(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "The international journal of accounting"

limit- 



^^"««A'"«^.fi) 



KS 



^-oksSpaign 



NOTICE: Return or renew all Library Materialsl The Minimum Fee for 
each Lost Book is $50.00. 

The person charging this material is responsible for 
its return to the library from which it was withdrawn 
on or before the Latest Date stamped below. 

Theft, mutilation, and underlining of books are reasons for discipli- 
nary action and may result in dismissal from the University. 
To renew call Telephone Center, 333-8400 

UNIVERSITY OF ILLINOIS LIBRARY AT URBANA-CHAMPAIGN 




Digitized by the Internet Archive 

in 2011 with funding from 

University of Illinois Urbana-Champaign 



http://www.archive.org/details/internationaljou33univ 



o ' . \^ > \.' 



33: I 



PERIODICAL 




9P^- /sj> 



The 

International 
Journal of 

Accounting 



EDI 
Belverd E. Needles, Jr. 

DePaul Vnivvrsitv 

EDITOR 
Andrew D. Bailey, Jr. 

University of Illinois at 
I'rhana-Champaiiin 



Special Issue 

International Accounting Research 
1965-1996 

Indexes and Annotated Bibliography 
of the International Journal 
of Accounting 



Published by 



Greenwich. Connecticut London. Ensland 




CO-EDITORS 
Arthur R. Wyatt 

University of Illinois at 
Urhana-Champai^n 

Yukio Fujita 

Aichi-Gakuin University, Tokyo 
Volume 33 • Number 1 • 1998 



Center for International Education and Research in Accounting, 
University of Illinois at Urbana-Champaign 



Name of publ.cation: THE INTERNATIONAL JOURNAL OF ACCOUNTING (ISSN:0020-7063) 
Issue: Volume 33/Number 1/1998 
Frequency: Published Quarterly 

Office of publication: 55 Old Post Road No. 2. P.O. Box 1678 
Greenwich, Connecticut 06836-1678. 



Subscription rates (po.stage included): 

Institutions: United States S225.00 

Foreign Surface Mail S250.00 
Foreign Air Mail $275.00 



Individuals: United States S95.00 

Foreign Surface Mail SI 20.00 
Foreign Air Mail SI 45.00 

(Please remit by personal check or credit card) 



Please contact publisher for missing issues. 

All subscriptions must be prepaid and are fo r the 1999 calendar year only. 

POSTMASTER send address changes to: 

Subscription Dept 



55 Old Post Road No. 2, P.O. Box 1678, Greenwich. CT 06836-1678. 
(Europe and United Kingdom) 38 Tavistock Street, Covent Garden 
London WC2E 7PB, England 



Editorial Office: 



Editor: 



Center for International Education & Research in Accounting 

320 Commerce West Building 

Box 109, 1206 South Sixth Street 

Champaign, IL 61820 

217-333-4545: 217-244-6565(fax) 

<bsmith2@Commerce.cba.uiuc.edu> 

A.D. Bailey, Jr. 



Back Issues: Information about availability and prices of back issues starting with Volume 3 1 , Number 1 
may be obtained from the publisher's order department (address above). Prior issues, please 
contact the editorial office. 

Claims: Claims for undelivered copies must be made no later than three months after publication. 

The publisher will supply missing copies when losses have been sustained in transit and 
when the reserve stock will permit. 



Copyright: © Board of Trustees of the University of Illinois, 



IVIAR 5 1998 

UNIVERSITY OF ILLINOIS 
URBANA-CHAMPAIGN 



The 

International 
Journal of 

Accounting 



Special Issue 

International Accounting Research 
1965-1996 

Indexes and Annotated Bibliography 
of the International Journal 
of Accounting 



GUEST EDITOR 
Belverd E. Needles, Jr. 

DePaul University 

EDITOR 
Andrew D. Bailey, Jr. 

University of Illinois at 
Urbana-Champaign 

CO-EDITORS 
Arthur R. Wyatt 

University of Illinois at 
Urbana-Champaign 

Yukio Fujita 

Aichi-Gakuin University, Tokyo 
Volume 33 • Number 1 • 1998 



Greenwich, Connecticut 



London, England 



Center for International Education and Research in Accounting, 
University of Illinois at Urbana-Champaign 



Andrew D. Bailey, Jr. 

University of Illinois. U rhana-Champaign 

CO-EDITORS 

Arthur R. Wyatt. University of Illinois, U rhana-Champaign 
Yukio Fujita. Aichi Gakuin University. Tokyo 

BOOK REVIEW EDITOR 

Belverd E. Needles. Jr.. DePaul University 

EDITORIAL POLICY BOARD 

Hans Havermann. KPMG Deutsche Treiihand-Gesellschaft. Diisseldoif 

H. Peter Holzer, Wirtschaftsuniversitdt. Vienna 

Toshio lino, Surugadai University. Japan 

Yu Xu-Ying. Xiamem University. People's Republic of China 

Stephen A. Zeff. Rice University 

EDITORIAL REVIEW BOARD 

Dhia D. AlHashim. California State University. Northridge 

A. Bose, Haldia Petrochemicals Limited 

Giles Chevalier, Samson Belair/Deloitte & Touche, Montreal 

Nairn Dahmash, University of Jordan 

Tom Evans, University of Central Florida 

Shawki Farag, The American University, Cairo 

James B. Ghartey, Jr., Controller and Accountant-General's Department, Ghana 

Sergio de ludiicibus, Universidade de Sao Paulo 

Robert J. Kirsch. Southern Connecticut State University' 

Chris Lefebvre, Katholieke Universiteit Leuven, Belgium 

Joelle Le Vourc'h, Ecole Superieure de Commerce de Paris 

Gary Meek, Oklahoma State University 

Gordian A. Ndubizu. Drexel University 

Prawit Ninsuvannakul, Chulalongkorn University, Thailand 

Babatunde Ogundele. University of Ilorin, Nigeria 

Soong Park. The Economics Institute, Colorado 

Lee Radebaugh, Brigham Young University 

Hanns-Martin Schoenfeld, University of Illinois, U rhana-Champaign 

James Schweikart, University of Richmond 

Daniel T. Simon. University of Notre Dame 

M.A. van Hoepen. Erasmus University, The Netherlands 

R.S. Olusegun Wallace, Middlesex University Business School, London 



THE INTERNATIONAL 
JOURNAL OF ACCOUNTING 

VOLUME 33 NUMBER 1 1998 

Special Issue 

International Accounting Research from 1965 to 1996: 
Indexes and Annotated Bibliography of The International 
Journal of Accounting 

GUEST EDITOR 

Belverd E. Needles, Jr. 

DePaul University 



Dedication: To Vernon K. Zimmerman 
PREFACE 

Belverd E. Needles, Jr 1 

INDEXES 

Index 1 : Articles by Country/Region & Methodology 

Comprehensive 3 

Index 2: Articles by Subject 

Comprehensive 19 



Index 3: Articles by Country/Region & Methodology 

European Region 23 

Index 4: Articles by Subject 

European Region 29 

index 5: Articles by Country/Region & Methodology 

Asian/Pacific Region 31 

Index 6: Articles by Subject 

Asian/Pacific Region 37 

Index 7: Aricles by Country/Region & Methodology 

Developing Countries 39 

Index 8: Articles by Subject 

Developing Countries 45 

Annotated Bibliography 47 



The International 
Journal of 
Accounting 



Preface 

The purpose of this compendium of indexes and annotated bibliography for the full his- 
tory of the International Journal of Accounting (formerly The International Journal of 
Accounting, Education, cmd Research) is to provide a resource for scholars in this field of 
research. Having been published for thirty-two years, the International Journal of 
Accounting has the longest continuous history of published research in international 
accounting. Although other journals have more recently covered this field, the Interna- 
tional Journal of Accounting in its early years was the only outlet for such research in the 
United States. V.K. Zimmerman described the mission of the journal in his "Note from the 
Editor" in the first issue (Vol. 1, No. 1, Fall 1965), as being "To explore and identify the 
international dimension of accounting as it exists today." Following this philosophy dur- 
ing this entire period until his death in November 1996, Zimmerman's editorship reflects 
the full range of developments and changes in international accounting research. 

The annotated bibliography contains entries for all the articles published in the Interna- 
tional Journal of Accounting and related monographs through the end of 1996 (Volume 
32). In total, 768 articles have been published in this journal and related monographs, 
including 263 devoted to the European region, 183 to the Asian Pacific region and 126 to 
countries classified by the World Bank (1990) as economically developing. In the early 
years of the journal, one of the two issues per year were devoted to the proceedings of the 
Seminar in International Accounting conducted annually at the University of Illinois at 
Urbana-Champaign. More recently, the proceedings of the seminar have been published 
as separate monographs. Since the research represented in these proceedings represents, in 
effect, an extension of the journal, the articles in these monographs are covered by this 
study. The separately published monographs included in this bibliography are: 

The Multinational Corporation: Accounting and Social Implications, 1977. 

The Impact of Inflation on Accounting: A Global View, 1979 

Managerial Accounting: An Analysis of Current International Applications, 1984 

The Recent Accounting and Economic Developments in the Middle East, 1985 

The Recent Accounting and Economic Developments in Western Europe, 1985 

The Recent Accounting and Economic Developments in the Far East, 1988 

Comparative International Accounting Educational Standards, 1990 

Ethical Considerations in Contemporary International Accounting Practice. 1992 

Changing International Financial Markets and Impact on Accounting, 1992 



Direct all correspondence to: Belverd E. Needles, Jr., School of Accountancy, DePaul University, 1 East Jack- 
son Blvd. Chicago, IL 60604. U.S.A. (Tel: 312-362-5 130; Fax: 3 12-362-6208; E-Mail: 
bneedles@condor.depaul.edu). 

The International Journal of Accounting, Vol. 32, No. 4, pp. 1-2 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



2 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

• The New Europe: Recent Political and Economic Implications for Accountants and 
Accounting, 1994 

Volumes 1-23 consisting of two issues each were published by the Center for Interna- 
tional Accounting Education and Research in Accounting at the University of Illinois at 
Urbana-Champaign. Volumes 24-30 consisting of four issues per year were published by 
the Springer- Verlag. Volume 3 1 and 32 also consisting of four issues per year were pub- 
lished by the current publisher JAI Press, Inc. 

Each sequentially numbered entry in the annotated bibliography, presented alphabeti- 
cally by author, contains the full name of the author(s), title of the article, affiliation of the 
author(s), research methodology, subject of the research, country(ies) or region, and a 
short description of the research. Criteria for making these designations are set forth in the 
article "International Accounting Research: An Analysis of Thirty-Two Years from the 
International Journal of Accounting," by Belverd E. Needles, Jr. in Volume 32, Number 2 
of the International Journal of Accounting. 

Indexes of the entries in the bibliography are provided for easy reference. In addition to 
an overall index for all entries, indexes are also provided for the European region, Asian/ 
Pacific region, and developing countries. In each of these areas, an index is provided by 
subject and by country or region and methodology. 

Many thanks to my graduate assistants at DePaul University — Michael Whalen, Marty 
Frierson, and Haoying Ewing — for their assistance with this project. Working with them 
has been a pleasure. 

I wish to acknowledge the encouragement and support my work throughout my career 
from Professor Zimmerman. This project of almost ten years was inspired by his leader- 
ship in the field of international accounting and could not have been completed without 
his support. Further, I wish to thank Dr. Andrew Bailey for his willingness to see it 
through to fruition. 

Belverd E. Needles, Jr. 



The International 
Journal of 
Accounting 



INDEX 1: ARTICLES BY COUNTRY/REGION & 
METHODOLOGY— COMPREHENSIVE 



Africa 



Deductive Descriptive: 94, 229. 264, 289, 314, 372 
Empirical Descriptive: 70, 196, 751 
Theoretical: 191 

Arab Countries 

Deductive Descriptive: 177, 178,654 
Empirical Descriptive: 179, 312 
Theoretical: 27, 617 

Argentina 

Deductive Descriptive: 122, 314 
ASEAN Countries 

Deductive Descriptive: 151 

Asia 

Deductive Descriptive: 229, 289, 433 
Empirical Descriptive: 196, 751 

Australia 

Capital Markets: 309 

Deductive Descriptive: 14, 56, 88. 89, 148, 288. 289, 314, 392, 

414, 423, 430, 448, 584, 628, 723 

Empirical Descriptive: 20, 46, 58, 131, 221, 294, 338, 422, 485, 621. 

671,694 



The International Journal of Accounting, Vol. 33, No. 1, pp. 3-17 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 



Empirical Statistical: 435 

Historical: 571. 724 

Modeling: 207 

Theoretical: 13. 90. 91. 103. 191, 702 

Austria 

Theoretical: 376 

Bangladesh 

Deductive Descriptive: 266. 726 
Empirical Statistical: 19. 333 
Theoretical: 585 

Barbados 

Deductive Descriptive: 130 

Belgium 

Deductive Descriptive: 31. 424. 425. 432. 469 
Empirical Statistical: 30, 366. 547, 548, 613 
Historical: 78 

Botswana 

Deductive Descriptive: 460 

Brazil 

Deductive Descriptive: 28. 122, 242, 314, 475, 494, 566, 723 
Empirical Descriptive: 194 
Theoretical: 193,201.634 

Brunei 

Deductive Descriptive: 173, 533 

Canada 

Deductive Descriptive: 14. 56. 87. 88, 89. 148, 245, 277, 314, 

3 16. 33 1 , 342. 392. 414. 428, 430. 437, 448, 538. 590. 628. 683. 723 

Empirical Descriptive: 20, 42. 46, 131, 146, 183, 196, 221, 

250, 378, 454, 485, 610, 645, 751 

Empirical Statistical:41 .43.435.507,593 



Index 1 



Historical: 506, 724 
Modeling: 197, 207 
Theoretical: 27, 90, 91, 103, 1 19, 491, 562, 696, 702, 756 

Central & South America 

Deductive Descriptive: 288, 289, 572. 602, 619 
Empirical Descriptive: 196, 298, 508, 751 
Theoretical: 191,209,346 

Chile 



Deductive Descriptive: 314 
Modeling: 391 



China 



Capital Markets: 754 

Deductive Descriptive: 51, 109, 143, 159, 224, 227, 282, 289, 

342, 343, 372, 416, 426, 453, 663, 755 

Historical: 83, 384, 434 

Theoretical:410, 634, 691 

Colombia 

Deductive Descriptive: 557 
Modeling: 391 

Cook Islands 

Deductive Descriptive: 735 

Cyprus 

Empirical Descriptive: 70 

Czech Republic 

Deductive Descriptive: 369 

Denmark 

Deductive Descriptive: 468 



6 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Empirical Descriptive: 70 
Historical: 724 

Developed Countries 

Deductive Descriptive: 339 
Theoretical:27, 226, 516 

Developing Countries 

Deductive Descriptive: 34, 50, 229, 300. 356, 375. 475, 522, 339, 697 
Empirical Descriptive: 692 

Theoretical: 38, 200. 210, 226, 231, 235, 340, 487, 516, 639, 642, 680 
Capital Markets: 208 

East Germany 

Deductive Descriptive: 82, 284. 467 
Eastern Block Countries 

Deductive Descriptive: 284, 398, 61 1, 646 

Egypt 

Deductive Descriptive: 29, 30, 31, 35, 107, 180, 229, 292, 296, 483 
Empirical Descriptive: 1 1, 70 
Empirical Statistical: 30 
Theoretical: 620 

Ethiopia 

Deductive Descriptive: 375 
Europe 

Deductive Descriptive: 76, 120, 137, 281, 284. 289. 316, 377. 468, 

486. 505. 530, 608, 700 

Empirical Descriptive: 48, 79, 176, 196, 508, 570, 707. 731, 751 

Empirical Statistical: 33 

Modeling: 554 

Theoretical: 1 17, 152, 376, 443, 452, 524 

European Community 

Capital Market: 291 

Deductive Descriptive: 288, 326, 424, 469, 478, 565. 590. 597. 

