municipal organisations. If municipal governance forms and structures influence accounting compliance, then understanding these relationships becomes important when discussing heterogeneous practice and efficient accounting regulation. The context and object of analysis is the practices of revenue recognition within the Swedish municipal solid waste management sector. Overall, this analysis identifies that financial accounting compliance is influenced by municipal governance forms and structures, and the results further highlight how financial accounting practices might diffuse through local intra-organisational processes. The results emphasise that municipal governance forms and structures are important factors when considering heterogeneous accounting practices in the municipal sector which complement the more conventional analysis of how external institutional, political and economic forces influence accounting choice and compliance.

Do audit firm and audit costs/fees influence earnings management in Swedish municipalities?

Previous research on the private sector shows that auditors and auditing firms are important actors in ensuring high-quality reporting based on accrual accounting. The aim of this study is to explore whether audit firms and audit costs/fees influence municipalities’ probability of applying earnings management in their annual accounts. The empirical data, which covered the financial years 2011–13, were handpicked from annual reports or retrieved from other sources. In general, our study shows that the probability of earnings management increased if audit costs/fees increased. However, there were differences regarding the probability of earnings management relating to which audit firm was engaged. This implies that audit quality is a factor that affects the probability of earnings management in Swedish municipalities. The study also indicates that different audit firms make different trade-offs between professional versus commercial logics, and that this is reflected in the clients’ propensity to engage in earnings management. Points for practitioners Today a majority of developed countries have adopted accrual-based accounting for municipalities. Along with accrual-based accounting follows the risk of earnings management. Problems regarding accounting quality imply an increased importance of the financial audit. However, our study shows that there is no obvious positive relationship between audit cost/fees and audit quality. The ability to constrain earnings management seems to vary between audit firms. The important implication for practitioners is that auditing must have quality standards that are subject to follow-up and control, which applies both on a system level and also when municipalities procure and contract audit firms for audit assignments.