Forum

• Is auditors’ migration status associated with their performance?

  Education is meant to foster the development of individuals and promote equality. However, in China, the uneven development across regions may undermine this mission. Graduates from universities in less developed areas often face discrimination in the job market, while their peers from more developed regions enjoy unfair advantages. This study investigates this issue, providing evidence of such discrimination.

   

  Specifically, the researchers looked at how the quality of work performed by auditors in China is influenced by where they studied before entering the job market. They found that auditors who moved from less developed to more developed regions generally provided higher-quality audits than those who stayed in their original areas. This finding suggests that employers, during the interviewing and screening of graduates, might have set a higher bar for students graduating from underdeveloped regions, requiring these students to pose higher capabilities to surpass this higher threshold.

   

  Conversely, auditors who moved to less developed regions tended to deliver lower-quality audits, showing that the capabilities of these students have been over-estimated by their employers in the selection process. This underserved advantage lowers the bar for these students to pass.

   

  The difference in audit quality also influenced their career success, with those who moved upwards in economic development doing better in their careers.

   

  Overall, the study highlights how regional disparities can impact professional opportunities and outcomes, shedding light on an important issue in the job market. The researchers call for debiasing in employers’ recruitment process so that students studying in less developed regions can have more opportunities to progress their career, helping to achieve the mission of education.

   

  Wen He (wen.he1@monash.edu), Monash Business School, Monash University

  Chao Kevin Li (k.li@adelaide.edu.au), Adelaide Business School, The University of Adelaide

  Yi Si (acsiyi@xjtu.edu.cn), The School of Management, Xi’an Jiaotong University

  This blog is based on the paper:

  He Wen, Chao Kevin Li, Yi Si. Is auditors’ migration status associated with their performance?. European Accounting Review, Forthcoming. https://www.tandfonline.com/doi/abs/10.1080/09638180.2024.2384379

• Exploring Multi-Level Drivers of Accountants’ Opinions on the Changes Introduced by the Corporate Sustainability Reporting Directive

  Accounting, traditionally seen as a tool for optimizing economic performance, is now increasingly recognized as essential for supporting sustainability initiatives. Accountants play a key role in advancing sustainable development through their expertise in governance, risk management, business analysis, and their ability to effectively track and report on companies’ performance, as well as verify their reporting.

  The recently introduced Corporate Sustainability Reporting Directive (CSRD) expands reporting requirements to a broader range of companies and mandates assurance of these reports to enhance the quality and reliability of the information provided. How do accountants perceive these changes, and what factors influence their opinions on the new sustainability reporting regulations?

  In our article, “Exploring Multi-Level Drivers of Accountants’ Opinions on the Changes Introduced by the Corporate Sustainability Reporting Directive,” published in Accounting in Europe, my co-authors, Ewelina Zarzycka, Paweł Zieniuk, and I explore the following research questions (RQs):
  RQ1: What drives accountants’ opinions on the increased scope of sustainability reporting regulation?
  RQ2: What drives accountants’ opinions on mandatory sustainability reporting assurance?

  By conducting a survey of 1,076 Poland-based accountants in 2021 and employing logit regression analysis, we found that drivers at the transnational level (international regulations and standards), organizational level (benefits tied to sustainability reporting), and individual level (knowledge of reporting regulations) positively influence accountants’ support for the new CSRD measures. Conversely, drivers at the national level, such as membership in a professional accountants’ association, were found to be irrelevant.

  This study contributes to the literature by applying the Aguilera et al. (2007) multilevel model of social change to explain accountants’ attitudes towards regulatory changes. The findings provide valuable insights for regulators, standard setters, and educators who seek to understand and influence the evolving roles and opinions of accountants in sustainability reporting. For effective implementation of the CSRD, a collaborative approach involving national accounting bodies and regulators is recommended to promote knowledge sharing and skill development among accountants.

  Additionally, countries with later adoption of sustainability reporting may need to invest more in developing accountants’ knowledge and skills to align with those in countries where sustainability practices are more established. Tailored professional development and education are essential to fostering a more supportive attitude towards the CSRD’s requirements and facilitating the profession’s transformation towards sustainable development.

  We hope you will find our study interesting!