601,604,646,698,715 



Index 1 



Empirical Descriptive: 70, 72, 155, 156, 254, 298, 710 

Empirical Statistical: 262, 366, 576 

Historical: 603 

Theoretical: 27, 191, 234, 560, 706 

Far East 

Empirical Descriptive: 196 
Fiji 

Deductive Descriptive: 735 
Finland 



Capital Markets: 535 
Deductive Descriptive: 354 



France 



Deductive Descriptive: 28, 31, 100, 148, 288, 437, 468, 470, 
498, 523, 537, 566, 680, 683, 699 
Empirical Descriptive: 68, 31 1, 485, 519 
Empirical Statistical: 30, 613, 212 
Theoretical: 1 14, 1 16, 346, 376, 560, 701 



Germany 



Deductive Descriptive: 28, 31, 32, 148, 204, 288, 302, 314, 352, 

353, 357, 401, 444, 445, 447, 451, 468, 523, 529, 530, 537, 566, 

630, 632, 678, 680, 699 

Empirical Descriptive: 68, 485, 519, 709 

Empirical Statistical: 212, 262, 613 

Theoretical: 8, 27, 91, 1 14, 1 19, 187, 234, 376, 387, 395, 446, 452, 560 



Ghana 



Deductive Descriptive: 263 
Historical: 482 



Global 



Capital Markets: 69, 41 1, 649 

Deductive Descriptive: 23, 24, 96, 1 33, 233, 236, 337, 474, 5 1 2, 52 1 , 650 
Empirical Descriptive: 167, 239, 317, 337, 386, 450, 465, 692 
Empirical Statistical: 4, 80, 192, 195, 258, 412, 495, 725 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 1 , 1 998 



Historical: 747 
Theoretical: 301. 560 



Greece 



Deductive Descriptive: 171.468 
Historical: 172 



Guatemala 

Deductive Descriptive: 16 

Holland 

Deductive Descriptive: 247, 566 
Historical: 163 

Hong Kong 

Capital Markets: 132 

Deductive Descriptive: 688 

Empirical Descriptive: 294. 419. 518 

Empirical Statistical: 135. 360. 449. 471. 528. 661. 689. 703 

Theoretical: 134 

Historical: 724 

Hungary 

Deductive Descriptive: 369 



India 



Deductive Descriptive: 97. 359. 628, 667 
Empirical Descriptive: 513. 666 
Empirical Statistical: 662. 665 
Historical: 724 



Indonesia 



Deductive Descriptive: 108. 173. 247. 533 
Empirical Descriptive: 518 
Empirical Statistical: 693 
Theoretical: 684 



index 1 

Inflationary Countries 

Empirical Statistical: 765 
Theoretical: 272 

Iran 

Deductive Descriptive: 248 
Empirical Descriptive: 249 

Iraq 

Deductive Descriptive: 292 
Empirical Descriptive: 1 1 
Empirical Statistical: 30 

Ireland 

Deductive Descriptive: 468 
Islamic Countries 

Deductive Descriptive: 5 
Israel 



Italy 



Japan 



Capital Markets: 476 

Deductive Descriptive: 122, 223, 268. 431. 458 
Empirical Descriptive: 62, 65, 70 
Empirical Statistical: 63, 477 



Deductive Descriptive: 468, 523. 604 
Empirical Descriptive: 298. 762 
Empirical Statistical: 613 
Historical: 269 
Theoretical: 286. 620 



Capital Markets: 185. 406. 476. 615 

Deductive Descriptive: 247. 256. 289. 344. 348. 409. 420. 473, 

509. 536, 673. 676, 686, 695, 699 

Empirical Descriptive: 46, 52, 68, 220, 518. 534, 626, 635 

Empirical Statistical: 169. 212. 222. 457. 477. 693. 708. 757. 758 



10 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Historical: 675 
Modeling: 554 
Theoretical: 91, 145, 154, 286, 383, 543 

Jordan 

Empirical Descriptive: 9, 1 1 
Theoretical: 178 

Kenya 

Empirical Descriptive: 70 
Kiribati 

Deductive Descriptive: 735 

Korea 

Capital Markets: 390 

Deductive Descriptive: 150, 421, 488, 748 

Empirical Statistical: 551. 552 

Theoretical: 322 

Historical: 724 

Kuwait 

Deductive Descriptive: 237, 438. 567. 648. 654. 655 
Empirical Descriptive: 11,312 

Latin America 

Deductive Descriptive: 92 

Libya 

Deductive Descriptive: 55, 237 
Empirical Descriptive: 1 1 

Luxembourg 

Deductive Descriptive: 468 

Malaysia 

Capital Markets: 335 
Deductive Descriptive: 173,533 
Empirical Descriptive: 295, 518 
Empirical Statistical: 661 



Index 1 11 

Malta 

Deductive Descriptive: 252 

Mexico 

Deductive Descriptive: 251, 314, 744 
Empirical Statistical: 157, 745 
Historical: 493 
Theoretical: 235, 286 

Middle East 

Deductive Descriptive: 34. 289, 292 
Empirical Descriptive: 70, 196, 751 
Theoretical: 191,617 

Nauru 

Deductive Descriptive: 735 

Netherlands 

Capital Markets: 476 

Deductive Descriptive: 77, 288. 314, 353. 468, 523, 537, 566, 

636,680,718 

Empirical Descriptive: 68, 519 

Empirical Statistical: 347, 477, 613, 693 

Theoretical: 27, 103, 560, 711, 712 

New Zealand 

Deductive Descriptive: 288, 314, 392, 414, 423, 459, 584, 683. 717. 728 

Empirical Descriptive: 20, 53, 131, 138, 189, 250, 270, 466. 492. 

553. 568, 733 

Empirical Statistical: 455, 605 

Historical: 124,724 

Theoretical: 90, 91, 110, 191, 559, 569, 588, 727 

Nigeria 

Deductive Descriptive: 355, 542, 544, 550. 677 
Empirical Descriptive: 70 

Nine 

Deductive Descriptive: 735 



12 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

No specific country 

Deductive Descriptive: 21, 101, 115, 124, 125, 126, 175, 202, 

203, 216, 228, 232, 261, 267, 273, 278, 285, 315, 367, 382, 

462, 464, 472, 539, 612, 625, 633, 637, 641, 643, 647, 664, 

670. 716, 719, 738, 746. 760, 766 

Empirical Descriptive: 181,217, 246. 306. 308, 682, 730, 732, 

741,752 

Empirical Statistical: 293, 481, 586 

Historical: 128, 255 

Modeling: 98, 99, 105, 659 

Theoretical: 26, 59, 60, 61, 73, 74, 75, 93, 1 12, 140, 142, 147, 

153, 161, 162, 182, 184,211,213,214,218,230,238,253, 

259, 260, 265. 276. 280. 299, 320, 321, 332, 358, 371. 388, 

399, 400, 402, 404, 427, 441, 442, 500, 502, 510, 522, 556, 

564, 575, 607, 598, 629, 638, 656, 668, 669, 674, 681, 685, 

690, 713. 720. 729. 739. 743, 750, 761 

North America 

Theoretical: 191 
Norway 

Deductive Descriptive: 596 
Oceania 

Empirical Descriptive: 751 

Pakistan 

Deductive Descriptive: 296, 628 
Empirical Descriptive: 578 



Panama 



Deductive Descriptive: 158 
Empirical Descriptive: 599 



Peru 



Theoretical: 579. 714 

Philippines 

Capital Markets: 476 

Deductive Descriptive: 173, 533, 628 



Index 1 13 

Empirical Descriptive: 5 1 8 
Empirical Statistical: 10. 477 

Poland 

Deductive Descriptive: 31. 82. 84. 188. 279. 361. 362. 363. 

369. 467 

Empirical Statistical: 30 

Theoretical: 364 

Rumania 

Deductive Descriptive: 467 

Saudi Arabia 

Capital Markets: 6, 7 

Deductive Descriptive: 3. 237. 296. 438. 483. 499. 652. 764 

Empirical Descriptive: 11, 70, 206 

Modeling: 207 

Singapore 

Deductive Descriptive: 173. 247. 480, 533 
Empirical Descriptive: 521. 709 
Empirical Statistical: 44. 661 

Slovalc Federal Republic 

Deductive Descriptive: 369 
Socialist Countries 

Deductive Descriptive: 82 
Solomon Islands 

Deductive Descriptive: 307, 735 

South Africa 

Deductive Descriptive: 288, 314, 448. 566, 628 
Empirical Descriptive: 70, 131, 645 
Empirical Statistical: 660 

South America 

Deductive Descriptive: 288, 289, 572, 602, 619 
Empirical Descriptive: 196. 298. 508, 751 



14 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Theoretical: 191,209.346 

South Korea 

Deductive Descriptive: 144 
Empirical Descriptive: 518 

Soviet Union 

Deductive Descriptive: 82, 160. 214. 275. 281. 288, 289. 342. 

372, 4 1 8, 438, 467, 6 1 1 , 646, 748 

Empirical Descriptive: 622 

Empirical Statistical: 30 

Historical: 54. 583 

Theoretical: 274. 341.408 



Spain 

Deductive Descriptive: 598 
Empirical Descriptive: 81. 373 
Historical: 603 

Sudan 

Deductive Descriptive: 237 

Sweden 

Deductive Descriptive: 148. 353. 370, 523 
Empirical Descriptive: 37. 68. 519. 546 
Theoretical: 38.91 

Switzerland 

Deductive Descriptive: 28, 76. 407. 767. 768 
Empirical Descriptive: 519 
Modeling: 391 
Theoretical: 91. 376,573 

Syria 

Deductive Descriptive: 1. 2 

Taiwan 

Deductive Descriptive: 143, 283 
Empirical Descriptive: 518 
Empirical Statistical: 327, 365. 380 
Historical: 139 



Index 1 15 



Thailand 



Tonga 



Deductive Descriptive: 25, 173, 329, 379, 532, 533, 627 
Empirical Descriptive: 518 
Theoretical: 763 



Deductive Descriptive: 735 



Tunisia 

Deductive Descriptive: 329 
Theoretical: 525 

Turkey 

Deductive Descriptive: 120, 541 
Tuvalu 

Deductive Descriptive: 735 

United Arab Emirates 

Deductive Descriptive: 237 
Empirical Descriptive: 70 

United Kingdom 



Capital Markets: 309, 476, 615 

Deductive Descriptive: 14, 28, 31, 36, 56, 88, 89, 106. 129, 148. 

168, 205, 245, 247. 252, 277, 288, 310. 314. 323, 326, 331. 339. 

355, 392, 414, 423, 430, 448, 459, 469, 470. 523, 537, 538, 561, 

566, 577, 590, 596, 628, 678, 680, 699, 723, 740 

Empirical Descriptive: 20. 46, 49, 68. 81, 138. 176, 196. 220, 221. 

241, 244, 250, 290, 311, 312, 454, 485, 519, 553, 558, 614, 621, 645, 

653,671,672 

Empirical Statistical: 30. 33. 43. 63, 212, 222, 243, 328, 351. 455, 

477,511,593,693 

Historical: 136, 506, 571. 724 

Modeling: 391 

Theoretical: 12, 13, 22, 27, 90, 91, 103, 1 10, 1 19, 164, 186, 345, 

346, 385, 417, 440, 452, 559, 560, 562, 569, 585, 588, 620, 691, 

696,702.721 



16 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 



United Nations 



Capital Markets: 515 
Deductive Descriptive: 61 1 
Historical: 18.257 
Theoretical: 410 



United States 



Capital Markets: 7, 297, 309, 476, 478, 614, 623, 657 
Deductive Descriptive: 14, 16, 28, 31, 36, 39, 56, 57, 67, 76, 
77, 87, 88, 89, 106, 107, 120, 122, 123, 148, 150, 160, 165, 
168, 174, 190, 204, 205, 223, 240, 245, 247, 272, 277, 281, 
288, 289, 292, 303, 304, 305, 310, 313, 316, 331, 342, 350, 
353, 354, 355, 372, 377, 389, 392, 396, 397, 405, 407, 409, 
413, 414, 420, 429, 430, 431, 437, 438, 448, 459, 460, 469, 
473, 483, 484, 486, 494, 496, 503, 526, 531, 537, 538, 540, 
555, 557, 565, 566, 577, 581, 590, 591, 596, 600, 601, 606, 
624, 628, 631, 646, 673, 678, 683, 687, 695, 699. 715. 718, 
722, 723, 734, 736, 737, 744, 748, 753, 755, 759 
Empirical Descriptive: 17, 20, 37, 40, 42, 46, 48, 49, 52, 58, 
65,68,70,71,79, 111, 118, 131, 138, 150, 155, 166, 175, 
196, 199, 219, 220, 221, 250, 298, 312, 317, 324, 325, 334, 
337, 373, 374, 419, 454, 461, 485, 492, 497, 507, 545, 553, 
558, 589, 592, 599, 610, 615, 621, 626. 635, 645, 651, 653, 
671, 672, 709, 731, 733, 750, 751 

Empirical Statistical: 10, 30, 33, 43, 44, 47, 63, 95, 102, 121, 
141, 149, 157, 198, 212, 222, 318, 319, 327, 347, 351, 380, 381, 
393, 394, 415, 455, 457, 477, 487, 504, 507, 511, 514, 551, 552, 
593, 613, 644, 662, 665, 693, 708, 745, 758, 765 
Historical: 66. 83, 136. 506, 571, 574 
Modeling: 197, 207, 336, 391, 554, 742 

Theoretical: 12, 13, 15,22,27,45,64,90,91, 104, 110, 113, 114. 
1 16, 1 19, 134, 145, 154, 164, 170, 186. 187, 193, 225, 234, 273, 
286, 287, 301, 322, 330, 341, 345, 346, 368, 376, 403, 436, 439, 
440, 443, 452. 456, 463, 479, 491, 501, 527, 559, 560, 562, 563, 
573, 580, 582, 585, 587, 588, 594, 595, 609, 634, 658, 679, 696, 
702,721,756 

Uruguay 

Deductive Descriptive: 127 
Modeling: 391 

Vanautu 

Deductive Descriptive: 735 



Index 1 17 

Venezuela 

Deductive Descriptive: 600 

West Germany 

Deductive Descriptive: 470, 531, 687 
Empirical Descriptive: 46, 220, 311 
Empirical Statistical: 10, 222, 511, 693 

Western Samoa 

Deductive Descriptive: 735 
Yugoslavia 

Deductive Descriptive: 467, 704, 705 
Zambia 

Empirical Descriptive: 70 

Zimbabwe 

Capital Markets: 549 
Empirical Descriptive: 70 



The International 
Journal of 
Accounting 



INDEX 2: ARTICLES BY SUBJECT— COMPREHENSIVE 



accounting education 

3, 11,25,39,64,93. 100, 108, 113, 118, 130, 159, 165, 166, 171, 181, 
217, 247, 250, 263, 266, 310, 371, 372, 405, 425, 428, 458, 459, 460, 
463, 480, 488, 489, 492, 524, 527, 532, 540, 541. 550, 555. 556, 599. 
618, 619, 621, 631, 641, 642, 651, 654, 667, 696, 738, 743, 747, 750, 763 

accounting history 

54,59.66.78,83,98, 104, 112, 128, 163, 172,211,257,332,440,571, 
574, 583, 603. 744 

accounting theory 

14, 15. 24, 26, 51, 60. 75, 88, 89, 90, 99, 1 14, 122, 129, 131. 133, 142, 

147, 149, 153, 162, 182, 184, 187, 216, 219, 235, 238, 240, 255, 259, 

271, 273, 275, 285, 299, 306, 321, 323, 349, 376, 377, 382, 399, 400, 

401, 402, 403, 404, 406, 437, 441, 442, 452. 481. 484, 501, 510. 559. 

