Faculty of Business - Accounting & Finance Working Papers

Australian Commonwealth public sector environmental reporting in a new public managerialism environment

G. Bowrey — Thu, 02 Oct 2008 22:51:53 PDT

The environmental impact of organisations operations on the environment has come under significantly increased public awareness, over the past two decades. Even so, most organisations in Australia are not required by regulation to report on the impact of their organisations on the environment. Some organisations have been voluntarily providing reports to varying degrees on their environmental performance and management, however the only legislated environmental reporting requirement for private sector organisations in Australia is to report breaches of environmental laws and licences in their annual reports (Section 299(1) Corporations Act 2001). In the public sector the situation is slightly different. The Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act 1999), enacted in 1999, requires federal (Commonwealth) government organisations to include in their annual reports a section detailing the environmental performance of and environmental management in their organisation as well as the organisation’s contribution to the nation’s ecologically sustainable development. This paper argues that the adherence [and lack of] to the Environment Protection and Biodiversity Conservation Act 1999 reporting requirements by Commonwealth organisations, including Commonwealth Agencies, Commonwealth Statutory Authorities and Commonwealth Companies, can be explained by the sector’s recent reforms influenced by the pervasive new public managerialism (NPM) mentality within the sector. The paper will also introduce the new concept of NPM reporting paradox.

Responsible Financing?: The Equator Principles and Bank Disclosures

J. Andrew — Thu, 02 Oct 2008 22:45:33 PDT

The purpose of this paper is to consider the impact of the Equator Principles on banking disclosures. The research explores whether signatory banks are disclosing information related to their obligations under the Equator Principles and discusses the types of disclosures being made publicly available. The research illustrates that banks are disclosing very little information to help users assess the impact the Equator Principles have had on these banks practices. It is also suggested that banks are reframing their identity through these principles, but it is still difficult to assess whether this is also transforming practice. There is little academic research considering financial institutions and their social and environmental responsibilities and this work seeks to address this gap.

Corporate Social Responsibility Reporting of Two Note-issuing Banks in Hong Kong

F. Hui — Thu, 02 Oct 2008 22:36:43 PDT

The environmental performance and management disclosure of organisations has over the past decade come under increased scrutiny due to a number of factors including, in particular, the impact organisations have had on the world’s environment and the corresponding rapid change in the world’s climate. These concerns have made organisations, including financial institutions, review the level of their environmental performance and management disclosures to demonstrate, amongst other objectives, their level of social responsibility. Financial institutions due to the nature of their business are not generally seen to contribute directly to the degradation of the environment however they do provide the funds for many organisations’ projects which do directly impact on the environment. This paper will review the environmental performance and management disclosures of two note issuing banks in Hong Kong; the Hongkong and Shangihai Banking Corporation (HSBC) and Bank of China (Hong Kong) Limited (BOCHK) from 2003 to 2006. This review will be conducted with reference to the Equator Principles, a voluntary environmental performance framework, which were developed specifically for financial institutions. The second purpose of this paper is to contribute to the literature on legitimation theory with specific reference to the social constructionalist perspective of legitimation.

Development of the Venture Capital Market in Australia

V. Wan — Thu, 11 Sep 2008 22:44:04 PDT

To remedy a shortage of venture capital for the development of emerging technology businesses, the Australian Government in 1984 initiated a Management and Investment Companies (MIC) Program. Under the Program, 11 MICs were licensed to raise venture capital from investors who are allowed to claim 100 per cent of their investments as a tax deduction. Apart from the 11 MICs, there are other venture capital organisations currently operating in Australia. This study identified a total of 47 venture capital organisations of different ownership structures and investment preferences. Undoubtedly, the MIC Program has played a catalytic role in the rapid development of this market to its current capital base of $353 million. However, there are still segments within the market where venture capital supply is deficient. Further, the recent stock market downturn has dampened the venture capital supply generally. The Government's initiatives in reviewing its policy framework at this juncture are crucial in order to remove the impediments and create a positive environment conducive to the long term development of the venture capital market in Australia.