   

• Moving beyond Beyond Budgeting

  As in Shakespeare’s story of Hamlet, who contemplates whether to live or die, budgeting has for a long time been debated as a matter of “to be or not to be.” In our recent paper in the European Accounting Review, we wish to renounce this understanding.

   

  The context

  We studied a large Scandinavian bank and found that it had abandoned budgeting and reinstated it in a new form. Despite its listing on the stock exchange and demands for predictable financial performance, the bank operated without a corporate budget for almost two years. Therefore, during our case study, we were interested in understanding how budgeting changed upon reintroduction.

   

  Beyond Budgeting: an alternative to budgeting?

  For years, the bank relied on tight budget control at the corporate level. Executives were used to being evaluated on various performance measures encapsulated in the budget, which resulted from an aggregation of negotiated decentral budgets (i.e., a bottom-up approach).

   

  However, the accounting department had become aware of the Beyond Budgeting framework. Originally proposed by Jeremy Hope and Robin Fraser, the framework entailed 16 principles for abandoning traditional budgeting and achieving better performance through radical decentralization. Since the bank was organized in a decentralized structure, the accounting department found this framework interesting, so when the opportunity for abandoning the corporate budget arose following a data warehouse structuring, they presented the idea to the Board of Directors.

   

  Although they were skeptical at first, the Board of Directors came to see the forecasting model, which was developed to provide realistic macroeconomic projections on the bank’s revenues and costs, as an effective replacement for the corporate budget. This forecasting model was inspired by Beyond Budgeting, yet the new control element did not lead to a prolonged abandonment of budgets.

   

  Budget reintroduction

  The corporate budget was reintroduced after a couple of years, but budgeting had taken a new form in the bank. Realizing the benefits of the forecasting model, forecasts were used to create the corporate budget, which was established via macroeconomic projection and decoupled from the decentralized budgets. As a traditional budget, this budget was fixed for the calendar year and used to control costs. Meanwhile, the forecasting model continued to provide updated information each quarter within the fixed time horizon of the calendar year and was used to project revenues.

   

  The takeaway

  With our paper, we wish to bring attention to the important understanding that budgeting is not a question of either using budgets traditionally or completely abandoning budgets to move Beyond Budgeting. Rather, budgeting is a complex management control system encompassing various control elements, such as budgets and forecasts. When considering how budgeting best solves different purposes (e.g., planning, controlling, or performance evaluation), some control elements may be more appropriate than others. We found the forecasting model effective in controlling revenues and budgets effective in controlling costs, but more importantly, budgeting led to better planning and performance evaluation when forecasts and budgets were used at the same time.

   

  Looking forward

  In the future, we are excited to learn more about budgeting in other contexts. While we focused on the corporate level, budgeting may function differently, and for different places, in specific functions, or inter-organizational collaborations. We hope our paper can inspire

  to unfold the dynamics of management control systems in theory and practice. Feel free to contact us if you have any questions or comments.

   

  Per Nikolaj Bukh (pnb@pnbukh.com), Aalborg University Business School

  Amalie Ringgaard (sofiear@business.aau.dk), Aalborg University Business School

  Niels Sandalgaard (nis@business.aau.dk), Aalborg University Business School

   

  This blog is based on the paper:

  Bukh, P. N., Ringgaard, A., & Sandalgaard, N. (2024). Moving beyond Beyond Budgeting: A ase study of the dynamic interrelationships between budgets and forecasts. European Accounting Review. https://doi.org/10.1080/09638180.2024.2362681