561, 562, 563, 568, 569, 575, 587, 593, 594. 607, 612, 633, 636, 664, 

669, 671, 674, 682, 685, 701, 71 1, 712, 713, 716, 720, 722, 729, 736, 760, 761 

auditing 

10, 37, 62, 70, 81, 150, 157, 175, 179, 204. 225. 243, 282, 294, 295, 

322, 324, 325, 327, 363, 416, 419, 429. 473, 495, 518, 521, 523, 528, 

529, 544, 545, 551, 564, 591, 595, 648, 660, 661, 662, 686, 703, 724, 726, 758 

economics and development 

2, 5, 7, 16, 21, 34, 45, 48, 94, 106, 1 16, 138, 141, 144, 152, 178, 185, 
191, 201, 202, 203, 208, 209, 210, 215, 224, 231, 237, 264, 278, 284, 
291, 300, 313, 329, 335, 339, 351, 355, 356, 368, 393, 398, 409. 427, 
433, 436, 468. 471. 475, 482, 490, 516, 525, 535, 539, 547. 549. 567. 



The International Journal of Accounting, Vol. 33, No. 1, pp. 19-21 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



20 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

577, 578. 615. 617. 620, 627. 639. 640. 646. 655. 656. 657. 658. 663, 
672, 673. 677. 678. 690, 691, 699, 704, 719. 735. 746. 748. 754 

financial accounting and reporting 

4, 8, 9, 13. 17, 18, 19, 20, 22, 23, 27, 28, 30, 32, 40, 43, 44. 47. 48, 50, 
55, 56, 58, 68, 69. 71. 72, 73, 74, 79, 80. 82. 85, 87. 91, 92, 101, 102, 
103, 105, 107, 111, 117, 120, 121, 127, 132, 137, 143, 146, 148, 151, 
154, 155, 160, 164, 169, 170, 173, 176, 177, 186, 192, 194, 196, 197, 
198, 199. 205, 206, 212, 221, 227, 229, 232, 239, 241. 242, 244. 245. 
246, 248, 249, 251, 252, 253, 254, 256. 258, 262. 268. 270, 272. 279. 
283, 286, 290, 293, 297, 298, 301, 302, 303, 304. 309, 311.312. 314. 
315, 316, 326, 330, 337, 340, 341. 342. 343. 345. 346. 347. 348, 353. 
354, 360, 361, 362, 364, 366, 367, 370. 378. 379. 383, 390, 392, 397, 
410, 41 1, 414, 421, 422, 423, 424, 426, 430, 431, 445, 446, 448. 449, 
450. 451. 454. 456. 462, 465, 467. 470. 469, 474. 476, 477, 478, 479, 
486. 487. 488. 493. 498. 499. 503. 505. 507, 508. 511, 512, 513, 514, 
515, 519, 520, 531, 536, 537, 542, 543. 546, 552, 557, 565, 566, 568, 
576, 579, 582, 585. 586, 589, 592. 596. 598. 601. 602. 604, 605. 608. 
611, 613, 614, 623. 624, 625, 629. 634. 643. 644. 645. 659. 665. 666. 
670. 676. 679. 680. 681. 683. 687. 689. 692. 693. 694. 695. 698. 702. 
705. 706. 709, 710, 715. 718. 725. 734. 741. 742. 745. 752. 753. 757. 765 

governmental 

67, 124. 161. 180. 193, 418, 558. 570 
information systems 

156, 189, 276, 387, 408, 526, 626, 638. 737 

managerial accounting 

12,46,52,53,61,84,95, 109. 110. 115, 123. 190.207,216,222,230, 

234, 261, 265, 287, 308, 320, 328, 333, 334, 336, 350, 373, 394, 395, 

396, 412, 417, 420, 455, 466, 491, 496, 497, 505, 517, 534, 538, 554, 

580. 588, 600, 622, 628, 630, 638. 647, 649, 668, 697. 708. 723. 727. 755. 756 

miscellaneous 

31. 96. 135, 145, 174. 188. 214, 369, 386, 391, 430, 432, 457, 
584, 730. 764. 766. 767 

professional development 

33, 41, 97. 125. 134, 136. 139, 183, 226, 236, 277. 280, 288, 289, 318, 
319, 338, 352, 359, 365, 374, 381, 384, 415, 444, 453, 461, 464, 483. 
500, 522, 533, 609, 635. 650, 675. 688, 700. 717. 728. 768 



Index 2 21 

public accounting 

6, 35, 36, 42, 57, 63, 65, 76, 77, 126, 158, 220, 223, 233, 281, 292, 
317, 331, 375, 388, 407, 443, 447, 502, 506, 509, 530, 553, 572, 597, 
610, 632, 652, 653, 707, 731, 751, 762 

social effects of accounting 

29, 86, 140, 167, 195, 218, 228, 260, 267, 269, 344, 357, 358, 380, 
438, 439, 560, 581, 606, 616, 684, 714, 721, 733, 740 

taxation 

1, 38, 1 19, 168, 200, 296, 305, 413, 494, 740 



The International 
Journal of 
Accounting 



INDEX 3: ARTICLES BY COUNTRY/REGION & 
METHODOLOGY— EUROPEAN REGION 

Europe (in general) 

Deductive Descriptive: 76, 120, 137, 281, 284, 289, 316, 377, 

468, 486, 505. 530, 608. 700 

Empirical Descriptive: 48. 79, 176, 196, 508, 570, 707, 731, 751 

Empirical Statistical: 33 

Modeling: 554 

Theoretical: 1 17, 152, 376, 443, 452, 524 

Austria 

Theoretical: 376 

Belgium 

Deductive Descriptive: 31, 424, 425, 432, 469 
Empirical Statistical: 30, 366, 547, 548, 613 
Historical: 78 

Czech Republic 

Deductive Descriptive: 369 

Denmark 

Deductive Descriptive: 468 
Empirical Descriptive: 70 
Historical: 724 

East Germany 

Deductive Descriptive: 82, 284, 467 



The International Journal of Accounting, Vol. 33, No. 1, pp. 23-27 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



24 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1. 1998 

Eastern Block Countries 

Deductive Descriptive: 284, 398, 61 1. 646 

European Economic Community 

Capital Markets: 291 

Deductive Descriptive: 288, 326, 424, 469, 478, 565, 

590. 597, 601, 604, 646, 698, 715 

Empirical Descriptive: 70. 72. 155. 156. 254. 298. 710 

Empirical Statistical: 262. 366. 576 

Theoretical: 27. 191, 234. 560. 706 

Finland 

Capital Markets: 535 
Deductive Descriptive: 354 

France 

Deductive Descriptive: 28. 31. 100. 148. 288. 437. 468, 
470, 498, 523, 537, 566, 680, 683, 699 
Empirical Descriptive: 68, 31 1. 485, 519 
Empirical Statistical: 30, 212. 613 
Theoretical: 1 14. 116. 346. 376. 560. 701 

Germany/ West Germany 

Deductive Descriptive: 28, 31, 32, 148, 204, 288, 302, 

314, 352, 353, 357, 401. 444, 445. 447. 451, 468. 523, 

529, 530. 531, 537, 566. 630. 632. 678. 680. 687. 699 

Empirical Descriptive: 46, 68, 220, 31 1, 485, 519, 709 

Empirical Statistical: 10, 212, 222, 262, 511, 613, 693 

Theoretical: 8, 27, 91, 1 14, 1 19, 187, 234, 376, 387, 395, 446, 452, 560 



Greece 



Deductive Descriptive: 171,468 
Historical: 172 



Holland 



Deductive Descriptive: 247. 566 
Historical: 163 



Index 3 25 

Hungary 

Deductive Descriptive: 369 
Ireland 

Deductive Descriptive: 468 

Italy 

Deductive Descriptive: 468, 523, 604 
Empirical Descriptive: 298. 762 
Empirical Statistical: 613 
Historical: 269 
Theoretical: 286, 620 

Luxembourg 

Deductive Descriptive: 468 
Malta 

Deductive Descriptive: 468 

Netherlands 

Capital Markets: 476 

Deductive Descriptive: 77, 288, 314, 353. 468, 523, 537, 566, 636, 680, 718 

Empirical Descriptive: 68, 519 

Empirical Statistical: 347. 477, 613. 693 

Theoretical: 27, 103, 560, 711, 712 

Norway 

Deductive Descriptive: 596 



Poland 



Deductive Descriptive: 31, 82, 84, 188, 279, 361, 362, 363, 369, 467 
Empirical Statistical: 30 
Theoretical: 364 



Rumania 

Deductive Descriptive: 467 



26 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Slovak Federal Republic 

Deductive Descriptive: 369 
Soviet Union 

Deductive Descriptive: 82, 160, 214, 275, 281, 288, 289, 

342, 372, 418, 438, 467, 611, 646, 748 

Empirical Descriptive: 622 

Empirical Statistical: 30 

Historical: 54, 583 

Theoretical: 275, 341,408 



Spain 



Deductive Descriptive: 598 
Empirical Descriptive: 81, 373 
Historical: 603 



Sweden 



Deductive Descriptive: 148, 353, 370, 523 
Empirical Descriptive: 37, 68, 519, 546 
Theoretical: 38,91 



Switzerland 



Deductive Descriptive: 28, 76, 407, 767, 768 
Empirical Descriptive: 519 
Modeling: 391 
Theoretical: 91, 376, 573 



United Kingdom 



Capital Markets: 310, 476, 615 

Deductive Descriptive: 14, 28, 31, 36, 56, 88, 89, 106, 129, 

148, 168, 205, 245, 247, 252, 277, 288, 310, 314, 323, 326, 

331, 339, 355, 392, 414, 423, 430, 448, 459, 469, 470, 523, 

537, 538, 561. 566, 577, 590, 596, 628, 678, 680, 699, 723, 740 

Empirical Descriptive: 20, 46, 49, 68, 81, 138, 176, 196, 220, 

221, 241, 244, 250, 290, 311, 312, 454, 485, 519, 553, 558, 

614,621,645,653,671,672 

Empirical Statistical: 30, 33, 43, 63, 212, 222, 243, 328, 351, 

455,477.511,593,693 

Historical: 136,506,571,724 

Modeling: 391 



Index 3 27 

Theoretical: 12, 13, 22, 27, 90, 91, 103, 1 10, 1 19, 164, 186, 
345, 346, 385, 417, 440, 452, 559, 560, 562, 569, 585, 588, 
620,691,696,702,721 

Yugoslavia 

Deductive Descriptive: 467, 704, 705 



The International 
Journal of 
Accounting 



INDEX 4: ARTICLES BY SUBJECT— EUROPEAN REGION 

accounting education 

100, 171, 247, 250, 310, 372, 425, 459, 524, 621, 696 
accounting history 

54,78, 163, 172,440,571,603 

accounting theory 

14, 88, 89, 90, 1 14, 129, 187, 275, 323, 376, 377, 385, 
401, 437, 452, 557, 561, 562, 569, 583, 593, 636, 671, 701, 
711,712 

auditing 

10, 37, 70, 81, 204, 243, 363, 523, 529 

economics and development 

49, 106, 116, 138, 152, 191,284,291,339,351,355,398. 
468, 535, 548, 575, 615, 620, 646, 672, 678, 691, 699, 704, 748 

financial accounting and reporting 

8, 13, 20, 22, 27, 28, 30, 32, 43, 48, 56, 68, 79, 82, 91, 103, 
117, 120, 137, 148, 155, 160, 164, 176, 186, 196,205,212, 
221, 241, 244, 245, 252, 254, 262, 279, 286, 290, 298, 302, 
309, 311, 312, 314, 316, 326, 341, 342, 345, 346, 347, 353, 
354, 361, 364, 366, 370, 376, 392, 403, 414, 423, 424, 430, 
445, 446, 448, 451, 454, 467, 470, 469. 476, 477, 478, 485, 
486, 498, 505, 508, 51 1, 519, 531, 537, 546, 565, 566, 573, 
576, 585, 596, 598, 601, 604, 608, 611, 613, 614, 645, 680, 
683, 687, 693, 698, 702, 705, 706, 709. 715. 718 



The International Journal of Accounting, Vol. 33, No. 1, pp. 29-30 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



30 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

governmental 

418,558.570.590 
information systems 

156,387.408 

managerial accounting 

12, 46, 84, 1 10, 123, 222, 234, 328, 373, 395, 417, 455, 
538, 554, 622, 628, 630, 723 

miscellaneous 

31, 188. 214, 369, 391, 430, 432, 767 
professional development 

33, 136. 277, 288, 289, 352, 444, 700, 768 

public accounting 

36, 63, 76, 77, 220, 281, 331, 407, 443, 447, 506, 530, 553, 
597, 632, 653, 707, 731, 751, 762 

social effects of accounting 

269,357,438,560,721 
taxation 

38. 119. 168,740 



The International 
Journal of 
Accounting 



INDEX 5: ARTICLES BY COUNTRY/REGION & 
METHODOLOGY— ASIAN/PACIFIC REGION 

Asia (in general) 

Deductive Descriptive: 229, 289, 433 
Empirical Descriptive: 196, 284 

ASEAN Countries 

Deductive Descriptive: 151 

Australia 

Capital Markets: 309 

Deductive Descriptive: 14, 56, 88, 89, 148, 288, 289, 314, 

392, 414, 423, 430, 448, 584, 628, 723 

Empirical Descriptive: 20, 46, 58, 131, 221, 294, 338, 422, 485, 

621,671,694 

Empirical Statistical: 435 

Historical: 571,724 

Modeling: 207 

Theoretical: 13, 90, 91, 103, 191, 702 

Bangladesh 

Deductive Descriptive: 266, 726 
Empirical Statistical: 19, 333 
Theoretical: 585 



Brunei 

Deductive Descriptive: 173, 533 



The International Journal of Accounting, VoL 33, No. 1, pp. 31-35 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