Gender-based Role Representations in Annual Company Reports

M. M. Greenwell — Thu, 11 Sep 2008 22:28:28 PDT

This research had its genesis in the teaching of Financial Accounting to second year undergraduate students [1]. In the introduction to the subject the author distributed actual copies of annual company reports (ACRs) to expose them to students. In this course students learn various techniques. e.g. Group Accounts, and disclosure requirements. Class discussion evolved from a consideration of the relative merits of graphic presentation of financial data and actual financial accounts, to a consideration of the information content of the glossy pictures. Generally, there seemed to be a substantial number of pictures in the reports and more specifically, there seemed to be many photographs of people. It was this impression, combined with the author's commitment to equal employment opportunity (EEO) principles and to improving the status of women in society that lead the author to investigate gender-based role representatlons in ACRs.

Pathological Responses to Accounting Controls: The British Commissariat in the Crimea 1854-1856

W. N. Funnell — Thu, 11 Sep 2008 22:09:17 PDT

It has become widely recognised that the plight of the British Army in the Crimea (1854-6) was due primarily to unpreparedness. This had been induced by the pursuit of extreme economy In military spending by consecutive governments In the 'great peace' following the Napoleonic Wars. What has not been realised sufficiently, however, is that the consequences of this s trident economy were profoundly compounded by the system of military accounting and financial control administered by the Treasury. Thus, it was the inflexibility of the system of financial control which accentuated and which was directly responsible for the continued difficulties of the army in the Crimea.

A Field Experimental Study of the Impact of Social Responsibility Disclosure on Institutional Investment Decision-Making

H. Y. Teoh — Wed, 10 Sep 2008 22:52:21 PDT

This study used a repeated measures experimental design to evaluate the effect of social responsibility disclosure in annual reports on the investment decision-making behavior of institutional investors. Information cues were prepared using actual company data and subjects were required to go through an investment exercise. To the extent that social responsibility information was of a general type and presented in narrative form, the results indicated that such disclosure did not have an effect on institutional investors' decisions. However, this study also found that certain themes and presentation of social disclosure were perceived more important for investment decision-making which could have policy implications for preparers of annual reports.

Australian Accounting Practitioners' Perceptions of Undergraduate Curricula and Academics

F. A. Gul — Wed, 10 Sep 2008 22:46:37 PDT

The purpose of this study was to compare the actual level of content of 125 topics taught in the Australian accounting curricuIa with the level expected or desired by practitioners. In addition, this study also evaluated practitioners' perceptions of accounting academics. Results showed that there was little divergence between practitioner expectations of the content levels of the topics and the actual content levels taught. The results also showed that, in general, practitioners have a favourable view of academics in that they were viewed as honest, competent, up-to-date and their research as being useful. On the other hand, practitioners felt that academics should be members of a professional accounting body and should read both academic and professional journals. Practitioners also indicated that they wanted a bigger role in training accountants.

A Comparative Study of Accounting Information Systems Courses in Australia and the United States

V. Wan — Wed, 10 Sep 2008 22:38:52 PDT

The design of an information system, particularly that of computer-based information systems has an important role in accounting. The importance has been recently highlighted in a report by the Australian Society of Accountants' taskforce (1984), which asserts that "since accountants will be developing their own information systems, fundamental skills in systems analysis and design will become essential for all accountants". Most tertiary educational institutions are increasingly aware of the importance of Accounting Information Systems (AIS) as an academic subject, and do incorporate AIS in the undergraduate accounting curriculum1. This practice is consistent with the views of most writers specialising in the leaching of AIS, such as Nestman and Jackson (1978), and Schroeder (1972).

Impact of Floating Exchange Rates on Company Risk Management Practices: The Australian Experience

H. Y. Teoh — Wed, 10 Sep 2008 22:33:07 PDT

This study addressed two research questions: first, the effect of floating the Australian dollar on individual company's exchange risk exposure and, secondly, the extent of company response in managing foreign exchange risk. The findings indicated that floating of the dollar resulted in increased risk exposures though the impacts were not uniform across all companies. Likewise, the impact on foreign exchange risk management practices was not necessarily to the same extent for all companies. Overall, there is evidence that since floating the dollar an increasing number of companies is giving more serious attention to the exchange risk management function.