• Training of future accountants in higher education institutions of Ukraine

  The article discusses some issues of teaching students the specialty “accounting”. The disciplines that were taught to future accountants in the 50s, 70s, 80s and in independent Ukraine are considered. Thus, it is possible to study the genesis of education of accountants in relation to the requirements of the time and economic situation. The clearly demonstrated difference between compulsory (fundamental) disciplines and auxiliary (elective, credit) disciplines clearly shows at what time which disciplines were considered the most important andwhich were secondary. Accounting theory should be a set of postulates, methods, limitations/exceptions used in the study of accounting, its maintenance, as well as in the preparation of financial and management reporting. Moreover, the “embedded” basic knowledge should further contribute to individual professional development! The author emphasizes the need for a systematic study of the curricula of higher educational institutions (using a clear example of the curriculum of the specialty “Accounting and Analysis of Economic Activities” of the Kyiv Institute of National Economy named after D.S. Korotchenko, approved in 1982). ) in order to rethink the number of disciplines, the definition of hours (active and passive) and the sequence of teaching disciplines. Some problems are identified regarding disciplines that can be excluded from curricula (second foreign language, physical education) and transferred to electives. Instead, the curriculum could be filled with individual disciplines (professional ethics ofaccountants and auditors, organization of accounting and reporting, etc.) to acquire professional competencies. Any revision of the current curriculum should be based on one thing -what new requirements for accounting and reporting, for an accountant, what changes have occurred in the country and in the world! And what kind of accountant is needed today, and most importantly for the future, with what knowledge and skills for practical work.

  https://ete.org.ua/index.php/journal/issue/view/3
  https://ete.org.ua/index.php/journal/article/view/118/27

• Voluntary Adoption of Recommended Reporting Practice in the Nonprofit Sector

  The activity and influence of nonprofit organizations has grown exponentially in recent years. Associated financial framework requirements facilitate standardization and transparency of information regarding organizations’ financial affairs and provide a means to foster greater stakeholder trust. However, global nonprofit reporting financial framework requirements vary dramatically, from mandatory detailed reporting to recommended practices to completely voluntary.

   

  A detailed nonprofit financial reporting framework, Charities Statement of Recommended Practice (Charities SORP), has been promulgated for both the UK and Ireland. While adoption is mandatory in the UK, the Irish nonprofit sector currently operates under a voluntary financial reporting system. This unique setting provides a means to assess the use and benefits of a formal, government recommended reporting practice, where adoption will soon be made mandatory.

   

  Our study published in the European Accounting Review (Dwyer, Harris & Murphy, 2024), analyzes an industry diverse sample of 23,124 nonprofit year observations for 6,593 unique Irish nonprofit organizations. It examines determinants and funding consequences of voluntarily using Charities SORP in advance of mandatory adoption.

   

  We show that there has been a steady increase in the adoption of Charities SORP, with use more than doubling between 2015-2020. We also show that Irish nonprofit organizations with more external oversight from regulators, auditors and funders as well as those with more resources are more likely to adopt Charities SORP. In addition, we observe that organizations are more likely to adopt Charities SORP when peer organizations in the same industry/county have already adopted SORP.

   

  With regard to funding consequences, our findings highlight that Irish nonprofit organizations following Charities SORP receive more future funding support from both donors and government grantors. We also observe that donors reward smaller and educational organizations voluntarily adopting Charities SORP than larger, non-educational organizations. In addition, we find that more efficient organizations and those that spend more on advertising their mission are rewarded with higher future donation support.

   

  Our findings provide important insights for nonprofit regulators in jurisdictions that have yet to establish financial reporting requirements and for those that have recommended practices. Mindful of several recent high-profile charity scandals, we support calls to encourage nonprofit organizations to adopt the expanded reporting framework provided by Charities SORP as a means to rebuild stakeholder trust.

   

   

  Article available here:

  Dwyer, KAM., Harris, E. & Murphy, B. (2024) Voluntary Adoption of Recommended Reporting Practices: Evidence from the Irish Nonprofit Sector, European Accounting Review, DOI: 10.1080/09638180.2024.2384376

   

• Sustainable Futures Hackathon 2024 – Hacking Place in Accounting Education

  Sustainable Futures Hackathon 2024 – Hacking Place in Accounting Education

  Nick McGuigan, Charles H. Cho & David Derichs

  

   

  This year the EAA Education Committee worked collaboratively with the Centre for Social and Environmental Research (CSEAR) to host the 2024 Sustainable Futures Hackathon during the opening of the annual congress, recently held in Bucharest, Romania.

  This year’s co-organisers Nick McGuigan (Monash University, Australia), Charles H. Cho (Schulich School of Business, York University, Canada) and David Derichs (Aalto University, Finland) instigated a very different and somewhat unusual format to the hackathon, challenging participants’ educational worldview by interrogating where accounting education takes place.