32 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

China 

Capital Markets: 754 

Deductive Descriptive: 51, 109. 143. 159, 224, 227, 282, 289, 

342, 343, 372, 416, 426, 453, 663, 755 

Historical: 83, 384, 434 

Theoretical:410. 634. 691 

Cook Islands 

Deductive Descriptive: 735 
Far East 

Empirical Descriptive: 196 
Fiji 

Descriptive Descriptive: 735 

Hong Kong 

Capital Markets: 132 

Deductive Descriptive: 688 

Empirical Descriptive: 294, 419, 518 

Empirical Statistical: 135, 360, 449, 471, 528, 661, 689, 703 

Theoretical: 134 

Historical: 724 



India 



Deductive Descriptive: 97, 359, 628, 667 
Empirical Descriptive: 513, 666 
Empirical Statistical: 662, 665 
Historical: 724 



Indonesia 



Japan 



Deductive Descriptive: 108, 173, 247, 533 
Empirical Descriptive: 518 
Empirical Statistical: 693 
Theoretical: 684 



Capital Markets: 185, 406, 476, 615 



Index 5 33 

Deductive Descriptive: 247, 256, 289, 344, 348, 409, 420, 473, 

509, 536, 673, 676, 686, 695, 699 

Empirical Descriptive: 46, 52, 68, 220, 518, 534, 626, 635 

Empirical Statistical: 169, 212, 222, 457, 477, 693, 708, 757, 758 

Historical: 675 

Modeling: 554 

Theoretical: 91, 145, 154, 286, 383, 543 

Kiribati 

Deductive Descriptive: 735 

Korea 

Capital Markets: 390 

Deductive Descriptive: 150, 421, 488, 748 

Empirical Statistical: 551, 552 

Theoretical: 322 

Historical: 724 

Malaysia 

Capital Markets: 335 
Deductive Descriptive: 173,533 
Empirical Descriptive: 295, 518 
Empirical Statistical: 661 

Nauru 

Deductive Descriptive: 735 

New Zealand 

Deductive Descriptive: 288, 314, 392, 414, 423, 459, 584, 683, 

717,728 

Empirical Descriptive: 20, 53, 131, 138, 189, 250, 270, 466, 492, 553, 

568, 733 

Empirical Statistical: 455, 605 

Historical: 123,724 

Theoretical: 74, 75, 90, 157, 452, 463, 479, 583 

Niue 

Deductive Descriptive: 735 



34 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Oceania 

Empirical Descriptive: 751 

Pakistan 

Deductive Descriptive: 296. 628 
Empirical Descriptive: 578 

Philippines 



Capital Markets: 476 
Deductive Descriptive: 173, 533, 628 
Empirical Descriptive: 518 
Empirical Statistical: 10, 477 

Singapore 

Deductive Descriptive: 173, 247, 480, 533 
Empirical Descriptive: 521, 709 
Empirical Statistical: 44, 661 
Historical: 724 

Solomon Islands 

Deductive Descriptive: 307, 735 

South Korea 

Deductive Descriptive: 144 
Empirical Descriptive: 518 



Taiwan 



Deductive Descriptive: 143, 283 
Empirical Descriptive: 518 
Empirical Statistical: 327, 365, 380 
Historical: 139 



Thailand 



Deductive Descriptive: 25, 173, 329, 379, 532, 533, 627 
Empirical Descriptive: 518 
Theoretical: 763 



Index 5 35 

Tonga 

Deductive Descriptive: 735 
Tuvalu 

Deductive Descriptive: 735 
Vanautu 

Deductive Descriptive: 735 
Western Samoa 

Deductive Descriptive: 735 



The International 
Journal of 
Accounting 



INDEX 6: ARTICLES BY 
SUBJECT— ASIAN/PACIFIC REGION 

accounting education 

25, 108, 159, 247, 250, 266, 372, 459, 488, 492, 532, 621, 667, 763 

accounting history 

83,571 

accounting theory 

14,51,88,89,90, 131, 149,406,559,568,569,671 

auditing 

10, 150, 282, 294, 295, 322, 327, 416, 419, 435, 473, 518, 
528, 551, 661, 662, 686, 703, 726, 758 

economics and development 

138, 144, 185, 191, 224, 329, 335, 409, 433, 471, 578, 615, 
627, 663, 673, 691, 699, 735, 748, 754 

financial accounting and reporting 

13, 19, 20, 44, 56, 58, 68, 91, 103, 132, 143, 148, 151, 154, 
169, 173, 196, 221, 227, 229, 256, 270, 283, 286, 309, 314, 
342, 343, 348, 360, 379, 383, 390, 392, 410, 414, 421, 422, 
423, 426, 449, 476, 477, 485, 513, 536, 543, 552, 585, 605, 
634, 665, 666, 676, 683. 689, 693, 694, 695, 702, 708, 757 



The International Journal of Accounting, Vol. 33, No. 1, pp. 37-38 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



38 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

information systems 

189, 626 

managerial accounting 

46, 52, 53, 109, 1 10, 207, 222, 333, 420, 455, 466. 534, 
554. 588, 628. 708. 723. 727. 755 

miscellaneous 

135, 145,430,457.584 

professional development 

97, 134. 139, 288. 289. 307. 338, 359, 365. 384. 453. 533. 635. 
675.688.717.728 

public accounting 

220.509.553.751 
social effects of accounting 

86. 344. 380. 684. 733 
taxation 

296 



The International 
Journal of 
Accounting 



INDEX 7: ARTICLES BY COUNTRY/REGION & 
METHODOLOGY— DEVELOPING COUNTRIES 

Argentina 

Deductive Descriptive: 122,314 

Bangladesh 

Deductive Descriptive: 266, 726 
Empirical Statistical: 333, 19 
Theoretical: 585 

Barbados 

Deductive Descriptive: 130 

Botswana 

Deductive Descriptive: 460 

Chile 

Deductive Descriptive: 314 
Modeling: 391 

China 

Capital Markets: 754 

Deductive Descriptive: 51, 109, 143, 159, 224, 227, 282, 289, 

342, 343, 372, 416, 426, 453, 563, 755 

Historical: 83, 384, 434 

Theoretical:410. 634, 691 



The International Journal of Accounting, Vol. 33, No. 1, pp. 39-43 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



40 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Colombia 

Deductive Descriptive: 557 
Modeling: 391 

Cyprus 

Empirical Descriptive: 70 

Egypt 

Deductive Descriptive: 29, 30, 31, 35, 107, 180, 229, 292, 296, 483 
Empirical Descriptive: 1 1, 70 
Empirical Statistical: 30 
Theoretical: 620 

Ethiopia 

Deductive Descriptive: 375 
Fiji 

Deductive Descriptive: 735 

Ghana 

Deductive Descriptive: 263 
Historical: 482 



Guatemala 

Deductive Descriptive: 16 

Kenya 

Empirical Descriptive: 70 

Korea 

Capital Markets: 390 

Deductive Descriptive: 150, 421, 488, 748 

Empirical Statistical: 551, 552 

Theoretical: 322 

Historical: 724 



Index 7 41 



Malaysia 



Capital Markets: 335 
Deductive Descriptive: 173.533 
Empirical Descriptive: 295. 518 
Empirical Statistical: 661 



Mexico 



Deductive Descriptive: 251, 314, 744 
Empirical Statistical: 158. 745 
Theoretical: 235, 743 
Historical: 493 



Nigeria 



Deductive Descriptive: 355. 542. 544, 550. 677 
Empirical Descriptive: 70 



Pakistan 



Deductive Descriptive: 297, 628 
Empirical Descriptive: 578 



Panama 



Deductive Descriptive: 158 
Empirical Descriptive: 599 



Philippines 



Deductive Descriptive: 173. 533, 628 
Empirical Descriptive: 518 
Empirical Statistical: 10, 477 
Capital Markets: 476 



Poland 



Deductive Descriptive: 31, 82, 84, 188, 279, 361, 362, 363, 369, 467 
Empirical Statistical: 30 
Theoretical: 364 



Solomon Islands 

Deductive Descriptive: 308, 735 



42 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Sudan 

Deductive Descriptive: 237 

Thailand 

Deductive Descriptive: 25. 173. 329, 379. 532, 533, 627 
Empirical Descriptive: 518 
Theoretical: 763 

Tonga 

Deductive Descriptive: 735 

Tunisia 

Deductive Descriptive: 329 
Theoretical: 525 

Turkey 

Deductive Descriptive: 120,541 

Uruguay 

Deductive Descriptive: 127 
ModeUng: 391 

Venezuela 

Deductive Descriptive: 600 
Western Samoa 

Deductive Descriptive: 735 
Yugoslavia 

Deductive Descriptive: 467, 704, 705 
Zambia 

Empirical Descriptive: 70 

Zimbabwe 

Capital Markets: 549 
Empirical Descriptive: 70 



Index 7 43 

General: developing & emerging countries 

Capital Markets: 640 

Deductive Descriptive: 34, 50, 229, 300. 339, 356. 375. 475, 

522. 646 

Empirical Descriptive: 692 

Theoretical: 38, 200. 210. 226. 231. 235. 340, 487, 620. 639. 642 



The International 
Journal of 
Accounting 



INDEX 8: ARTICLES BY 

SUBJECT— DEVELOPING COUNTRIES 

accounting education 

1 1, 25, 130, 159, 263, 266, 372, 458, 460, 480, 488, 532, 541, 
599, 642, 763 

accounting history 

83, 744 
accounting theory 

51, 122,235 
auditing 

10, 70, 157, 282, 295, 363, 416, 521, 544, 661, 726 

economics and development 

16, 34, 94, 106, 144, 201, 210, 224, 231, 237, 300, 329, 335, 
339, 355, 356, 368, 482, 490, 525, 549, 578, 620, 627, 639, 
640,663,691,704,735,754 

flnancial accounting and reporting 

9, 19, 30, 50, 82, 107, 120, 127, 143, 227, 229, 248, 249, 251, 
279, 286, 314, 342, 343, 361, 362, 364, 379, 390, 397, 410, 
421, 426, 467, 476, 477, 493, 552, 585, 634, 692, 705, 745 

government 

157 



The International Journal of Accounting, Vol. 33, No. 1, pp. 45-46 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1997 University of Illinois 



46 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

managerial accounting 

84. 109,600,628,755 
miscellaneous 

31, 188,369,391 
professional development 

216, 289, 308, 384, 453, 483, 522, 533 
public accounting 

35.158,292.375 
social effects of accounting 

29 
taxation 

38, 200, 296 



The international 
Journal of 
Accounting 



ANNOTATED BIBLIOGRAPHY 



Abdeen, Adnan M., Syria (University of Petroleum and Minerals, Saudi Arabia). 
The Impact of Accounting Practices on Tax Revenue in Syria [taxation]. The 
Inteniational Journal of Accounting. 1984 Sep; 20(1): 121-139. 
Methodology: deductive descriptive. 

Discussion of the relationship of accounting and the tax system in Syria. Finds 
that the accounting function can help to improve the tax system. 

Abdeen, Adnan M., Syria (University of Petroleum and Minerals, Saudi Arabia). 
The Role of Accounting in Project Evaluation and Control: The Syrian Experi- 
ence [economics and development]. The International Journal of Accounting. 
1980 Mar; 15(2): 143-158. 
Methodology: deductive descriptive. 

Description of the organizational structure and methodology used by the Syri- 
ans for capital projects and economic development. 

Abdeen, Adnan M.; Yavas, Ugur, Saudi Arabia (California State University at Los 
Angeles/ZUniversity of Petroleum and Minerals, Saudi Arabia). Current Status 
of Accounting Education in Saudi Arabia [accounting education]. The Interna- 
tional Journal of Accounting. 1985 Mar; 20(2): 155-173. 
Methodology: deductive descriptive. 

Description of the Saudi Arabian system for accounting education. Describes 
the deficiencies and provides recommendations for the system's improvement. 

Abdel-Magid, Moustafa P.; Cheung, Joseph K., global (Simon Eraser University, 
Canada/ZSimon Eraser University, Canada). Ratio Scales, Eoreign Exchange 
Rates, and the Problem of Eoreign Currency Translation: An Analytical-Empir- 
ical Perspective [financial accounting and reporting]. The International Journal 
of Accounting. 1986 Sep; 22(1): 33-49. 
Methodology: empirical statistical. 

Study of fourteen foreign subsidiaries regarding the effects of different types of 
translation methods. Einds that the least squares method minimized the estima- 
tion error. 

Abdel-Magid, Moustafa E., Islamic countries (Simon Eraser University, Canada). 
The Theory of Islamic Banking: Accounting Implications [economics and 
development]. The International Journal of Accounting. 1981 Sep; 17(1): 79- 
102. 

Methodology: deductive descriptive. 

Discussion of the religious, social, and political factors affecting Islamic bank- 
ing. Includes an overview of Islamic banking theory and related accounting 
concerns. 



The International Journal of Accounting, Vol. 33, No. 1, pp. 47-178 ISSN: 0020-7063. 

All rights of reproduction in any form re.served. Copyright © 1997 University of Illinois 



48 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

6. Abdelsalam, Mahmoud; Satin, Diane. Saudi Arabia (King Saud University, Saudi 

Arabia/ZUniversity of California, Berkeley). The Effect of Published Corporate 
Financial Reports on Stock Trading Volume in Thin Markets: A Study of Saudi 
Arabia [social effects]. 77?^ International Journal of Accounting. 1991; 26(4): 
302-313. 

Methodology: capital markets. 

Examination of relationship between corporate financial reports and stock trad- 
ing volume in Saudi Arabia. Gives four reasons of insignificant effect of 
financial reports on share trading volume. 

7. Abdelsalam, Mahmoud; Satin. Diane. Saudi Arabia/United States (King Saudi Uni- 

versity, Saudi Arabia/ZUniversity of California at Berkeley). The Impact of 
Published Annual Financial Reports on Share Prices in Saudi Arabia [econom- 
ics and development]. The International Journal of Accounting. 1988 Mar; 
23(2): 113-124. 
Methodology: capital markets. 

Study of the Saudi Arabian stock market's reaction to published 
announcements. 

8. Abel, Rein. Germany (University of Pennsylvania). The Impact of Environment on 

Accounting Practices: Germany in the Thirties [financial accounting and report- 
ing]. The International Journal of Accounting. 1971 Sep; 7(1): 29^7. 
Methodology: theoretical. 

Study of the importance of environmental factors in establishing the character- 
istics of accounting practices that are prevalent in any country. Contends that 
these factors must be considered when striving for international uniformity. 

9. Abu-Nassar, Mohammad; Rutherford, Brian A., Developing countries/Jordan (Uni- 

versity of Jordan/ZUniversity of Kent, Canterbury, UK). Preparers' Attitudes to 
Financial Reporting in Less Developed Countries with Moderately Sophisti- 
cated Capital Markets: The Case of Jordan [financial accounting & reporting]. 
The International Journal of Accounting. 1995; 30(2): 129-138. 
Methodology: empirical descriptive. 

Comparative study of financial statement preparers in Jordan with previous 
studies involving preparers in other developing countries. 

10. Agacer, Gilda M.; Doupnik. Timothy S., United StatesZthe PhilippinesZWest Ger- 

many (Mississippi State UniversityZZUniversity of South Carolina). Perceptions 

of Auditor Independence: A Cross-cultural Study [auditing]. The International 

Journal of Accounting. 1991; 26(3): 220-237. 

