Knowledge that Transforms

This study considers the role of accounting in moments of resistance in day-to-day institutional contexts. It does so by drawing on the perspectives of Mikhail Bakhtin (1981 , 1984 , 1986) – a Russian philosopher who sought to understand the notion of dialogue in everyday communicative practices. We study these moments of resistance within the context of non-governmental organizations (NGOs) – organizations affected by authoritative discourses of accountability that seek representative, tangible and verifiable understandings of impact and performance. Within our empirical study, we show how accounting reports related to performance and impact gradually moved along a continuum from being received in authoritative mode to internally persuasive mode and how, as a result, resistance to an authoritative discourse of accountability was created and maintained. We found that this was enabled through the reception and promotion of accounting’s subjunctive possibilities.

In this study, I investigate how firms design risk-focused control practices to embed risk considerations in employee decision making. The firm’s objective is to make sure that employee behavior is aligned with firm risk appetite. To investigate how firms go about this control problem, I consider the use of risk-focused results controls (i.e., expanding results controls by risk aspects). Despite the advantages of jointly managing risk and performance through risk-focused results controls, prior literature indicates that their isolated use has also some drawbacks. Recent research hints at the crucial role of risk culture in this regard. In a next step, I present risk-focused information sharing as tangible and manageable dimension of risk culture that alleviates the weaknesses of risk-focused results controls while leaving the benefits of the latter intact. I also posit that risk-focused results controls make risk-focused information sharing more effective. Drawing on complementarity theory, I argue theoretically and show empirically that there is a complementarity between risk-focused results controls and risk-focused information sharing irrespective of the level of risk appetite a firm displays. Furthermore, I identify firm risk appetite as a system-specific contextual variable that drives the degree of complementarity between the two risk-focused control practices. Consistent with my prediction, the results indicate that the complementarity between risk-focused results controls and risk-focused information sharing is significantly stronger for firms displaying a high level of risk appetite. Using data from a survey of 202 companies, I find empirical support for my hypotheses.

Recent reviews of the academic literature indicate that little is known regarding how users evaluate the materiality levels auditors use or respond to quantitative materiality disclosure. Regulators around the world have taken different stances on whether materiality should, or should not, be disclosed in the auditor’s report. In response to the dearth of research on these policy decisions, we examine the effect of audit materiality disclosures, or lack thereof, on professional investors’ decision making across different investment contexts (debt vs. equity, public vs. private). Our study is designed to test global audit public policy and as such our hypotheses are motivated by assertions made by regulators, auditing standards, and audit theory. Among a sample of 246 professional investors in our main experiment and 91 professional investors in two supplemental experiments, we find no consistent evidence that investors incorporate materiality disclosures into their investment decisions. Most importantly, we find evidence that investors’ understanding of materiality is not in line with regulator assertions. For example, investors fail to make consistent connections between the amount of disclosed audit materiality and the level of auditor effort. Our results hold across debt and equity investment settings for both public and private companies. In sum, our findings suggest that disclosures of audit materiality are not well understood by professional investors and are not viewed as decision relevant. This research informs practitioners, regulators, and academics regarding the effect of materiality disclosure on investor decision making as well as stakeholders’ views and expectations of overall materiality.

This paper explores the ways in which leaked documents can be recruited to contribute to the counter-hegemonic aims of the shadow accounting project. Drawing on material published by Wikileaks as part of Cablegate, our case study focuses on private communication between US Embassy officials about Chevron Nigeria from 2002 to 2010. In analyzing these documents, we mobilize the ideas of both Laclau and Mouffe (1985) and Jessop (1990), emphasizing the role discourse plays in the production and maintenance of hegemonic coalitions between powerful state and market actors, which are central to neoliberalism. Our analysis suggests that the sharing of discourse, much of which occurs in private, allows a hegemonic coalition to agree to a “’popular-national’ programme” (Jessop, 1990) that serves the interests of the coalition, while masquerading as collectively beneficial. In our case study, this private discourse provided the means through which the “moral and intellectual leadership” of the coalition could be embedded in a shared commitment to the maintenance of oil production in Nigeria, despite significant resistance from local communities. In choosing to use leaks to explore the state-capital nexus, we offer a shadow account of the discursive production of hegemony that reveals it to be an ongoing and active project. Importantly, we also show that the very act of creating and recreating hegemony through discourse produces moments of vulnerability and fragility that present counter-hegemonic opportunities. When leaks are mobilized to produce shadow accounts of the contradictions and tensions that exist between the state and capital, the “political frontier” can be restored in ways that re-politicize and radicalize democracy (Mouffe, 2018, p. 4).

This paper adds to the literature on the role of financial economics in accounting standard-setting by analyzing the co-performation of an economic theory – the Efficient Market Hypothesis (EMH) – in the construction of a new approach to accounting for credit losses in financial reporting. Inspired by actor-network theory and its notions of performativity and translation, the paper draws on interview data and documents to reconstruct the process by which the devalued “incurred loss” impairment model was replaced with a more forward-looking “expected loss” approach under IFRS in response to the 2008 financial crisis. These actions comprised of a series of experiments and negotiations, including an unsuccessful effort to establish an “ideal”-type model and the failure of a joint initiative between the IASB and the FASB. Alongside extensive considerations over how to make the approach operational, the influence of the EMH regarding the relationship between loan pricing and initial expectations of credit losses is elucidated. We show how a standard-setting objective grounded in financial economics is translated through a process of approximation as it forges linkages with other matters of concern. This process sheds light on the transformations involved in finding tolerable solutions when utilizing financial economics in the setting of accounting standards.

