Knowledge that Transforms

ABSTRACT We conduct two experiments to examine whether and how the framing (bonus vs. penalty) of a target‐based incentive contract affects knowledge sharing and knowledge seeking. In the first experiment, we predict and find that penalty‐framed contracts increase employees' stress due to the fear of potential loss, which in turn reduces their willingness to share knowledge. Additionally, consistent with loss aversion, employees under penalty‐framed contracts are more likely to seek knowledge than those under bonus‐framed contracts. The second experiment corroborates our theoretical arguments by demonstrating the crucial role of stress in reducing knowledge‐sharing behavior. The results show that, when stress is alleviated through an informal control mechanism, penalty‐framed contracts no longer reduce knowledge sharing. The implications of our findings for research and practice are discussed.

Abstract This mixed‐methods study investigates whether individual auditors' career advancements to more prestigious audit firms can predict their audit quality. Using hand‐collected data on more than 2,000 audit partners from professional networking website profiles, I identify audit partners with advancements from less to more prestigious audit firms and empirically test whether these upward trajectories predict audit partner quality. I find that these audit partners provide higher‐quality audits, as evidenced by discretionary accruals and going‐concern opinions. These results are robust to audit partner changes, entropy balancing, and other sensitivity analyses. Moreover, clients of these partners report more conservative financial statements. The qualitative results from 10 semistructured audit partner interviews indicate that audit partners enter the auditing labor market at less prestigious firms due to both internal factors (e.g., late entry into the job market, location preferences) and external factors (e.g., poor market conditions/recessions or lack of Big N recruitment). In fact, their choice to make upward advancements results from both work considerations, such as limited growth opportunities, feeling unchallenged in their previous roles, and the desire to specialize, alongside nonwork considerations, such as audit firm culture and reducing commute/travel time for client work. Taken together, the evidence suggests that these significant upward career transitions represent market corrections of initial auditing labor markets and that such transitions may be of interest to investors, regulators, audit committees, and academics.

ABSTRACT Accounting is often thought of in terms of numbers and abstract models, yet it is sustained in practice by a host of ordinary objects. This paper demonstrates how seemingly mundane items—blackboards, cue cards, flipcharts, sticky notes, envelopes, and boxes—can play quiet yet decisive roles in extending and connecting accounting into new settings. Borrowing from literature on everyday surface aesthetics, we introduce the notion of geometric mediation to denote how certain arrangements of mundane objects can draw us in, appearing so compelling that they invite us to connect the abstract logics associated with them. We illustrate this process through a study of the Logical Framework, a performance tool for nongovernmental organizations, and its transformation when adopted by a German development agency in the 1970s. Although the tool initially met resistance from an agency whose logics conflicted with the use of managerial devices, the simple materials used to operationalize the tool helped these differences feel less stark. Their shapes and arrangements made the framework look naturally compatible with other approaches, leading to a new version of the tool, known as ZOPP. Our study contributes in two ways. First, it shows how everyday aesthetics can quietly help accounting spread and adapt. Second, it offers a new view of how accounting brings together competing aspirations, not only through explicit negotiation or compromise, but also through subtle, often unnoticed material connections that make things feel “right” before they are fully thought about.

ABSTRACT This article explores how accounting ideas travel to unfamiliar environments and instigate new modes of calculation therein. The empirical focus is on the food balance sheet, a key calculative technology in the realm of food security. Drawing on Said's four‐stage schema for analyzing the movement of theories and ideas, this investigation traces the journeying of the balance sheet to the field of food security from the First World War, culminating in the institutionalization of the food balance sheet as a standardized and universal practice from the late 1940s. The study reveals the conditions that facilitated acceptance of the balance sheet idea in a new field—specifically, its alignment to the problem of managing the national and global supply of food, as well as the presence of individual actants who recognized its utility for communicating and addressing the problem of food insecurity during periods of global conflict and humanitarian crisis. These key individuals emanated from the United States, the dominant power in an age of internationalism. It is shown that conceptual traveling involved the jettisoning of core elements of the accounting construction of the balance sheet, but also their selective reimportation once the balance sheet became domesticated in its new location. The article offers original insights to the forces that generate calculative innovations in epistemic communities beyond accounting.

ABSTRACT This paper examines how accounting and control practices constitute and distribute agency and responsibility for sustainability in global supply chains. Drawing on a field study in the fashion industry, we describe the sustainability control practices used by a major buyer firm vis‐à‐vis its suppliers and trace their evolution from a “compliance‐based” to a more “collaborative” regime. We find that these controls did not simply guide, monitor, or assess supplier firms; they responsibilized them in a more fundamental sense, namely by virtue of scripting the suppliers' actorhood . We show how such scripting evolved in ways that enabled the buyer to progressively distance itself from certain sustainability and control problems, as emergent controls produced the legitimate supplier as an actor who can, and should, address sustainability in an increasingly autonomous and entrepreneurial manner. A key argument that we therefore develop is that sustainability control practices operate as technologies of actorhood that not only address sustainability problems but also redistribute locales of moral authority and responsibility in interorganizational settings—not only among actors but also into the invisible hand of the market. We further show how such constitution of organizational actorhood relies on, and triggers, processes of subjectivation at the individual level, as members come to embody their organization's imagined actorhood.