Methodology: empirical statistical. 

Examination to determine if client size, management advisory services, past 

due fees, and spouse employment at same audit firm play roles in weakening 

auditing independence. 

11. Agami. Abdel; Alkafaji, Yass A., Egypt/Jordan/Saudi Arabia/Libya/IraqZKuwait 

(Old Dominion UniversityZZNorthem Illinois University). Accounting Educa- 
tion in Selected Middle Eastern Countries [accounting education]. The 
International Journal of Accounting. 1987 Sep; 23(1): 145-169. 
Methodology: empirical descriptive. 



Bibliography 49 

Description of the social, political, and professional influences on accounting 
education in the Middle East. 

12. Agrawal, Surendra P., United States/United Kingdom (Memphis State University). 

Current Cost Accounting in the United Kingdom and the United States: A Com- 
parative Analysis [managerial accounting]. 77?^ International Journal of 
Accounting. 1983 Mar; 18(2): 95-108. 
Methodology: theoretical. 

Comparison of the current cost accounting methods used in the U.S. and the 
U.K. 

13. Agrawal. Surendra P.; Hallbauer, Rosalie C, United States/United Kingdom/Aus- 

tralia (Wright State University/ZFlorida International University). Advantages 

of Replacement Cost Accounting: A Critical Evaluation [financial accounting 

and reporting]. The International Journal of Accounting. 1978 Mar; 13(2): 1- 

14. 

Methodology: theoretical. 

Presentation of many examples of simulated situations where replacement cost 

accounting could be used. Criticizes the benefits of such treatment and calls for 

alteration. 

14. Agrawal, Surendra P.; Jensen, Paul H.; Meador, Anna Lee; Sellers, Keith, United 

States/United Kingdom/Canada/Australia (Memphis State University/ZUniver- 
sity of Central Arkansas/ZMarshall University/ZUniversity of Arkansas). An 
International Comparison of Conceptual Frameworks of Accounting [account- 
ing theory]. The International Journal of Accounting. 1989; 24(3): 237-249. 
Methodology: deductive descriptive. 

Discussion of the international and domestic developments of accounting the- 
ory in the U.S., the U.K., Canada, and Australia. 

15. Agrawal, Surendra P.; Rosenzweig, Kenneth, United States (Memphis State Uni- 

versity/ZUniversity of Dayton). Some Simpler Methods of Accounting for the 

Effects of Changing Prices [accounting theory]. The International Journal of 

Accounting. 1983 Sep; 19(1): 157-171. 

Methodology: theoretical. 

Presentation and analysis of three accounting methods — the Price Waterhouse, 

Grady, and Agrawal methods — for changing prices. 

16. Aguirre, Alejandro; Hagigi, Moshe, Guatemala/United States (Megasistemas Inter- 

nacional, S. A./Francisco Marroquin University, Guatemala/ZBoston 
University). Accounting, Economic, and Environmental Determinants of 
Financial Reporting Practices in Guatemala [economics and development]. The 
International Journal of Accounting. 1987 Mar; 22(2): 169-191. 
Methodology: deductive descriptive. 

Description of the economic, environmental, and legal factors affecting 
accounting practice in Guatemala. 

17. Ahadiat, Nasrollah, United States (California State Polytechnic University, 

Pomona). Some Thoughts on the Development of Geographic Segment Report- 
ing in the United States [financial accounting & reporting]. The International 
Journal of Accounting. 1995:30(2): 139-148. 



50 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Methodology: empirical descriptive. 

Presentation of research evidence supporting the need to revise the Financial 

Accounting Standards Board (FASB) standards regarding geographic reporting 

standards. 

18. Ahadiat, Nasrollah; Stewart, Barbara R., United Nations (Towson State University/ 

/Towson State University). International Geographic Segment Reporting Stan- 
dards: A Case for the Harmonization of Accounting and Reporting Practices 
[financial accounting & reporting]. The International Journal of Accounting. 
1992; 27(1): 45-56. 
Methodology: historical. 

This article gives a historical overview of the development of financial state- 
ment reporting by several organizations, including the United Nations and 
European Economic Community, as well as other geographic segment 
organizations. 

19. Ahmed. Kamran; Nicholls, Des, Bangladesh (University of Wellington, New 

Zealand/ZAustralian National University, Canberra). The Impact on Non-Finan- 
cial Company Characteristics on Mandatory Disclosure Compliance in 
Developing Countries: The Case of Bangladesh [financial accounting & report- 
ing]. The International Journal of Accounting. 1994; 29(1): 62-11 . 
Methodology: empirical statistical. 

Study involving nonfinancial companies in Bangladesh which evaluates statu- 
tory disclosure compliance of information in the corporate annual reports and 
disclosure compliance based upon selected company characteristics. Statistical 
findings show that large audit firms and subsidiaries of multinational compa- 
nies have a positive influence on the level of disclosure compliance. 

20. Ahmed, Sadrudin A.; Zeghal, Daniel, Canada/United States/United Kingdom/Aus- 

tralia/New Zealand (University of Ottawa/ZUniversity of Ottawa). Industry 
Segment Identification and Social Responsibility Information Disclosure in 
Selected Canadian Companies [financial accounting and reporting]. The Inter- 
national Journal of Accounting. 1987 Mar; 22(2): 153-168. 
Methodology: empirical descriptive. 

Study of different industries in Canada, finds that industries typically disclose 
similar information. 

21. Aitken, Hugh T., none (Exports Credit Insurance Corporation). Accounting Related 

to Exports Credits Insurance and Finance [economics and development]. The 

International Journal of Accounting. 1969 Sep; 5(1): 71-78. 

Methodology: deductive descriptive. 

Review of the current condition of credit in the international market, the risks 

involved, and solutions to problems surrounding the topic. 

22. Aitken, Michael J., United Kingdom/United States (University of New South 

Wales, Australia). A General Theory of Financial Reporting: Is It Possible? 
[financial accounting and reporting]. The International Journal of Accounting. 
1990; 25(4): 221-233. 
Methodology: theoretical. 



Bibliography 51 

Analysis of accounting theory. Author contends that a general theory may be 
developed; however, it is not possible to develop a theory that takes into 
account all possible needs. 

23. Aitken, Michael J.; Islam, M. A., global (University of New South Wales, Austra- 

lia//University of New South Wales, Australia). Dispelling Arguments Against 

International Accounting Standards [financial accounting and reporting]. The 

International Journal of Accounting. 1984 Mar; 19(2): 35-46. 

Methodology: deductive descriptive. 

Presentation of arguments, pro and con, regarding international accounting 

standards. 

24. Aitken, Michael J.; Wise, Trevor D., global (University of New South Wales, Aus- 

tralia//La Trobe University, Australia). The Real Objective of the International 
Accounting Standards Committee [accounting theory]. The International Jour- 
nal of Accounting. 1984 Sep; 20(1): 171-177. 
Methodology: deductive descriptive. 

Discussion of the effectiveness of the lASC's standards. Contends that because 
of the accountant-dominated standard-setting process, the lASC has been inef- 
fective to date. 

25. Akathaporn, Parporn; Novin, Adel M.; Abdolmohammadi, Mohammad J., Thai- 

land (Western Washington University, Bellingham, Washington//Kent State 
University, Kent, Ohio//Bentley College, Waltham, Massachusetts ). Account- 
ing Education and Practice in Thailand: Perceived Problems and Effectiveness 
of Enhancement Strategies [accounting education]. The International Journal 
of Accounting. 1993; 28(3): 259-272. 
Methodology: deductive descriptive . 

Evaluation of problems in Thailand's accounting profession and accounting 
education program, based on a survey of 285 Thai accounting educators and 
professionals. The results of this study revealed numerous deficiencies. 

26. Al Hashim, Dhia D., none (Florida International University). Accounting Control 

Through Purposive Uniformity: An International Perspective [accounting the- 
ory]. The International Journal of Accounting. 1973 Mar; 8(2): 21-32. 
Methodology: theoretical. 

Study of purposive uniformity — a system of accounting control in which the 
inteipretation of economic events, the prescription of accounting methods, and 
development of reports are responsive to definite user needs. 

27. Al Hashim, Dhia D., European Economic Community/Arab Countries/United 

States/United Kingdom/Netherlands/Germany/Canada/Developed Countries 

(California State University at Northridge). Accounting Framework for the 

Gulf Cooperation Council [financial accounting and reporting]. The Recent 

Accounting and Economic Developments in the Middle East. Champaign, IL: 

Center for International Education and Research in Accounting; 1985 May: 

1-12. 

Methodology: theoretical. 

Presentation of an accounting framework for the Gulf Cooperation Council 

members. Framework addresses the goals of countries in the Middle East. 



52 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

28. AI Hashim. Dhia D., Brazil/France/Germany/Switzerland/United StatesAJnited 

Kingdom (California State University at Northridge). Regulation of Financial 
Accounting: An International Perspective [financial accounting and reporting]. 
The International Journal of Accounting. 1980 Sep; 16(1): 47-62. 
Methodology: deductive descriptive. 

Discussion of the relationship between the status of a country's accounting pro- 
fession and the regulating body. Concludes that generally, the lower the status 
of the profession, the more likely the governmental body will be governmental 
or legislative. 

29. Al Hashim, Dhia D., Egypt (California State University at Northridge). Social 

Accounting in Egypt [social effects of accounting]. The International Journal 

of Accounting. 1977 Mar; 12(2): 127-141. 

Methodology: deductive descriptive. 

Discussion of the controlled accounting system in Egypt. Concludes that the 

current system in Egypt does not properly evaluate management's use of 

resources. 

30. Alnajjar, Fouad K., Soviet Union/United KingdomAJnited States/France/Belgium/ 

Poland/Egypt/Iraq (Wayne State University). Standardization in Accounting 
Practices: A Comparative International Study [financial accounting and report- 
ing]. The International Journal of Accounting. 1986 Mar; 21(2): 161-176. 
Methodology: empirical statistical. 

Study of accounting standard development. Finds that accounting standards 
have generally been falling under legislative regulation through time. 

31. Alnajjar. Fouad K.; Buttross, Thomas E., Belguim/France/Germany/United King- 

dom/Russia/Poland/Egypt (Wayne State University, Detroit, Michigan/ZDetroit 
Mercy University, Michigan). The Development and Acceptance of Interna- 
tional Accounting Standards: The Evolution of lASC after Two Decades 
[miscellaneous]. The New Europe: Recent Political and Economic Implications 
for Accountants and Accounting. Champaign, IL: Center for International Edu- 
cation and Research in Accounting; 1994: 21 1-232. 
Methodology: deductive descriptive. 

Examination of factors which lead to different national accounting systems and 
introduction of a model for implementing harmonized international accounting 
standards. 

32. Alnajjar, Fouad K.; Volz, William H., Germany (Wayne State University, Detroit, 

Michigan/ AVayne State University, Detroit, Michigan). The Status of Account- 
ing and its Environment in West Germany: An Overview [financial accounting 
& reporting]. The International Journal of Accounting. 1991; 26(2): 104-1 17. 
Methodology: deductive descriptive. 

Discusses environmental impact, particularly tax and corporation laws, on West 
German accounting with its distinct feature of uniformity and compliance to 
regulations. 

33. Alnajjar, Fouad K.; Prodhan, Bimal K., United Kingdom/United States/Europe 

(Wayne State University/ZUniversity of Strathclyde, Scotland). Accounting 



Bibliography 53 

Research 1976 to 1985: A Transatlantic Perspective [professional develop- 
ment]. The International Journal of Accounting. 1987 Sep: 23(1): 167-188. 
MethodologN : empirical statistical. 

Study of \arious accounting journals regarding research methodology. Finds 
growth de\eloping toward empirical and institutional influences. 

34. Al-Saffar. Hadi R.. Middle East/de\ eloping countries (Organization of Petroleum 

Exporting Countries,). The Role of Accounting Information in National Devel- 
opment Planning in the Middle East [economics and development]. The Recent 
Accounting and Economic Developments in the Middle East. Champaign. IL: 
Center for International Education and Research in Accounting: 1985 May: 
25-32. 

Methodology: deductive descripti\e. 

Presentation and discussion of national-investment-price planning and control 
in the Middle East. 

35. Amber. Matwalli B.. Eg\pt (Cairo University. Egypt). Impact of Public Ownership 

on the U.A.R. Accounting Profession [public accounting]. The International 

Journal of Accounting. 1969 Mar: 4(2): 49-61. 

Methodology: deductive descripti\e. 

Discussion of the changes in the economic system of Eg>pt that have resulted in 

basic changes in the accounting profession, particularly after July 1961. 

36. Ameiss. Albert P.. United States/United Kingdom (University of Missouri at St. 

Louis). Can British E.xperience in Profit Forecasting Assist U.S. Firms Inter- 
ested in Establishing Such Financial Disclosure? [public accounting]. The 
International Journal of Accounting. 1977 Sep: 13(1): 77-91. 
Methodolog} : deductive descripti\e. 

Comparison of the requirements of the Security and Exchange Commission and 
the U.K. for financial forecasting. Holds that if such disclosures could be prop- 
erly implemented the a\erage in\estor w ould benefit. 

37. Ameiss. Albert P.. Sweden/United States (University of Missouri at St. Louis). 

Could Swedish Auditing Procedures Result in Greater Corporate Control for 

U.S. Stockholders'? [auditing]. The International Journal of Accounting. 1970 

Mar: 5(2): 103-116. 

Methodology: empirical descriptixe. 

Proposal of solutions to U.S. reporting problems through application of S\\ ed- 

ish auditing procedures. 

38. Ameiss. Albert P.. de\eloping countries/Sweden (University of Missouri at St. 

Louis). Developing Nations and Tax-Ordained .Accounting Principles — The 
Swedish Model [taxation]. The Intenuitional Journal of Accounting. 1971 Mar; 
6(2): 89-102. 
Methodolog\ : theoretical. 

Study of how accounting can become an integral part of the central planning 
process in newly emerging nations, as it has been in Sweden. Also explores 
how such planning can defeat the purposes of sound principles of accounting, 
even though national objectives may be accomplished. 



54 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

39. Ameiss, Albert P., United States (University of Missouri at St. Louis). International 

Accounting at the Senior Student Level [accounting education]. The Interna- 
tional Journal of Accounting. 1974 Sep; 10(1): 107-121. 
Methodology: deductive descriptive. 

Account of experiences at the University of Missouri at St. Louis in introducing 
and reviewing an undergraduate-level course in international accounting . 
Includes a course syllabus and shows U.S. pronouncements relating to the 
weekly subject matter. 

40. Ameiss, Albert P., United States (University of Missouri at St. Louis). Two 

Decades of Change in Foreign Subsidiary Accounting and United States Con- 
solidation Practices [financial accounting and reporting]. The International 
Journal of Accounting. 1972 Mar; 7(2): 1-22. 
Methodology: empirical descriptive. 

Review of 20 years of change, using the results of surveys about the consolida- 
tion of foreign subsidiary accounting operations from 1950 to 1970. 