  Collaborating with six talented co-facilitators, Joan Ballantine (Ulster University, Northern Ireland), Ericka Costa (University of Trento, Italy), Alessandro Ghio (Laval University, Canada), Blerita Korca (University of Bamberg, Germany), Alessandro Merendino (Queen Mary University of London, England), Erica Pimentel (Queen’s University, Canada), the organisers matched facilitator research interests and expertise with ‘place’ to actively and playfully engage in Hacking Place in Accounting Education.

   

  Participants joined each co-facilitator in small groups to go out and explore six diverse place sites across the city of Bucharest. These included, working with nature in accounting at Grădina Cișmigiu public gardens, working with equity, diversity, and social belonging in accounting at LGBTQIA+ bar Thor’s Hammer, working with technology and immaterial space in accounting with Bonapp digital app, working with art in accounting at Anca Poterasu Gallery, working with community in accounting at Dimitrie Gusti National Village Museum, and working with history in accounting at Bucharest’s historic old town.

  Taking participants away from what they perceived as the ‘normal’ educational context enabled learning to come alive, “It was very stimulating to be in a physical place where ESG issues actually take place. It forces you to think critically about the specific ESG issue”. This is important as “It makes the context real. We were looking at SDGs, and in this place, certain SDGs came to life”. In doing so, accounting education became “more down-to-earth, close to day-to-day”, the proximity of learning for participants changed and they could feel a closeness with accounting that was not perceived as present elsewhere.

  Forty-one accounting academics, spanning 21 countries and spread across 4 continents, joined their co-facilitators in small groups to hack the place in which accounting education and learning take place, designing innovative learning materials that capture place-based education in accounting. This included participants playfully being asked to form first impressions by ‘going on a date’ with their Bucharest site! Taking time out to get to know each other a little better. Walking around the site trying to get a feel for each other.

  “I was surprised how much my own prior beliefs impacted how I perceived place differently from my group members”.

  It was then time to get intimate. Now that participants were all on a first name basis with their site, it was time to get physical and map it out. Mapping key reflections and references picked up about the site.

  “It widened the context in which I perceive what is accounting – it broadened my perspective”.

  Gaps were subsequently filled from fact gathering, data hunting and storytelling. Participants built further knowledge on their site by uncovering further detail and depth, fleshing out history and stories of place to ensure a depth of context.

  “[It] raised creativity for learning activity design, group discussion very rich and productive”

  It was then time to make connections between the uncovered Bucharest site with the United Nations Sustainable Development Goals (SDGs) and Principles of Responsible Management Education (PRME) i5 pedagogical design principles.

  “[It] was a nice experience because made me think out of my comfort zone. The cultural diversity shows me different points of view and ways to do classes”.

  Within this context, participants then worked collaboratively to co-design learning experiments that query place, practice, and positioning, creating innovative learning activities and materials that could be applied in diverse accounting education contexts.

  “There are many different ways in which place connects to thoughts about accounting education. Communicating in the team reveal often more connections”.

  Innovative learning activities developed included, for example, immersive experience learning in audit, where students are asked to work in groups to conduct an audit of SDGs and local community, using all their senses in place to conduct individual observations before bringing these together to create an informed group perspective. Alternatively, making use of technology to encourage students to investigate an organisation, working collaboratively with generative AI platforms to formulate key performance indicators and unique ways of measuring organisational performance.

  Hacking Place in Accounting Education provided an exploratory context for accounting academics to explore connections between accounting and place, form deeper relationships with peers and work collaboratively to co-design innovative pedagogical learning materials that begin to place accounting education in context.

  “It’s a way to motivate students and improve their critical point of view. I work in a touristic city and most of my students also work at the same time they study. Now I can create an activity using these places and connect to accounting. I want to replicate this hackathon”.

• EAA 2024 Classroom Session – Using Active Feedback to Develop Students’ Critical Thinking Skills

  Dear EAA members,

  It was a great pleasure to see Suzanne McCallum from University of Glasgow offering the EAA 2024 Classroom session. Some information on the event are below.

