In this study, we experimentally investigate how managers' budget reporting behavior is influenced by two important features of the budgeting system: the measurement basis used in budget preparation (i.e., whether managers make budget reports in financial or nonfinancial measures) and managers' slack benefits in budget execution (i.e., whether managers benefit from budgetary slack directly or through an intermediate activity). While prior research suggests that moral self-regulation helps promote honest behavior, we predict that a financial measurement basis undermines moral self-regulation by strengthening the manager's desire to advance self-interest and that the absence of direct slack benefits undermines moral self-regulation by making misreporting more justifiable. We also predict that the effects of these two budgetary features on honesty are non-additive, due to the manager's diminishing marginal net utility from misreporting. Experimental results are consistent with our predictions. The implications of our findings for management accounting theory and practice are discussed

Audit practitioners, standards, and regulators continually emphasize the importance of professional judgment in the audit of complex processes and financial estimates. Despite this increasing call for more thoughtful analysis, research and inspection reports seem to suggest that auditors tend to make mechanistic audit decisions in such situations. This experiment evaluates auditor participants' improved application of professional judgment in the audit of complex estimates when taught a specific critical thinking methodology from system dynamics. Results indicate that emphasizing the use of professional judgment is not sufficient to decrease auditors' mechanistic mentality. As expected, however, auditors primed to take a systems-thinking perspective are better able to evaluate the complexity of the situation and to more effectively apply professional judgment. These results suggest that the goal of improving professional judgment can be achieved with an underlying change to the way auditors think

This study examines the joint effect of investor sophistication and the prospect of critical audit matter (CAM) disclosure on experienced audit committee members' propensity to ask challenging questions about management's significant accounting estimates. Using the theory of helping behavior and social responsibility norm, I predict that audit committee members will ask more challenging questions given a more unsophisticated investor base, particularly when there is a prospect of additional CAM disclosures in the audit report. I test my hypotheses using highly experienced audit committee members in an experimental setting. The results are supportive of my hypotheses. Additional analysis indicates the results are driven by audit committee members perceiving greater oversight duty in the presence of a more unsophisticated investor base and when there is the prospect of additional CAM disclosures. Overall, my findings shed light on factors that affect audit committee members' questioning behavior in the oversight process and are likely of interest to regulators and standard setters given their traditional emphasis on protecting unsophisticated investors as well as the current move towards expanding the audit report to include CAMs

Because of changes in tax regulations and increased political pressure, firms are reconsidering their practices of shifting manufacturing operations offshore to lower wage countries. Although outsourcing has been well researched, few studies examine managerial practices that influence offshore operations. We investigate the effects of choices regarding labor, suppliers, and outsourcing that influence firm longevity in the maquiladora industry in Mexico. We argue that firms are exposed to labor frictions, supply-chain constraints, and compliance and regulatory risks that if left unresolved can lead to plant closure attributable to labor or regulatory frictions and rising costs. We consider specific actions pursued by managers at maquiladora plants to mitigate the underlying constraints and then analyze factors that affect the likelihood of continuing operations, that is, the longevity of the plants. We find a positive relation between the likelihood of longevity in operations and the following plant characteristics: hourly wages, workforce stability, skill, and the decision to outsource regulatory compliance functions. We document a negative relation between longevity and total labor cost as a percent of total costs as well as using suppliers based in Mexico. We also find that high-tech plants have higher stability, pay higher wages, and experience greater longevity than low-tech plants. Overall, we identify key managerial choices that are related to longevity in offshoring production

The existence of fictitious users of financial statements has been confirmed in previous research. Our study investigates how this powerful yet ‘made-up’ construct is deployed within the discourses of the main stakeholders including ‘real’ users themselves, as they shape regulatory debates in the international accounting standard-setting arena. We draw on Bourdieu’s theorization of dominant discourse as a form of implicit power, and develop it further within the phraseological theory of meaning, specifically the linguistic concept of collocation, which focuses on habitual language patterns. Using this framework, we conduct a comparative analysis of the recurrent linguistic choices around the term ‘user’ in comment letters submitted in response to selected IASB’s regulatory proposals. Our study provides empirical evidence for the existence of commonalties and subtle differences in the ways in which made-up users are discursively operationalized by four key accounting constituent groups: the accounting profession, preparers, regulators, and ‘real’ users of financial statements. At the theoretical and methodological level, we demonstrate the explanatory power of the concept of collocation and its role in the identification of implicit patterns of dominant discourse in Bourdieu’s sense. Our research also shows that the close investigation of how the dominant discourse of the made-up users works generates a series of new why questions regarding the ‘real’ users’ role in accounting standard setting

Since the Global Financial Crisis, corporate tax minimization strategies have come under increasing public scrutiny. While the legitimacy of ‘aggressive’ practices has been challenged, corporate tax minimization largely remains unquestioned and manifests in corporate tax strategies. To appreciate how the institutionalized practice of tax minimization is maintained, despite threats to its legitimacy, this paper examines the influence of field dynamics on the enactment of corporate tax strategies. To map the field, we interviewed a cross section of actors involved in influencing the enactment of corporate taxation in Australia, including external advisors, CFOs, tax regulators and policy makers, unions, civil society groups and academics. By adopting Bourdieu's work as a lens, we find that a lack of practical means for implementing a moral view on tax prevents a radical departure from corporate tax minimization strategies. Changing the status quo failed due to critics lacking to propose a practical alternative to the law, which remained the sole guide for tax minimization practices. Despite the presence of heavy critiques, an analysis of the interdependence between the power structure of the field, actors' capitals and their habitus reveal a reinforcement of the view that tax minimization is the only viable strategy. These insights advance field-level studies in accounting by extending the scope of actors included, further demonstrating the influence of marginal actors on field-wide perceptions of legitimacy and potential routes for institutional change

Mobilising the literature on global governance, governmentality and accounting regulation, we trace the historical deployment of transparency and the associated assemblages of actors and technologies in transnational economic and market governance. Starting with the first uses of the term “transparency” in the European Common Market (ECM) after World War II, we show how transparency came to inform and frame the imagined rational individual as the central economic (customer, central to price discovery) and later political (citizen, central to the market's public accountability) participant. We then show how in the 1990s, with the rise of the New Financial Architecture (NFA), the role of transparency in economic/market governance was fundamentally transformed. Beginning with their good governance programs, the International Monetary Fund (IMF) and the World Bank gradually adopted “standardised transparency” (in the form of financial accounting, as well as standardised statistics, state budgets, corporate governance, etc.) to govern market participants through financial market discipline. This disciplining program worked in concert with a program of moral persuasion enacted through an intensifying performance measurement apparatus. We elaborate on the implications of this transformation for the political economy of accounting, by reflecting on how the reliance on standardised transparency in neoliberal governmentality has been about: a reconfiguration of the sites of problems (focused on the national level) and solutions (focalised at the global), a liquidation of transnational market governance (that is increased reach, flexiblisation and self-organisation of both the disciplining and moralising/subjectivising governance processes), and a reconfiguration of the topology of actorhood (away from states and individuals both as enablers and beneficiaries, and towards financial investors and private standard bodies