41. Amemic. Joel H.; Aranya, Nissim; Kanungo. Rabindra, Canada (University of Tor- 

onto//Tel Aviv University/ZMcGill University, Canada). Professional and Work 
Values of Accountants: A Cross-Cultural Study [professional development]. 
The International Journal of Accounting. 1983 Mar; 18(2): 177-192. 
Methodology: empirical statistical. 

Survey of Canadian accountants with French and Anglo backgrounds regarding 
their work ethics and acceptance of professional standards. 

42. Amemic, Joel H.; Aranya, Nissim, Canada/United States (University of Toronto// 

Tel Aviv University). Public Accountants' Independence: Some Evidence in a 
Canadian Context [public accounting]. The International Journal of Account- 
ing. 1981 Mar; 16(2): 11-33. 
Methodology: empirical descriptive. 

Sur\'ey of Canadian chartered accountants regarding independence. Concludes 
that practitioner's independence depends on level in the organization and size 
of the organization — the higher the level in the organization and the larger the 
size, the more independent he or she will be. 

43. Amemic, Joel H.; Galvin, B. J. B.. United States/Canada/United Kingdom (Univer- 

sity of Toronto//University of Toronto). Implementing the New Foreign 
Currency Rules in Canada and the United States: A Challenge to Professional 
Judgment [financial accounting and reporting]. The International Journal of 
Accounting. 1984 Mar; 19(2): 165-180. 
Methodology: empirical statisdcal. 

Analysis of the translation methods used. Results indicate disagreement 
between auditors and management regarding which translation methodology is 
appropriate. 

44. Andrew. Brian; Austin, Lloyd; Chew, Andrew. Singapore/United States (The Uni- 

versity of Western Sydney, AustraliaZ/Auckland University, New Zealand//The 
University of Technology, Australia). A Study of the Relationship Between 
Three Business Flows: Some Evidence From Singapore [financial accoundng 



Bibliography 55 

and reporting]. The International Journal of Accounting. 1988 Mar; 23(2): 
57-70. 

Methodology: empirical statistical. 

Study of companies in Singapore regarding their working capital from opera- 
tions, and cash flows from operations. Examines the usefulness of this 
information and the links this information may have to solvency. 

45. Andrews, Wesley T.; Smith, Charles H., United States (Arizona State University// 

University of Illinois at Urbana-Champaign). A Role for Financial Accounting 
in National Economic Planning in the United States [economics and develop- 
ment]. 7/?e /nfcrnar/ona/Joi/rna/ <7/Accc»to?rmg. 1976 Sep; 12(1): 133-145. 
Methodology: theoretical. 

A study of the basic objectives of a bill introduced in the U.S. Senate by sena- 
tors Hubert Humphrey and Jacob Javits outlining the potential role of financial 
accounting such as in a planning system. 

46. Anyane-Ntow, Kwabena, Japan/United States/Canada/West Germany/Australia/ 

United Kingdom (North Carolina Central University). Just-In-Time Manufac- 
turing Systems and Inventory Reported in Financial Statements: A 
Cross-National Comparison of Manufacturing Firms [managerial accounting]. 
The International Journal of Accounting. 1991; 26(4): 277-285. 
Methodology: empirical descriptive. 

Comparison of inventory levels and profitability between Japanese firms and 
those in other industrial countries, indicating long period of implementation of 
JIT systems and lower profitability accompanied. Suggests that all costs be con- 
sidered in adoption of JIT. 

47. Arbel, Avner; Jaggi, Bikki L., United States (State University of New York at 

Binghamton/ZState University of New York at Binghamton). Impact of 
Replacement Cost Disclosures on Investors' Decisions in the United States 
[financial accounting and reporting]. The International Journal of Accounting. 
1978 Sep; 14(1): 71-82. 
Methodology: empirical statistical. 

Study using statistical testing to determine investor reaction to the disclosure of 
replacement costs. Suggests that first disclosures do not affect investors, per- 
haps due to lack of investor understanding. 

48. Arnold, Jerry; Holder, William W.; Mann, M. Herschel, United States/Europe 

(University of Southern CalifomiaZ/University of Southern Califomia//Texas 
Tech University). International Reporting Aspects of Segment Disclosure 
[financial accounting and reporting]. The International Journal of Accounting. 
1980 Sep; 16(1): 125-135. 
Methodology: empirical descriptive. 

Study of the 10-U reports of 200 companies. Finds that many companies lacked 
disclosure of their foreign activities and concludes that there is a need for disag- 
gregated disclosure, which FASB 14 may not be able to achieve. 

49. Arnold, John; Moizer, Peter; Noreen, Eric, United States/United Kingdom (Univer- 

sity of Manchester, England//University of Manchester, EnglandZ/University of 
Washington). Investment Appraisal Methods of Financial Analysts: A Compar- 



56 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

ative Study of U.S. and U.K. Practices [economics and development]. The 

IntemationalJoumal of Accounting. 1984 Mar; 19(2): 1-18. 

Methodology: empirical descriptive. 

Survey of financial analysis methodology in the U.S. and U.K. Finds numerous 

differences between the two countries. 

50. Baccouche, Mustapha, developing countries (University of Illinois at 

Urbana-Champaign). The Need for International Accountancy [financial 
accounting and reporting]. The International Journal of Accounting. 1969 Sep; 
5(1): 97-99. 

Methodology: deductive descriptive. 

Study of the accounting needs of developing countries. Finds that the fulfill- 
ment of these needs must come from the government of each country. 

51. Bai, Zhao Lu, China (People's University of China). Accounting in the People's 

Republic of China — Contemporary Situations and Issues [accounting theory]. 

Recent Accounting and Economic Developments in the Far East. Champaign, 

IL: Center for International Education and Research in Accounting; 1988 May: 

27-50. 

Methodology: deductive descriptive. 

Brief history of the accounting profession in China and a description of current 

bookkeeping, managerial accounting, and auditing theories. 

52. Bailes, Jack C; Assada, Takayuki, JapanAJnited States (Oregon State University// 

Tsukuba University, Tokyo, Japan). Empirical Differences Between Japanese 
and American Budget and Performance Evaluation Systems [managerial 
accounting]. The International Journal of Accounting. 1991; 26(2): 131-142. 
Methodology: empirical descriptive. 

Survey of 256 Japanese and 80 American manufacturing companies budget and 
performance evaluations. Finds more participation by division managers, 
higher ranking of ROI and more emphasis on short-term performance evalua- 
tions in U.S. companies than in Japanese companies. 

53. Bailes, Jack C; McNally, Graeme M., New Zealand (Oregon State University// 

University of Canterbury, New Zealand). Cost and Management Accounting 

Practices in New Zealand [managerial accounting]. The International Journal 

of Accounting. 1984 Mar; 19(2): 59-71. 

Methodology: empirical descriptive. 

Survey of 62% of New Zealand firms regarding their managerial accounting 

practices. Indicates that their practices are similar to those followed by firms in 

the U.S. 

54. Bailey, Derek T., Soviet Union (University of Birmingham, England). Accounting 

in Russia: The European Connection [accounting history]. The International 

Journal of Accounting. 1982 Sep; 18(1): 1-36. 

Methodology: historical. 

Historical discussion of accounting in Russia. 

55. Bait-El-Mal, Mohamed M.; Smith, Charles H.; Taylor, Martin E., Libya (Univer- 

sity of LibyaZ/Arizona State University//University of Maryland). The 



Bibliography 57 

Development of Accounting in Libya [financial accounting and reporting]. The 
International Journal of Accounting. 1973 Mar; 8(2): 83-101. 
Methodology: deductive descriptive. 
Description of the development of accounting in the Libyan Arab Republic. 

56. Bakal, Robin J.; Lemon, W. Morley, Australia/CanadaAJnited Kingdom/United 

States (University of Illinois at Urbana-Champaign/ZMcMaster University, 
Canada). Current Value Accounting: One Standard or Many? [financial 
accounting and reporting]. The Impact of Inflation on Accounting: A Global 
View. Champaign, IL: Center for International Education and Research in 
Accounting; 1979 May: 241-259. 
Methodology: deductive descriptive. 

Discussion of the International Auditing Standards Commitee approach to 
inflation accounting. Concludes that, in the short run, standards for inflation 
accounting are not feasible. 

57. Baker, C. Richard, United States (Columbia University). The Structural Response 

of the Large CPA Firm to Its Environment [public accounting]. The Interna- 
tional Journal of Accounting. 1977 Mar; 12(2): 69-80. 
Methodology: deductive descriptive. 

Discussion of the methodology used by large CPA firms for coping with chang- 
ing legislation, technology, and client demands. 

58. Baker, H. Kent; Chenhall, Robert H.; Haslem, John A.; Juchau, Roger H., United 

States/Australia (The American University/ZMacquarie University, Australia// 

University of Maryland//Nepean College of Advanced Education, Australia). 

Disclosure of Material Information: A Cross-National Comparison [financial 

accounting and reporting]. The International Journal of Accounting. 1977 Sep; 

13(1): 1-18. 

Methodology: empirical descriptive. 

Survey comparing U.S. and Australian investor needs. Concludes that the level 

of disclosure is inadequate for these needs. 

59. Baladouni, Vahe, none (University of New Orleans). The Study of Accounting His- 

tory [accounting history]. The International Journal of Accounting. 1977 Mar; 

12(2): 53-67. 

Methodology: theoretical. 

Presentation of cultural, social, and technological frameworks necessary for the 

study of accounting history. 

60. Balke, Thomas E.; Sorenson, James E., none (University of Nebraska//University 

of Denver). Reliability and Validity of Accounting Data [accounting theory]. 
The International Journal of Accounting. 1975 Mar; 10(2): 37-46. 
Methodology: theoretical. 

Study that applies a conceptualization of validity and reliability from the behav- 
ioral sciences to accounting. 

61 . Bardsley, R. Geoffrey, none (Xerox Corporation). Managing International Financial 

Transactions [managerial accounting]. The International Journal of Accounting. 
1972 Sep; 8(1): 67-76. 



58 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Methodology: theoretical. 

Study of policies for the financial functions which might be used in a multinational 

corporation. Develops methods and procedures for the implementation of these 

policies. 

62. Barlev, Benzion, Israel (University of Rochester/Jerusalem School of Business 

Administration, Hebrew University). The Independent Auditor's Report: Study 

of a Change [auditing]. The International Journal of Accounting. 1976 Mar; 

11(2): 73-90. 

Methodology: empirical descriptive. 

Study of Israel's decision to substitute the American version of the audit report 

for the British tradition and issues that were considered in making this change. 

Uses findings obtained from an empirical investigation which centered on a 

group of accountants who were active in the professional committees of the 

ICPAI and who participated in the 1970 resolution. 

63. Barlev, Benzion. Israel/United States/United Kingdom (Jerusalem School of Busi- 

ness Administration, Hebrew University). The Initial Selection of Independent 
Public Accountants: An Empirical Investigation [public accounting]. The Inter- 
national Journal of Accounting. 1977 Mar; 12(2): 37-51. 
Methodology: empirical statistical. 

Study of the selection process methodology to choose an independent public 
accountant. Addresses such factors as firm size, type of service, personality 
traits, and personal ties are addressed in the study. 

64. Barlev, Benzion; Friedman, Abraham, United States (The Hebrew University, 

Jerusalem//The Hebrew University, Jerusalem). Experience Requirements and 
the Education of Certified Public Accountants [accounting education]. The 
International Journal of Accounting. 1982 Mar; 17(2): 75-88. 
Methodology: theoretical. 

Discussion of the theoretical and educational aspects of the experience require- 
ments to become a CPA. 

65. Bamiv, Ran; Elitzur, Ramy, Israel/United States (Ben Gurion University of the 

Negev, Israel/ZUniversity of Toronto). Attitudes of CPAs in Israel Towards 
GAAP for Closely Held Corporations and Small Business [public accounting]. 
The International Journal of Accounting. 1989; 24(4): 343-364. 
Methodology: empirical descriptive. 

Survey of the attitudes toward GAAP held by 200 CPAs in Israel. Finds that 
Israeli CPAs generally disagree with GAAP. 

66. Barr, Andrew, United States (University of Illinois at Urbana-Champaign). 

Accounting Yesterday, Today, and Tomorrow [accounting history]. The Inter- 
national Journal of Accounting. 1972 Sep; 8(1): 1-15. 
Methodology: historical. 

Study of events of the last fifty years as a basis for predicting future develop- 
ments in accounting. 

67. Barr. Andrew. United States (Securities and Exchange Commission). The Influence 

of Government Agencies on Accounting Principles with Particular Reference to 



Bibliography 59 

the Securities and Exchange Commission [governmental]. The International 

Journal of Accounting. 1965 Sep; 1(1): 15-33. 

Methodology: deductive descriptive. 

Study of positive and negative views of government influence on establishing 

uniformity in accounting practices. 

68. Barrett, M. Edgar, United States/United Kingdom/Japan/Sweden/Netherlands/Ger- 

many/France (Southern Methodist University). The Extent of Disclosure in 
Annual Reports of Large Companies in Seven Countries [financial accounting 
and reporting]. The International Journal of Accounting. 1977 Mar; 12(2): 
1-25. 

Methodology: empirical descriptive. 

Study of the extent of financial disclosure in the annual reports of major, pub- 
licly-held foreign corporations with that found in major, publicly-held U.S. 
firms. Presents a detailed analysis of the extent of annual report disclosure of 
both domestic and foreign firms as compared to segment reporting and capital 
expenditure, current and planned. 

69. Bavishi, Vinod B., Global (Center for International Financial Analysis and 

Research). International Accounting Differences and the Globalization of Capi- 
tal Markets: Issues and Answers [financial accounting & reporting]. Changing 
International Financial Markets and Their Impact on Accounting: Center for 
International Education and Research in Accounting. Champaign, IL: Center 
for International Education and Research in Accounting, Department of 
Accountancy; 1992: 1-16. 
Methodology: capital markets. 

Study examining major accounting distinctions between various industrialized 
nations and comparing these distinctions to GAAP principles, as well as provid- 
ing suggestions toward harmonizing such differences. 

70. Bavishi, Vinod B., United Arab Emirates/Egypt/Cyprus/Zambia/Israel/United 

States/European Economic Community/Africa/Middle East/South Africa/Zim- 
babwe/Nigeria/Kenya/Saudi Arabia (University of Connecticut). Who Audits 
the World? International Accounting Firms' Operations in Developing Coun- 
tries: The Case of Africa/Middle East [auditing]. The Recent Accounting and 
Economic Developments in the Middle East. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 183-195. 
Methodology: empirical descriptive. 

Study of international auditing firms regarding their structure, and market. Lists 
findings by firms. 

71. Bavishi, Vinod B.; Wyman, Harold E., United States (University of Connecticut// 

University of Connecticut). Foreign Operations Disclosures by U. S.-Based 
Multinational Corporations: Are They Adequate? [financial accounting and 
reporting]. The International Journal of Accounting. 1980 Sep; 16(1): 153-168. 
Methodology: empirical descriptive. 

Study of the inadequacies of current disclosure. Suggests that improvements be 
made, by grouping the countries according to level of development and political 
risk. Suggests a 5 percent cutoff instead of 10 percent. 