  Anastasia

  EAA Classroom Session – Using Active Feedback to Develop Students’ Critical Thinking Skills

  It was an honour to present the classroom session at the EAA’s 46^th Annual Congress in Bucharest. I really enjoyed the engagement and interaction with fellow educators, and it’s been great to hear from many of you, and to learn that you plan on trying innovations at your own institution. If you couldn’t attend (or have had a hectic time since the conference and need a reminder) then here’s a refresher of some of the main points.

  General idea:

  • Feedback is a process with students at the heart of it and comparison is the key driving force. Students can compare their work with a range of different sources of information to activate inner feedback processes, helping develop new understandings and performance improvement (as illustrated on the attached slides).
  • When we talk about feedback what we tend to focus on and plan for are the comments students receive from peers or teachers (and therefore the comparisons they make between comments received and their own work). However, this is a narrow view and encourages students to be reliant on others, rather than being independent learners.  So how can we change this? 
  • By thinking carefully and planning for a range of different comparisons (including comparison with information in resources) we can encourage students to move to deeper levels of learning and encourage critical thinking. So, to unlock the power of inner feedback, the decisions we need to make are:
    • Decide on a task for the students to complete. (This can be what you currently ask students to do.)
    • Select resources for comparison (being careful with the selection as different comparators will take you to different places).
    • Formulate clear instructions and decide how to make the output explicit e.g. students update their work or write self-review comments.

  Examples:

  The session focused on computational work and demonstrated a range of comparators that could be used for a depreciation computation scenario. Cycles of comparison gradually led to deeper levels of critical thinking and evaluation. The comparators selected were:

  1. Worked solution – what we traditionally provide. This helps students check the correctness of their solution.
  2. Expert video explanation – helps students focus on the process (rather than simply the correctness of the solution).
  3. Extract from the Conceptual Framework for Financial Reporting – allowing students to make a direct comparison between theory and practice (therefore focusing on why they are completing such calculations).

  When I used this with my large first-year class, these comparisons were completed asynchronously pre-class. The comparators noted below were completed in-class and were the activities completed at the classroom session at the EAA.  (The attached slides contain more detail, including instructions/questions to guide the output for each task.)   

  1. A worked solution with the depreciation assumptions changed – prompting students to consider the impact of professional judgment on the figures that appear in financial statements.
  2. A peer discussion on the impact of professional judgment, trying to decide on the most appropriate depreciation policy.
  3. Extract from the ethical code – prompting students to consider the role of a professional accountant and how this might impact on their decision making.

  Try it yourself:

  Participants were then invited to consider designing their own implementation (using the structure outlined in the slides). NOTE: it is not necessary to have an elaborate design, and something simpler than the example I demonstrated can have a big impact. The main thing to do is be creative and bold and try to think about comparators that are not necessarily the same format as the original work and that are not necessarily what you would traditionally use.  My top tips are:

  • When selecting comparators, be bold and creative in your choice. It is also important to be clear on what you are trying to achieve (as different comparators will lead to different outcomes).
  • Provide clear instructions to the students and make the output explicit.
  • Don’t feel you need to comment on everything the students produce. You might want to take a look to get a feel for how they are progressing, but there is no need to provide feedback comments on this work (you are trying to help them be independent learners).
  • Explain to the students why you are doing things in this way, so they understand the thinking and see the benefits of engaging with the tasks.

  Share your thoughts and ideas:

  I hope this has given many of you some food for thought on how to design and implement these ideas.  My co-author (David Nicol) & I would love to hear from you on how you are progressing, so please keep in touch at suzanne.mccallum@glasgow.ac.uk  

• Twenty Years of Accounting in Europe: A Bibliometric Analysis

  Introduction

  Accounting in Europe (AinE) is one of the two journals of the European Accounting Association (EAA) that publishes high-quality articles offering new insights for research, practice, policy, and regulation. Our scientometric overview synthesizes the scientific and policy-related contributions of AinE, using bibliometric techniques. It reveals the journal’s production and influence, sorting articles into categories, exploring collaboration patterns, unveiling key themes, identifying emerging trends, and outlining future research areas.

   

  Methodological Insights

  This retrospective analysis, covering contributions from 2004 to 2023, analyzed 264 articles. Performance, co-authorship, bibliographic coupling, and co-word analyses are used to shed light on the AinE’s landscape.