ABSTRACT This study examines whether common ownership by institutional investors is associated with auditor sharing among their investee companies. Auditor sharing can enhance audit quality through facilitated monitoring and improve financial reporting comparability—two benefits that enable common owners to internalize externalities across their portfolio firms (i.e., to reduce negative spillovers from audit failures and to capture positive spillovers from improved comparability across commonly owned peer investees). Using same‐industry company pairs in the United States, I find that common ownership is positively associated with the likelihood of sharing the same audit firm, and this association is stronger when co‐owners have longer investment horizons or more aligned incentives. A quasi‐experimental test leveraging BlackRock's acquisition of Barclays provides consistent evidence. Additional analyses indicate that shared board members serve as a potential channel through which auditor sharing arises. Finally, commonly owned, auditor‐sharing companies exhibit higher audit quality and are more likely to collectively dismiss auditors following revealed failures, consistent with improved oversight. These findings contribute to the literature on shared auditors, auditor choice, and common ownership by showing how a noncontractual relationship induced by common ownership shapes auditor sharing across companies and influences the shared auditor's incentives.

Abstract We examine whether earnings from parent‐only financial statements are incrementally informative to those from consolidated financial statements. We use a unique mandate in India that requires firms to provide both consolidated and parent‐level financial statements, since currently neither US GAAP nor IFRS mandates this level of disaggregation. While disaggregation provides additional information, it also imposes costs, raising the empirical question of whether its benefits outweigh the costs. Our analyses reveal that disaggregated quarterly earnings components inform investors, with investors placing more weight on parent‐level unexpected earnings than on subsidiaries' unexpected earnings. We do not find evidence of mispricing associated with disaggregation; rather, the higher weight on the parent's earnings reflects higher persistence, consistent with semi‐strong market efficiency. Moreover, parent earnings provide incremental informativeness, especially in the context of poor earnings quality and high mergers and acquisitions intensity. Our results endure when we examine annual parent‐ and subsidiary‐level earnings, where available, in 98 countries around the world. Our results contribute to the literature on disaggregation in accounting and earnings informativeness in equity markets, offering insights that may influence regulatory considerations on the usefulness of financial statement disaggregation.

ABSTRACT External audits enhance the credibility of financial statements and are a cornerstone of capital market integrity. However, the growing and complex auditing literature poses challenges for researchers. This survey synthesizes and critically evaluates archival audit research published in top accounting journals from 1995 to 2025, organizing over 600 studies into three core areas: the audit market, audit quality, and audit personnel and processes. We offer new conceptual insights into the audit market, emphasizing that audit assurance is unobservable and that audit fee studies generally estimate reduced‐form models rather than separate demand and supply functions. On audit quality, we expand upon DeAngelo's definition to include the auditor's responsibility to assess ex ante risk. We suggest an alternative three‐dimensional definition of audit quality that is more closely aligned with professional standards. We also clarify common misconceptions arising from conflating audit quality with financial reporting quality. Finally, we review the growing literature on audit personnel and call for more research into underexplored roles of personnel in the early stages of the audit process. Our survey contributes by reframing key constructs, identifying limitations in common proxies, and suggesting future research directions to advance our understanding of how audits function and shape financial reporting outcomes.

ABSTRACT Although cyber risk is widely recognized as a critical organizational threat, how firms configure internal roles and practices to address it remains poorly understood. This study offers insights into that question. In practice, two professional roles share the job of cyber risk assessment and assurance: cybersecurity specialists, who focus on the technical side of assurance, and internal auditors, who focus on governance, processes, and compliance. Drawing on 36 interviews across a range of organizations, we explain how these professional roles collaborate, when collaboration breaks down, and why working together is often difficult. We identify five common patterns of working across professional boundaries, ranging from rival parallel assessments to genuinely integrated work. As exposure to cyber threats rises because of regulation, critical operations, or greater digital dependence, accountability pressures increase, and managers and professionals spanning across the two professional roles act as connectors and engage in coordination across domains. We also show how standard risk‐management templates and reporting tools can shift from being symbolic checklists to becoming practical coordination mechanisms. Overall, the study offers a framework for building more integrated cyber risk assessment and assurance, with relevance for other emerging risks that demand cross‐functional expertise.

ABSTRACT We study how insider trading based on private cost information affects product market outcomes when firms differ in cost variance. In our model, managers exploit firm‐specific cost information to pursue short‐term trading gains, leading them to adjust output decisions and reshape product market competition. We show that trading opportunities have heterogeneous effects on firms' production and value: firms with high cost variance overproduce, whereas those with low cost variance underproduce; correspondingly, the value of firms with high cost variance rises, while that of firms with low cost variance declines. These results demonstrate how heterogeneous costs and private cost information create real economic consequences by linking insider trading incentives to distortions in product market competition and firm value.