60 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

72. Baydoun, Nabil, France, European Economic Community (City Polytechnic of 

Hong Kong and University of Otago, New Zealand). The French Approach to 

Financial Accounting and Reporting [financial accounting and reporting]. The 

International Journal of Accounting. 1995; 30(3): 222-244. 

Methodology: empirical descriptive. 

Examination of the cultural and environmental effects influencing France's 

financial accounting and reporting process. 

73. Beaver, William H., none (Stanford University). Accounting for Inflation in an 

Efficient Market [financial accounting and reporting]. The Impact of Inflation 
on Accounting: A Global View. Champaign, IL: Center for International Edu- 
cation and Research in Accounting; 1979 May: 21-42. 
Methodology: theoretical. 
Comparison of different methods of accounting for price-level changes. 

74. Beazley, Jr Garnett F., none (University of South Carolina). An International Impli- 

cation for Accounting [financial accounting and reporting]. The International 

Journal of Accounting. 1968 Mar; 3(2): 1-10. 

Methodology: theoretical. 

Discussion of the need for research efforts to focus primarily upon the 

cross-cultural aspects of the work of accountants in different environments. 

75. Bedford, Norton M., none (University of Illinois at Urbana-Champaign). The Inter- 

national How of Accounting Thought [accounting theory]. The International 

Journal of Accounting. 1966 Mar; 1(2): 1-7. 

Methodology: theoretical. 

Study of the processes used in the transmission of basic accounting knowledge 

and new accounting developments in one part of the world to other parts. 

76. Bedford, Norton M.; Gautier, Jacques P., Europe/Switzerland/United States (Uni- 

versity of Illinois at Urbana-Champaign/ZUniversity of Geneva). An 

International Analytical Comparison of the Structure and Content of Annual 

Reports in the European Economic Community, Switzerland, and the United 

States [public accounting]. The International Journal of Accounting. 1974 Mar; 

9(2): 1-44. 

Methodology: deductive descriptive. 

Discussion of the differing information provided by contemporary annual 

reports in the U.S., the European Economic Community, and Switzerland. 

Describes the differences in the accounting thought, principles, and procedures 

underlying rational report preparation as they existed in 1973. 

77. Beekhuizen, Theo; Frishkoff. Paul. Netherlands/United States (European Institute 

of Business Administration (INSEAD). France/ZUniversity of Oregon). A Com- 
parison of the New Dutch Accounting Act with Generally Accepted American 
Accounting Principles [public accounting]. The International Journal of 
Accounting. 1975 Mar; 10(2): 13-22. 
Methodology: deductive descriptive. 

Comparison of the accounting principles in the Netherlands with those of the 
U.S. Concludes that the Netherlands is a commercial center with sophisticated 
financial practices and the home of several world giant corporations and Dutch 
accounting principles have been codified. 



Bibliography 61 

78. Beghin, Paul; Lefebvre, Chris J. L., Belgium (Administrative en Economische 

Hogeschool, Belgium/ZKatholieke Universitiet Leuven, Belgium). The Impact 
of Fiscal Law on Prescribed Accounting Standards in Belgium [accounting his- 
tory]. The Recent Accounting and Economic Developments in Western Europe. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1985 May: 143-159. 
Methodology: historical. 
Historical recount of influences on the Belgian accounting practice. 

79. Belkaoui, Ahmed; Kahl, Alfred; Peyrard, Josette, United States/Europe (University 

of Ottawa/ZUniversity of Ottawa/ZUniversity of Paris). Information Needs of 
Financial Analysts: An International Comparison [financial accounting and 
reporting]. The International Journal of Accounting. 1977 Sep; 13(1): 19-27. 
Methodology: empirical descriptive. 

Survey of the needs of European and North American investors. Finds that 
North Americans agree on what information is valuable, but that American and 
European investors differ greatly. 

80. Belkaoui, Ahmed; Maksy, Mostafa. global (University of Illinois at Chicago//Uni- 

versity of Illinois at Chicago). Welfare of the Common Man and Accounting 
Disclosure Adequacy: An Empirical Investigation [financial accounting and 
reporting]. The International Journal of Accounting. 1985 Mar; 20(2): 81-94. 
Methodology: empirical statistical. 

Study of 124 countries to determine whether economic factors and social fac- 
tors have an effect on welfare and accounting principles. Finds that economic 
factors have an effect on the welfare of the common man, but that no link exists 
between welfare and accounting principles. 

81. Benau, Maria Antonia Garcia; Humphrey, Christopher; Moizer, Peter; Turley, Stu- 

art, Spain/United Kingdom (Universidad de Valencia, Spain/ZUniversity of 
Leeds, United Kingdom/ZUniversity of Leeds, United Kingdom/ZUniversity of 
Manchester, United Kingdom). Auditing Expectations and Performance in 
Spain and Britain: A Comparative Analysis [auditing]. The International Jour- 
nal of Accounting. 1993; 28(4): 281-307. 
Methodology: empirical descriptive. 

Comparison and differentiation of the audit expectations and perceptions in 
Spain and Britain. This article calls for more indepth analysis on the basis of 
audit expectations, as well as more emphasis on fulfilling audit expectations. 

82. Berry, Maureen H., Socialist CountriesZSoviet UnionZEast GermanyZPoland (Uni- 

versity of Illinois at Urbana-Champaign). The Accounting Function in Socialist 

Economies [financial accounting and reporting]. The International Journal of 

Accounting. 1982 Sep; 18(1): 185-198. 

Methodology: deductive descriptive. 

Discussion of the function, status, and economics of accounting in the Socialist 

countries. 

83. Beny, Maureen H., ChinaAJnited States (University of Illinois at Urbana-Cham- 

paign). The Cultural Development of Accounting in the People's Republic of 
China [accounting history]. Recent Accounting and Economic Developments in 



62 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 . 1 998 

the Far East. Champaign. IL: Center for International Education and Research 

in Accounting; 1988 May: 1-25. 

Methodology: historical. 

Study of the relationship between the changes in Chinese society and changes 

in Chinese accounting. Considers the effect of social, political, and economic 

pressures on the current accounting function. 

84. Berry. Maureen H.: Jaruga. Alicja A.. Poland (University of Illinois at 

Urbana-Champaign/ZUniversity of Lodz. Poland). Industrial Accounting in 

Poland's Reorganized Economy [managerial accounting]. The International 

Journal of Accounting. 1985 Mar: 20(2): 45-63. 

Methodology: deductive descriptive. 

Description of the 1980 reorganization of the accounting function in Poland. 

85. Blake. John: Salas. Oriol Amat: Clarke. Julia. Spain (University of Central Lan- 

cashire. UK//Universitat Pompeu Fabra. Balmes. Barcelona, Spain/ZUniversity 
of Central Lanashire). Management's Response to Finance Lease Capitalization 
in Spain [financial accounting and reporting]. The International Journal of 
Accounting. 1995: 30(4): 331-342. 
Methodology: empirical descriptive. 

Analysis of survey results involving a questionnaire survey of Spanish manag- 
ers regarding accounting for leases by lessees. 

86. Blattner, Ken, Japan (St. Cloud State University). Cultural Intluences on the Japa- 

nese Accounting System [social effects]. Changing International Financial 
Markets and Their Impact on Accounting. Champaign, IL: Center for Interna- 
tional Education and Research in Accounting, Department of Accountancy; 
1992: 139-146. 

Methodology: deductive descriptive. 
Study of internal cultural influences upon Japan's accounting system. 

87. Bloom. Robert. United States/Canada (Concordia University. Canada). American 

and Canadian Accounting Standard Setting: A Comparative Analysis [financial 

accounting and reporting]. TJie International Journal of Accounting. 1984 Mar; 

19(2): 47-57. 

Methodology: deductive descriptive. 

Comparison of the standard-setting bodies in Canada and the U.S. Concludes 

that its national culture requires Canada to implement its own standards apart 

from the FASB. 

88. Bloom. Robert: Debessay. Araya. United States/Australia/Canada/United Kingdom 

(John Carroll University/ZUniversity of Delaware). An Appraisal of the Con- 
ceptual Issues on Backlog Depreciation and a Comparative Analysis of 
International Accounting Practices [accounting theor}]. The International Jour- 
nal of Accounting. 1985 Sep: 21(1): 107-121. 
Methodology: deductive descripti\e. 

Comparison of the accounting practice for backlog depreciation. Contends that 
the determination of the availability of funds for replacement purposes should 
be a financing problem. 

89. Bloom, Robert; Debessay, Araya, United States/United Kingdom/Canada/Australia 

(John Carroll University/ZUniversity of Delaware). A Comparative Analysis of 



Bibliography 63 

Recent Pronouncements on Accounting for Changing Prices [accounting the- 
ory]. The International Journal of Accounting. 1985 Mar; 20(2): 1 19-138. 
Methodology: deductive descriptive. 

Discussion and analysis of the accounting methods used to account for 
price-level changes in the U.S., the United Kingdom, Canada, and Australia. 

90. Bloom, Robert; Debessay, Araya, United States/United Kingdom/Canada/New 

Zealand/Australia (John Carroll University/ZUniversity of Delaware). The Con- 
troversial Development of the Deprival Issue Value Concept [accounting 
theory]. The International Journal of Accounting. 1986 Sep; 22(1): 159-174. 
Methodology: theoretical. 
Presentation of the deprival valuation method for current cost accounting. 

91. Bloom, Robert; Naciri, M. A., United States/Canada/United Kingdom/Germany/ 

Australia/New Zealand/Sweden/Japan/Switzerland (John Carroll University// 
University of Quebec of Montreal, Canada). Accounting Standard Setting and 
Culture: A Comparative Analysis of the United States, Canada, England, West 
Germany, Australia, New Zealand, Sweden, Japan, and Switzerland [financial 
accounting and reporting]. The International Journal of Accounting. 1989; 
24(1): 70-97. 
Methodology: theoretical. 

Comparison of the accounting standard setting functions of the U.S.. Canada, 
the United Kingdom, Germany, Australia, New Zealand, Sweden, Japan, and 
Switzerland. 

92. Boatler, Robert W., Latin America (Texas Christian University. Forth Worth, 

Texas). When Inflation is Not High Enough: Disappearance of Real Assets 

Under FAS 52 [financial accounting & reporting]. The International Journal of 

Accounting. 1992; 27(3): 262-266. 

Methodology: deductive descriptive. 

Discussion of distortive accounting reporting of foreign assets belonging to 

American companies when such reporting is done in accordance with FAS 52. 

93. Bomeli, Edwin C, none (Bowling Green State University). Curricular Recognition 

of International Accounting — An Appraisal [accounting education]. The Inter- 
national Journal of Accounting. 1969 Sep; 5(1): 85-96. 
Methodology: theoretical. 

Exploration of the growing recognition of international accounting problems in 
accounting courses. Also considers less obvious manifestations of curricula rec- 
ognition of international accounting. 

94. Bond, Richard R., Africa (Illinois State University). Emerging Nations and Emerg- 

ing Institutions [economics and development]. The International Journal of 

Accounting. 1970 Sep; 6(1): 83-90. 

Methodology: deductive descriptive. 

Examination of the struggling nations of Africa. Proposes solutions to problems 

in the educational institutions of these countries. 

95. Borkowski, Susan C, United States (Lasalle University, Philadelphia, Pennsylva- 

nia). International Versus Domestic Managerial Performance Evakiation: Some 



64 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Evidence [managerial accounting]. The International Journal of Accounting. 

1993; 28(2): 129-139. 

Methodology: empirical statistical. 

Study of managerial performance evaluation of domestic and international 

managers. 

96. Borkowski, Susan C, Global (Lasalle University, Philadelphia, Pennsylvania). An 

Analysis (Meta- and Otherwise) of Multinational Transfer Pricing Research 

[miscellaneous]. The International Journal of Accounting, 1996; 31(1): 39-53. 

Methodology: Deductive descriptive. 

A description of current transfer pricing practice, methodology used to identify 

and analyze the transfer pricing studies, and review and meta-analyses of those 

studies. 

97. Bose, A., India (lEL Limited/Institute of Cost and Works Accountants, India). The 

Indian Accountancy Profession: Its Origins and Current Status [professional 
development]. Recent Accounting and Economic Developments in the Far East. 
Champaign. IL: Center for International Education and Research in Account- 
ing; 1988 May: 149-162. 
Methodology: deductive descriptive. 

Discussion of historical and current implications on the accounting profession 
in India. Maintains that the profession is moving forward, but needs coopera- 
tion from the country's unions. 

98. Boussard, Daniel, none (University of Paris). Accounting as an Artifact: A Method- 

ological Design on Dimensions of Accounting [accounting history]. The 
International Journal of Accounting. 1981 Mar; 16(2): 125-147. 
Methodology: modeling. 

Study of a model of accounting development using social political and opera- 
tional aspects. Concludes that accounting is a "social code" and application of 
true/false descriptions will adversely affect the development of accounting. 

99. Boussard, Daniel, none (University of Paris). Application of GST to the Financial 

Accounting Model [accounting theory]. The International Journal of Account- 
ing. 1978 Sep; 14(1): 17-37. 
Methodology: modeling. 

Study using the systems approach to develop a model of the accounting system. 
Also discusses the implications of such a model to accounting education. 

100. Boussard, Daniel; Burlaud, Alain; Malo, Jean-Louis, France (University of Paris/ 

Ecole Superieure de Commerce de Paris/ZUniversity of Paris/Ecole Superieure 
de Commerce de Paris/ZUniversity of Poitiers). The Education of Professional 
Accountants in France [accounting education]. Comparative International 
Accounting Educational Standards. Champaign, IL: Center for International 
Education and Research in Accounting; 1990 Apr: 193-211. 
Methodology: deductive descriptive. 

Discussion of the environmental, historical, and institutional effects on the 
French system. 

101. Bowles, C. C, none (Dow Chemical Company). International Accounting — A 

Challenge for Ingenuity [financial accounting and reporting]. The International 
Journal of Accounting. 1968 Sep; 4(1): 83-98. 



Bibliography 65 

Methodology: deductive descriptive. 

Discussion by the comptroller of the Dow Chemical Company European Divi- 
sion regarding the company's operations in Europe, providing examples and 
their resolutions. 

102. Brankovic, Marlene; Madura, Jeff, United States (MIG Companies/ZFlorida Atlan- 

tic University). Effect of FASB Statement No. 52 on Profitability Ratios 
[financial accounting and reporting]. The International Journal of Accounting. 
1990; 25(1): 19-28. 
Methodology: empirical statistical. 

Study of 30 multinational firms regarding the effects of FASB Statement No. 
52. Finds that FASB No. 52 has increased the volatility of net income and low- 
ered the volatility with regards to equity. 

103. Brennan, W. John, United Kingdom/Australia/Canada/Netherlands (University of 

Saskatchewan, Canada). The Impact of the Inflation Accounting Debate on 
Accounting Standard-Setting Bodies [financial accounting and reporting]. The 
Impact of Inflation on Accounting: A Global View. Champaign. IL: Center for 
International Education and Research in Accounting; 1979 May: 205-223. 
Methodology: theoretical. 

Discussion of the standard-setting bodies of various countries. Calls for the 
independence of international standard-setting bodies. 

104. Brewer, Carl, United States (Sam Houston State University). Accounting and His- 

tory [accounting history]. The International Journal of Accounting. 1988 Mar; 

23(2): 47-59. 