   

  Performance insights   

  It identifies five article types: Issues in European Accounting, Regular Articles, Special Issues, Comment Letters, and Opinion Pieces. Special Issues and Issues in European Accounting have the greatest impact. Non-financial reporting and financial instruments dominate the special issues in terms of impact. High Google Scholar indices for these two topics suggest that AinE’s audience extends beyond academia and that the journal content aligns well with its regulatory orientation.

   

  Collaboration insights

  Collaboration is more prevalent among EAA Financial Reporting Standards Committee members. Most highly collaborative institutions are ranked at the top of the US News & World Report Best Global Universities ranking. The UK leads in collaborations, with the UK and France forming the most powerful couple. AinE’s country network highlights its strong European focus and exhibits global research collaborations focused on the European regulatory agenda.

   

  Major themes

  Eleven thematic clusters emerge from the bibliometric analysis, discussing their main themes and evolution: (1) disclosure requirements, (2) transition to IFRS, (3) conceptual framework, (4) non-financial reporting, (5) regulatory bodies, (6) audit quality, (7) endorsement of IFRS, (8) accounting change, (9) IFRS for SMEs, (10) tax reporting, and (11) accounting for carbon emissions.

   

  Emerging trends and future directions

  Research predominantly focuses on sustainability reporting, with attention also given to IFRS 9, fair value hierarchy under IFRS 13, goodwill under IFRS 3, factors influencing audit quality, non-financial reporting, non-profit organizations, and IFRS 16. Sustainability reporting and non-profit organizations are further discussed, articulating future research directions.

   

  Conclusion

  In its 20 years, AinE has evolved into a mature journal, with a significant collaboration network and distinct aims, making substantial contributions to accounting and auditing regulatory debates. This study offers a comprehensive overview of AinE’s evolving landscape, with implications for editorial board, academics, practitioners, and regulators. By highlighting research trends and formulating future avenues, this scientometric overview serves as a catalyst for advancing scholarly exchange in the field.

   

  Article available here:

  Nerantzidis, M., & Vatis, S. E. (2024). Twenty Years of Accounting in Europe: A Bibliometric Analysis. Accounting in Europe, 1–27, DOI:10.1080/17449480.2024.2360934

• Sixth Ijiri Lecture on Foundations of Accounting at JAA Annual Meetings on August 26, 2024

  Professor (Emeritus) Hiroyuki Itami of Hitotsubashi University has been invited by Professor Usui and the Japan Accounting Association (JAA) to deliver the Sixth Yuji Ijiri Lecture on Foundations of Accounting at the JAA annual conference on August 26, 2024.

   

  The JAA annual conference will be held  at Waseda University, Tokyo, Japan  from Sunday August 25 to Wednesday August 28, 2024.

   

  Lecturer: Hiroyuki Itami, Professor Emeritus, Hitotsubashi University

  Title: Foundations of research I learned from Prof. Ijiri

  Date and Location: Monday, August 26, 2024,  2:50- 4:20 PM  (JST) at Waseda University in Tokyo, Japan

   

  Further information on Professor Yuji Ijiri and the Lecture on Foundations of Accounting is available here:

   

  https://aaahq.org/Ijiri-Lecture

• Private Firm Accounting Literature Database

  Given the importance of private firms for the global economy, there is a growing interest in research on private firms in general and on private firm accounting in particular. Our openly accessible online app (Privat Firm Accounting Literature Database) allows interested readers to explore their own dip into the literature. The database allows to filter for:

  • Keywords / full-text search
  • Topics (e.g. accounting quality, audit, banks, disclosure, IFRS, …)
  • Country/Regions
  • Data source (e.g. Orbis, Amadeus, or country-specific database)
  • Sample period
  • Publishing date

  The original database included 121 references. We now updated the database with more recent publications. The current sample presented by this app covers 144 original research papers and seven overview papers that have been published between 1986 and 2023.

  The database is an online extension of the paper Private firm accounting: the European reporting environment, data and research perspectives (C. Beuselinck, F. Elfers, J. Gassen, and J. Pierk). We believe the database and the paper to be insightful for a wide range of scholars, but we especially designed this overview to serve as a point of reference for PhD students and academics who are new to the private firm accounting literature.