A True and Fair View: A Revised "Accounting Interpretation"

J. B. Ryan — Wed, 10 Sep 2008 22:24:21 PDT

The purpose of this article is to provide an Interpretation of the 'true and fair' view" statutory standard that is consistent with recent developments in accounting theory emphasising the central role of relevance and reliability, both accepted today as key concepts in explaining accounting measurements in external financial reporting. The interpretation advocated equates fairness with relevance together with appropriate discIosure and true with correspondence of two kinds. both of which are necessary for accounting information to be reIiable. EmpiricaI correspondence refers to a one-to-one relationship, or correspondence between the measurements of assets and liabilities reported in financial statements and the actual quantity they purport to measure. Secondly, these measurements should be consistent with or correspond to the specific concepts of capital and profit being measured in a particular set of accounts; i.e., the measurements should be internally consistent and deductively valid in relation to the interpretation of the accounting system being applied. The application of this interpretation requires the identification of users and their financial information needs, and the selection of an appropriate reporting model or models.

The Extent of an Accountant's Liability to Third Parties

B. H. Andrew — Wed, 10 Sep 2008 22:07:44 PDT

Since the House of Lords in Hedley Byrne & Co Ltd. v Heller and Partners Ltd [1] enunciated the possibility of professional persons owing a duty of care to third parties for the consequences of negligent mis-statements, accountants have been concerned with the extent of this duty and their potential liability. Accountants normally owe a duty of care to their client as a term of the contract of engagement and the extent of this duty has become clear from a range of cases concerning the law of contract [2]. But the duty of care owed under a contract may be different in kind to that owed to a third party under the law of tort.

Capital Investment Modelling in the Australian Footwear Industry

M. M. Greenwell — Wed, 10 Sep 2008 21:59:24 PDT

The aim of this paper was to explore the possible bridging between two areas of capital expenditure budgeting research, i.e. environmental conditions and capital investment modelling, using secondary data, and also to identify fruitful areas of primary research into capital investment decision-making. The modelling indicated a high degree of association between a measure of industry protection and capital investment in the Australian footwear industry. Thus the research was considered to be a relevant indicator of fruitful primary research into the probable relationship between protection, one aspect of the economic and political environment of footwear manufacturers, and capital expenditure budgeting processes.

Interactive Effects of Evaluation Style and Organizational Structure Characteristics of Autonomy and Interdependence on Subunit Managerial Performance

H. Y. Teoh — Wed, 10 Sep 2008 21:50:55 PDT

This study was designed to provide empirical evidence that subunit managerial performance is an interactive function of evaluation style and organization characteristics of autonomy and interdependence. Both autonomy and interdependence are believed crucial to the design of evaluation systems because the accounting literature has suggested that accounting performance measurement is more suitable for independent and autonomous organizational subunits. Subjects were division managers of profit centers and investment centers from large manufacturing companies within the Metropolitan Sydney and Wollongong areas. Collection of data was based on interviews and pretested questionnaire. The statistical analysis involved formulation of two regression equations in which the focus of research interest was to find the significance of the regression coefficients in the cross-product terms representing, respectively, the interactive effects of evaluation style and autonomy, and evaluation style and interdependence. The results showed a significant interaction between evaluation style and autonomy, indicating the importance of matching accounting-based evaluation style and high autonomy to induce higher subunit managerial performance. The lack of significant interaction between evaluation style and interdependence was consistent with prior studies which asserted that profit centers and investment centers are characterized by a low level of interdependence between subunits.

Structure and Growth Performance of Small Industry in Sri Lanka

H. Wijewardena — Wed, 10 Sep 2008 21:16:20 PDT

Because of the inability of the agricultural sector, due to its physical limitations, in continuing as the major contributor to the economic development of Sri Lanka the need to promote the industrial sector has increased greatly in recent years. Small-scale industrial enterprises, in particular, deserve more encouragement since their labour intensive character is consistent with the relative abundance of labour and the scarcity of capital in the economy. However, statistics reveal that the growth performance of the small industry segment has not been satisfactory after the year 1977. The main reason for this seems to be the unfavourable effect of the 1977 policy reforms. It is necessary, therefore, that while protecting small enterprises from the harmful effects of the said policy reforms, steps be taken to promote small industry on the basis of a well planned longterm strategy as a complementary segment in the overall industrial sector, if Sri Lanka is to succeed in her industrialisation effort.