This paper aims to understand the mechanisms through which organizations, over time, manage competing logics within budgeting practices. We draw insights from new institutional studies in accountingto highlight the importance of practice-level negotiations for managing institutional conflicts, but we complement them with a focus on the organizational embeddedness of hybrid practices from organizational studies in accounting. More specifically, we build on the notion of ‘structured flexibility,’ according to which organizational structures frame and enable negotiations on hybrid practices, as critical to manage complexity in face of changing environmental conditions. We thus show how ‘structured flexibility’ is made possible by a number of characteristics of decision-making that have been widely studied by the behavioral theory of the firm, i.e. the decomposition of decision-making processes, the framing of local negotiations and the search for satisficing solutions. Our findings from a case study of a public university facing the conflict between a professional and a managerial logic shed light on how organizations may actively manage institutional complexity over time and suggest specific interventions to transform complexity into a source of strategic advantage.

Responsive regulation (RR) theory posits that effective regulators enforce compliance by escalating penalties only if persuasion fails, otherwise risking formation of a culture of resentment. Using RR theory as a lens, we examine the interactions between large audit firms and the PCAOB during the initial years of PCAOB regulation, when annually-inspected auditors utilized negative tone within their inspection response letters to express public disagreement with their inspection reports. Consistent with our expectations, we find that negative tone within response letters is positively associated with (1) future Part I inspection findings that result in a restatement of a client’s financial statements and (2) the likelihood that Part II of a future inspection report will be publicly disclosed. We triangulate these results and the underlying theory in semi-structured interviews of eight PCAOB inspectors and six audit partners involved in these early interactions between the largest firms and the PCAOB. Consistent with RR theory, the PCAOB viewed public disagreement as indicators of noncompliance, incorporated public disagreement into subsequent inspections, and escalated penalties for noncompliance. Contrary to RR theory’s prescriptions, the PCAOB did not use persuasion as a first reaction to noncompliance. In response, the firms stopped publicly disagreeing, but may have formed a culture of resentment toward the PCAOB.

A Performance Management System (PMS) can be conceived as either a package or a system, with the latter generally being seen as preferable to the former. This paper tries to go beyond this dualism by adopting an approach which understands the integration of the mechanisms within an overall PMS as being a continuum that ranges from a complete lack of integration to a totally integrated system. Loose coupling theory is used to investigate the type of relationships occurring in a PMS, with no and tight coupling being the extreme ends of a spectrum, with loose coupling representing a range of intermediate solutions providing both a desired level of coordination and also a degree of flexibility for local control needs. To ascertain whether one type of PMS coupling delivers superior performance, in terms of both organizational effectiveness and process innovation, this paper conceptually develops a PMS coupling index and validates this using a sample of 140 managers operating in a variety of sectors. The empirical findings show that the coupling approach demonstrates the effect of different PMS coupling states on both outcomes. Despite differing results from prior studies, intermediate levels of coupling appear to give the best outcomes for both effectiveness and innovation. Although further empirical work is necessary, this study contributes to enriching both the PMS design and the innovation management literature. Practitioners can also benefit from this research by using it to help design or redesign the relationships in a PMS in order to effectively match local and overall control needs.

Prior research shows that, under realistic conditions, jurors overly harshly evaluate audit firm culpability when financial statement fraud emerges after issuance of a clean audit opinion. In two experiments, we test theory-based predictions that three topical regulatory factors can reduce jurors’ assessments of audit firm culpability as well as predictions about two key mediators through which these factors effectively operate. The three factors are an auditor judgment rule (AJR) prohibiting juror second-guessing of auditor judgments made in good faith and with a reasonable basis, a critical audit matter (CAM) disclosure in the audit report that pertains to the disputed area, and a juror negligence training (JNT) in which jurors learn and apply legal concepts before the case evaluation. The two mediators are jurors’ perceptions that the audit firm missed a readily detectable fraud (detectability) and tacitly assented to management’s potentially fraudulent actions (acquiescence). Finally, we also test a “reactance-effects” prediction whereby, even while the AJR and JNT interventions decrease assessed auditor culpability on average, we expect the interventions will simultaneously increase assessed damages among the relatively small subset of jurors finding against the audit firm in their presence relative to jurors finding against the audit firm in their absence. Results support our predictions and also demonstrate that the mediators of perceived detectability and acquiescence can underlie these effects.

It has been argued that accountancy and finance have struggled to promote gender equality despite their intentions and efforts to do so. The paper contributes to explanations for this ongoing inequality by theorising the psychic life of women working in these fields, as displayed in their reflections on moments where they have failed to embody an identity that is the discursive and structural ideal within the profession. The ‘perfect worker’ is an idealised subjectivity modelled on the traditional male career and inflected by neoliberalism. Prior critiques of ‘postfeminism’ identify a pattern of self-blaming for inequality among women, but do not explain how and why they readily responsibilize themselves. Drawing on Freud’s theory of melancholia we suggest self-blame is the result of an unconscious confrontation with the loss of the perfect worker ideal: the ego’s response leading to a destructive cycle of self-reproach and atonement. The implication of melancholia is that structural contributors to inequality are reinforced. Furthermore, we develop Freud’s melancholia to theorise a contemporary manifestation that sees neoliberalism acting in concert with the psyche’s predisposition to defense, precipitating an epidemic of individualisation. This implies that neoliberalism employs a form of ‘perfectionist power’ that reinforces oppression at the level of the unconscious. We conclude that the advancement of equality requires a deliberate intervention in the melancholic cycle by moving the psyche into a process of mourning that recognises sociality as a condition of solidaristic resistance.