Timothy J. Fogarty

Organizational socialization in accounting firms: A theoretical framework and agenda for future research

Abstract Despite the importance of the socialization of staff members in accounting firms to prospects of organizational success, very little systematic theoretical or empirical work has developed in this area. This paper proposes a theoretical framework for this research by linking socialization to outcomes that pertain to the integration of the individual and by adapting mechanisms from institutional theory. In addition, this paper reviews the contribution of the extant accounting literature and identifies areas that future research should address.

The imagery and reality of peer review in the U.S.: Insights from institutional theory

Abstract Despite many challenges and highly visible failings, accountants in the U.S. continue to be a selfregulating profession. In large part, this can be attributed to the emergence and acceptance of peer review programs. This paper, using institutional theory as a template, addresses the discrepancies between what this technology promises and what it delivers. The discourse of peer review is reinterpreted to examine its societal consequences and its implications for the future of professional claims.

Early regulatory actions by the SEC: An institutional theory perspective on the dramaturgy of political exchanges

Abstract It has been urged that research be directed at understanding the development of political institutions, particularly administrative institutions, in the American governance structure, as well as their role in providing order and change in American politics. Toward this end, the purpose of this paper is to examine the development of one specific administrative institution, the Securities and Exchange Commission (SEC), and the effect of its regulatory actions in establishing the SECs own legitimacy with Congress, the press and regulatees, particularly in terms of the McKesson and Robbins enforcement action. Our archival analysis, using primary and secondary material, probes the SECs efforts at developing a dramaturgy of exchange relations with its external constituents in terms of its: 1. (a) conformity to sanctioned language forms; 2. (b) use of both the acquiescence and compromise strategies in dealing with external constituents and in balancing needs for the appearance of regulation with de facto inaction in regulating audit practice; 3. (c) development and application of a ritualistic pattern of interacting with regulatees. We conclude that in order to understand the SEC as a political institution, it is necessary to incorporate an appreciation of its self-interested behavior in terms of the form, content and rhetoric of its regulatory actions. A critical facet of early SEC efforts and success did not concern whether it did good in terms of applying effective regulations, or bad in terms of preserving the status quo in power relations among the business and political communities. The ability of the SEC to legitimate its existence and institutionalize its role in the financial markets and in the financial reporting and auditing communities proved more essential.

Political Aspects of Financial Accounting Standard Setting in the USA

Discussion about the actual nature of political action is unusual in the literature about the Financial Accounting Standards Board (FASB). Examines the treatment of politics in the US standard setting context and this analysis results in the conclusion that despite widespread recognition that standard setting is political, what this means is greatly underappreciated. Moving knowledge about financial accounting policy towards a more adequate realization of its political nature is furthered by a discussion of the roles of power, ideology and rhetoric.

Culture and accounting in Indonesia: An empirical examination

Abstract This study examines the relationships among the cultural characteristics of Indonesian society, reporting practices of Indonesian firms, and accounting standards promulgated by the Association of Indonesian Accountants. It is argued that an empirical relation exists between the change in cultural values, as conceived by Hofstedes theory of the five dimensions of cultural values (power distance, uncertainty avoidance, individualism, masculinity, and time horizon and the change in accounting values as captures by Grays four dimensions (professionalism, conservatism, secrecy, and uniformity). Using LISREL to evaluate data between 1981 and 1992, three of Hofstedes five cultural values (power distance, uncertainty avoidance, and individualism) have significant relationships with one or more accounting value. This limited confirmation of the culture-accounting relationships suggest that particular historical and economic configurations must be considered in longitudinal analysis. The conflicting influences of extensive government involvement in the economy and nascent market competition are a possible explanation of the Indonesian results.

The rationality of doing “nothing”: Auditors' responses to legal liability in an institutionalized environment

Abstract The auditing profession has come under increasing pressure in the past 30 years to respond to allegations that it has failed in its prime mission—that of notifying investors and others when financial statements of client companies are not be relied upon. Faced with a legal liability whose actual consequences pale only in comparison to its future potential losses due to this failure, public accounting has mounted a multi-faceted campaign to address the situation. This paper explores the public accounting professions responses to their malpractice situation against the suggestion that the crisis is institutional in its nature, and therefore not remediable within current social arrangements. Institutional theory is outlined and applied to auditing as a preface for a detailed examination of the many aspects of this public debate. This argument spans not only what public accounting has done in the face of its legal situation, but also what it has not done.

Public Accounting Work Experience

The work experience of individuals in public accounting is important for a variety of personal and organizational purposes. Work experience is divisible analytically into work outcomes (such as performance, job satisfaction, organizational commitment and turnover intentions) and work processes (such as the perception of role stress, job characteristics and organizational technology). However, work experience may be patterned by demographic variables (such as age, sex and marital status) and by organizationally conferred statuses (such as tenure with the firm and hierarchical rank). Discusses the concepts, reviews the literature and reports the results of a study which found that organizational statuses were a superior source of explanation. However, several demographic conditions also prove selectively important. Implications for further research and for public accounting practice are drawn.

Accountant ethics: A brief examination of neglected sociological dimensions

Traditional treatments of accountant ethics make implicit assumptions inconsistent with a sociological perspective. This paper identifies the ways in which accountant ethics have been approached both in literature pertaining to practice and the classroom. The boundaries of the topic, when its definitions are left tacit, systematically preclude many important features of ethics. Included in these are sociological treatments of the accounting profession as a group, extra-personal aspects of decision making, the stratification of accounting practice, and a sense of ethical action. The paper concludes with an illustration of how institutional theory has the potential to create a systematic sociological interpretation of accountant ethics.

Inside Agency: The Rise and Fall of Nortel

By employing the theoretical template provided by agency theory, this article contributes a detailed clinical analysis of a large multinational Canada-headquartered telecommunications company, Nortel. Our analysis reveals a twenty-first century norm of usual suspects: a CEO whose compensation is well above those of his peers, a dysfunctional board of directors, acts of income smoothing to preserve the confidence of volatile investors, and revelations of financial irregularities followed by a downfall. In many ways, the spectacular rise and – sudden – fall of Nortel illustrates excesses of actors within, and contradictions of the system of corporate governance implied by the agency model. Furthermore, this case illustrates limitations of the agency framework in complex situations with short-term oriented investors.

Institutional Pressures and Symbolic Displays in a GAO Context

Two key organizational properties have long been studied: (1) the manner in which instrumental work processes are performed, and (2) the symbolic display of rational practice in response to institutional pressures. However, the relationship between these properties has proven to be contentious. For example, at different times, the sociology of professions, institutional theory and loose coupling perspectives have proposed that they should be decoupled and then loosely coupled with one another. Extending beyond these contending propositions, it has also been reasoned that a duality inheres in many elements of organizational structure such that they may be simultaneously instrumental and symbolic in character. To evaluate the relationship among institutional pressures, instrumental work processes and coordination practices, we administered a questionnaire to audit teams in the US General Accounting Office (GAO). Statistical results, augmented with field interviews, suggest that instrumental work processes are loosely coupled with, rather than decoupled from, institutional pressures and their attendant symbolic displays of rational practice. Extending beyond the loose coupling concept, we also found that institutional pressures incite the symbolic facets of instrumental tasks and coordination practices, while GAO professional activities both embody and incite the instrumental facets of institutional pressures. Implications for future research in alternative organizational contexts are explored.