Cognitive Style as a Factor in Accounting Students' Performance on Multiple Choice Examinations

F. A. Gul — Wed, 10 Sep 2008 21:08:42 PDT

Using 59 final year accounting students as subjects and multiple regression analysis, this paper tests the hypothesis that accounting students' performance on multiple choice examinations is related to field dependence cognitive style. Results support the hypothesis and suggest that in evaluating student performances in multiple choice examinations, accounting academics should bear in mind that the scores on these examinations may be partly a function of students' cognitive style. This finding has implications for the use of multiple choice examinations in classroom evaluations.

Use of Financial Accounting Information in Share Investment Decisions

G. Gniewosz — Wed, 10 Sep 2008 20:59:11 PDT

This paper describes the use of accounting and other information in the share investment decision process of an institutional investor. The study was conducted within the context of an organisation's everyday working environment. The focus was on qualitative data and analysis of a case study rather than on quantitative data and general tendency analysis of a random sample. The significance of the annual report as an information source changes over the period of one year. It varies from serving as a primary information source to serving in a confirmatory role. Furthermore, the annual report also acts as a stimulus for identifying specific questions rather than merely as a source of information in response to prior questions.

The Framework of Public Sector Accountability in NSW and the Commonwealth: An Overview of Current Developments and Antecedents

W. N. Funnell — Wed, 10 Sep 2008 20:52:50 PDT

Government departments and government commercial enterprises, along with statutory authorities constitute a very significant sector in the Australian economy. Expenditure by all government agencies, i.e. departments, authorities, enterprises, constitute about 42% of Gross National Product in Australia. The public sector is also the single largest employer, accounting for the employment of 30% of all wage and salary earners in Australia (Curran Commission, 1988, p.1). In addition, 50% of Australia's capital stock is owned by government with 20% of all investment undertaken by government undertakings (Moore, D., 1988). The role of government in Australia is therefore considerable.

Sample Size and the Strength of Evidence: A Bayesian Interpretation of Binomial Tests of the Information Content of Qualified Audit Reports

D. J. Johnstone — Wed, 10 Sep 2008 20:42:19 PDT

Lindley (1957) demonstrated that from a Bayesian standpoint a given level of statistical significance P, carries less evidence against the null hypothesis H0 the larger (more powerful) the test. Moreover, if the sample is sufficiently large, a result significant on H0 at 5% or lower may represent strong evidence in support of H0, not against it. Contrary to Lindley's argument, a great many applied researchers, trained exclusively in orthodox statistics, feel intuitively that to "reject" the null hypothesis H0 at (say) a=5% is more convincing evidence, ceteris paribus, against H0 the larger the sample. This is a consistent finding of surveys in empirical psychology. Similarly, in accounting, see Burgstahler (1987). In econometrics, "Lindley's paradox" (as it has become known statistics) has been explained in well known books by Zellner (1971), Leamer (1978) and Judge et al. (1982), but is not widely appreciated. The objective of this paper is to reiterate the Bayesian argument in an applied context familiar to empirical researchers in accounting.

The Black Scholes Call Option Pricing Model and the Australian Options Market: Where Are We After 15 Years

A. Frino — Wed, 10 Sep 2008 20:25:23 PDT

The Black Scholes model has not been tested in Australia for about 10 years implying tests previously carried out used data from a developing options market. This study carries out cross sectional tests of the model using the most recent data available. The conclusion, unlike earlier studies, is that the Black-Scholes model cannot be rejected, and thus that the market is efficiently pricing options in an unbiased manner (in a Black Scholes sense), or alternately, that the model is capable of effectively pricing options. A unique time series analysis of mispricing is also carried out in order to determine whether this can be attributed to a 'market learning effect' over time. There is some evidence of such an effect. The tests differ from those of previous studies in a number of ways. One of the major limitations of past studies is overcome as the tests do not depend on historical measures of volatility. Special care is taken to exclude possible misleading observations occurring from non-synchronous share/option prices. The effects of dividends and the possibility of early exercise are dealt with by exclusion. Controls are also used to limit the possibility of incompatible risk free interest rate proxies having a confounding effect on results.