Methodology: theoretical. 

Presentation of support for the use of accounting as a historical function. 

105. Bricker, Robert; Grant, Julia; Woodlock, Peter, none (Case Western Reserve Uni- 

versity, Cleveland, Ohio//Case Western Reserve University, Cleveland, Ohio// 
Case Western Reserve University, Cleveland. Ohio). Harmonization and Inter- 
national Transfers of Accounting Related Information: A Laboratory Market 
Investigation [financial accounting & reporting]. The International Journal of 
Accounting. 1992; 27(4): 365-376. 
Methodology: empirical statistical. 

Study which presents a model to explore ways to harmonize the financial 
reporting on the transfer of international, intra-market. intra-industry 
information. 

106. Briston, Richard J., United States/United Kingdom (University of Strathclyde, 

Scodand). The Evolution of Accounting in Developing Countries [economics 

and development]. The International Journal of Accounting. 1978 Sep; 14(1): 

105-120. 

Methodology: deductive descriptive. 

Discussion of the development of national accounting systems. Concludes that 

the accounting system should be developed for a nation's needs, but that most 

of the development in this area has been towards international practice. 

107. Briston, Richard J.; El-Ashker, Ahmed A., Egypt/United States (University of Hull/ 

/Paisley College of Technology). The Egyptian Accounting System: A Case 



66 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 1, 1998 

Study in Western Influence [financial accounting and reporting]. The Intenia- 

tionalJoumal of Accounting. 1984 Mar; 19(2): 129-155. 

Methodology: deductive descriptive. 

Discussion of the factors affecting the development of the accounting system in 

Egypt. 

108. Briston, Richard J.: Liang, Foo See: Yunus. Hadori. Indonesia (University of Hull// 

Nanyang Techological Institute. Singapore/ZGadjah Mada University, Indone- 
sia). Accounting Education and Work Force Requirements in Indonesia 
[accounting education]. Comparative International Accounting Educational 
Standards. Champaign, IL: Center for International Education and Research in 
Accounting: 1990 Apr: 147-173. 
Methodology: deductive descriptive. 

Discussion of the Indonesian system and the effects of duelism with the Dutch 
system. Concludes that the formation of the coordinating committee may pro- 
vide for the needs of the Indonesian system. 

109. Bromwich, Michael; Wang, Guoqi, China (London School of Economics & Politi- 

cal Science. United Kingdom//The People's University of China. PRC). 
Management Accounting in China: A Current Evaluation [managerial account- 
ing]. The International Journal of Accounting. 1991 ; 26( 1 ): 5 1-66. 
Methodology: deductive descriptive. 

Discusses introduction of western managerial accounting in China and the 
development of Chinese version of managerial accounting. 

110. Brooks. LeRoy; Buckmaster. Dale. United States/New Zealand/United Kingdom 

(University of South Carolina//University of Delaware). On Monetary' Working 
Capital Maintenance: Theory and Implementation [managerial accounting]. 
The International Journal of Accounting. 1987 Mar; 22(2): 103-1 14. 
Methodology: theoretical. 

Presentation of a methodology for capital maintenance. Provides a model for 
the effects of price change on monetary working capital. 

111. Brown. Betty. United States (University of Louisville). The Relationship between 

Firm Attributes and Early Adoption of the Foreign Currency Translation Stan- 
dard. SFAS No. 52: An Empirical Investigation [financial accounting and 
reporting]. The International Journal of Accounting. 1985 Sep; 21(1): 1-19. 
Methodology: empirical descriptive. 

Survey of Fortune 500 companies regarding their adoption of SFAS No. 52. 
Finds that adoption of SFAS No. 52 increased reported profits and financial 
leverage factors. 

1 12. Brown, Clifford D., none (State University of New York at Brockport). The Emer- 

gence of Income Reporting [accounting history]. The International Journal of 

Accounting. 1975 Mar; 10(2): 85-107. 

Methodology: theoretical. 

Study of the emergence of the use of income data by management. 

113. Brummet, R. Lee, United States (University of North Carolina). Internationalism 

and the Future of Accounting Education [accounting education]. The Interna- 
tional Journal of Accounting. 1975 Sep; 11(1): 161-165. 



Bibliography 67 

Methodology: theoretical. 

Discussion of the effects of multinational corporation on accounting education. 

114. Buckmaster, Dale, United States/Germany/France (University of Delaware). Infla- 

tion Gains and Losses from Holding Monetary Assets and Liabilities 1918 to 

1936: A Study of the Development of Accounting Thought in the United States 

[accounting theory]. The International Journal of Accounting. 1982 Mar; 17(2): 

1-22. 

Methodology: theoretical. 

Discussion of the various theoretical and social factors influencing inflation 

accounting. 

1 15. Burke, Walter L., none (University of South Wales, Kensington, Australia). Capital 

Expenditure Analysis [managerial accounting]. The International Journal of 

Accounting. 1974 Mar; 9(2): 143-154. 

Methodology: deductive descriptive. 

Discussion of the expenditure appraisal method of payback, accounting rate of 

return, discounted cash flow, sensitivity analysis, and probabilistic models. 

116. Burlaud, Alain; Dahan, Lionel, United States/France (Ecole Superieure de Com- 

merce de Paris/University of Paris//Ecole Superieure de Commerce de Paris). 
Global Productivity Surplus Accounts [economics and development]. The 
International Journal of Accounting. 1985 Sep; 21(1): 159-172. 
Methodology: theoretical. 

Presentation of the surplus account method. Provides a description of the meth- 
odology and the difficulties of application. 

117. Burnett, R. Andrew, Europe (Price Waterhouse & Company). The Harmonization 

of Accounting Principles in the Member Countries of the European Economic 
Community [financial accounting and reporting]. The International Journal of 
Accounting. 1975 Sep; 11(1): 23-37. 
Methodology: theoretical. 

Study of the reasons why efforts toward harmonization are more evident at the 
legislative level, than at the level of national professional institutes. Discusses 
the actions of national governments and law-making bodies in the development 
and promulgation of policies. 

118. Bums, Jane O., United States (Indiana University). A Study of International 

Accounting Education in the United States [accounting education]. The Inter- 
national Journal of Accounting. 1979 Sep; 15(1): 135-145. 
Methodology: empirical descriptive. 

Survey of international accounting programs at 151 schools. Indicates that only 
3 1 .6 percent of responding schools have an international accounting course and 
concludes that much improvement is needed in this area. 

119. Burns, Jane O.; Ross, Ronald S., United Kingdom/Germany/United States/Canada 

(Indiana University/ZIndiana University). Establishing International Transfer 
Pricing Standards for Tax Audits of Multinational Enterprises [taxation]. The 
International Journal of Accounting. 1981 Sep; 17(1): 161-179. 



68 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Methodology: theoretical. 

Discussion of various methods of, and influences on. transfer pricing. Con- 
cludes that the arm's length method is the most commonly used, even though it 
is difficult to define. Calls for bilateral treaties to resolve this problem. 

120. Bursal, Nasuhi I., Turkey/United States/Europe (Ohio State University). The 

Accounting Environment and Some Recent Developments in Turkey [financial 
accounting and reporting]. The International Journal of Accounting. 1984 Mar; 
19(2): 93-127. 

Methodology: deductive descriptive. 

Discussion of recent developments affecting the accounting profession in Tur- 
key. Concludes that the changes in the legal structure and the economy have 
affected accounting practice significantly. 

121. Callaghan, Joseph H.; Bazaz, Mohammad Sadegh, United States (Oakland Univer- 

sity, Rochester, Michigan/ZOakland University, Rochester. Michigan). 
Comprehensive Measurement of Foreign Income: The Case of SFAS No. 52 
[financial accounting & reporting]. The International Journal of Accounting. 
1992; 27(1): 80-87. 
Methodology: empirical statistical. 

Study to determine whether direct equity adjustments (EA's) of foreign subsid- 
iaries of multi-national corporations be considered as income, allowing 
investors to use a comprehensive income to measure multinational 
corporations. 

122. Callen, Jeffrey L.; Livnat, Joshua, United States/Israel/Brazil/ Argentina (Hebrew 

University, Israel/University of Toronto/ A^anderbi It University/Hebrew Uni- 
versity, Israel). Is Historical Cost Accounting Possible during Hyperinflation? 
[accounting theory]. The International Journal of Accounting. 1984 Mar; 19(2): 
73-81. 

Methodology: deductive descriptive. 

Examination of the various effects of inflation accounting on the historical cost 
model. Concludes that the historical cost model is still appropriate. 

123. Camfferman, Kees, The Netherlands (Vrije Universiteit, Amsterdam, The Nether- 

lands). Schmidt, Limperg and Dissemination of Current Cost Accounting in the 

Netherlands [managerial accounting]. The International Journal of Accounting. 

1994; 29(3): 251-264. 

Methodology: historical. 

Historical perspective of the prevalance of Theodore Limperg' s theories of cost 

accounting over those of Fritz Schmidt. 

124. Campfield, William L., none (Office of Policy and Special Studies. U.S. General 

Accounting Office). Selected International Trends in Financial Planning and 

Control in the Public Sector [governmental]. The International Journal of 

Accounting. 1969 Sep; 5(1): 123-151. 

Methodology: deductive descriptive. 

Presentation of the attempts by selected governments to make significant 

improvements in their financial management practices. 



Bibliography 69 

125. Canning, Robert J., none (General Electric Company). Selection, Training and 

Placement of Overseas Accounting Personnel [professional development]. The 

International Journal of Accounting. 1968 Sep; 4(1): 41-50. 

Methodology: deductive descriptive. 

Presentation of the topics of selection, training, and placement of overseas 

accounting personnel. Covers the importance of these subjects in international 

business. 

126. Carey, John L., none (American Institute of Certified Public Accountants). How 

Can Barriers against International Accounting Practice Be Eliminated? [public 
accounting]. The International Journal of Accounting. 1970 Sep; 6(1): 53-58. 
Methodology: deductive descriptive. 

Proposal that large international accounting firms maintain offices in develop- 
ing countries in order to industrialize these countries and promote the growth of 
international accounting. 

127. Carmony, Larry, Uruguay (Terra Corporation). Accounting in the Context of Its 

Environment: The Uruguayan Case [financial accounting and reporting]. The 
International Journal of Accounting. 1987 Mar; 22(2): 41-56. 
Methodology: deductive descriptive. 

Description of the accounting system in Uruguay. Describes internal and exter- 
nal conflicts in the development of the Uruguayan system. 

128. Carrington, Athol S., none (University of New South Wales, Australia). Account- 

ing Standards and the Profession— Seven Ages of Development [accounting 
history]. The Multinational Corporation: Accounting and Social Implications. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1977 Jan: 41-46. 
Methodology: historical. 
Discussion of the seven ages of accounting. 

129. Castle, Eric F., United Kingdom/United States (City of London Polytechnic). The 

Problems of Consolidation of Accounts of a Multinational Enterprise: Shell 

Group of Companies — Shell Transport and Trading Company, Limited, U.K. 

[accounting theory]. The International Journal of Accounting. 1980 Sep; 16(1): 

209-219. 

Methodology: deductive descriptive. 

Description of the consolidation of the Shell group companies. Concludes that 

international standards create greater differences in reporting now than they did 

previously. 

130. Chaderton. Robertine, Barbados (University of the West Indies). The Education of 

Professional Accountants in the Barbados [accounting education]. Comparative 
International Accounting Educational Standards. Champaign. IL: Center for 
International Education and Research in Accounting; 1990 Apr: 237-243. 
Methodology: deductive descriptive. 

Historical and institutional view of the accounting system in Barbados. Lists 
many reports calling for changes in the system, but concludes that the imple- 
mentation of these reports will not be forthcoming. 

131. Chambers, R. J., United States/ Australia/Canada/New Zealand/South Africa (Uni- 

versity of Sydney, Australia). The Functional Utility of Resale Price 



70 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 1 , 1 998 

Accounting [accounting theon]. Tlie Intenxational Journal of Accounting. 1985 

Sep: 21(1): 53-70. 

Methodology: empirical descriptive. 

Suney of accountants and u•^e^^ of financial statement^ regarding tiie presenta- 
tion and valuation procedures of the assets presented. 

132. Chan. Anthon> Moung Yin: Chan. Pik Yu: Chan. Wai Lin: Leung. Man "ling: 

Won. Xga ^'ue. Hong Kong (Cit> Polytechnic of Hong Kong). Segmental 
Reporting and Risk Reduction: The Hong Kong E.xperience [financial account- 
ing & reporting]. The Internationa] Journal of Accounting. 1993; 28(3): 

Methodology: capital markets. 

Assessment of segmental financial reponing of companies listed on the Hong 
Kong Stock Exchange in regards to investors" benefits and risk expectations. 
Statistical analysis pro\ es that -egmental reponing doe^ not reduce ri^k to Hong 
Kong investors. 

133. Chan. Anthony Moung-Yin. Global (The Chine>e Uni\ervit_\ of Hong Kong). The 

Pattern of the Theoretical Basis of I.\S: .Accounting Theor\ Models at the Inter- 
national Level [accounting theor}]. The Initrnauonal Journal of Accounting. 
1986 Sep: 22(1): 101-11". 
Methodolog} : deductive descnptixe. 

Discussion of the development of the I.ASC and the committee's impact on 
international standards. 

134. Chan. Anthonx Moung-'^'in. Hong Kong/L'nited States (Chinese l"ni\ersity oi 

Hong Kong). The Speculative .Accounting System in Hong Kong: Understand- 
ing Hong Kong"s Accounting Reality [professional development]. Recent 
Accounting and Economic Developments in the Far East. Champaign. IL: Cen- 
ter for International Education and Research in .Accounting: 1988 May: 
197-218. 

Methodology: theoretical. 

.Analysis and comparison of Hong Kong's current accounting practice with U.S. 
accountmg practices. Contends that Hong Kong's speculative nature will be the 
determining force in its future G.AAP. 

135. Chan. .Anthonv Moung-Yin. Hong Kong (The Cit\ University of Hong Kong). Pos- 

sible Factors of the .Accuracy of Prospectus Earnings Forecast in Hong Kong 
[Misecllaneous]. The International Journal of Accounting. 1996; 31(3): 
381-398. 

Methodology: Empirical statistical. 

An analysis of prospectus earnings forecasts iPEFi in assessing the quality of 
initial public offerings candidates. It indicates that prospectus earnings fore- 
casts accuracy in the Hong Kong context tends to increase if the past profit 
variability is lower, the change in economic conditions is smaller, and the com- 
pany's listing is more recent. 

136. Chandler. Roy A.. United States/United Kingdom (University of Wales. Cardiff. 

United Kinadom). The International Harmonization of .Accounting: In Search 



Bibliography 71 

of Influence [professional development]. The International Journal of Account- 
ing. 1992; 27(3): 222-233. 
Methodology: historical. 

Description of the progression toward international harmonization and the 
influences of organizations outside the accounting profession that have made an 
impact on international harmonization of accounting. 

137. Chang, Lucia S.; Most, Kenneth S., Europe (Florida International University//Flor- 

ida International University). International Accounting Standards: The Case of 
European Oil Companies [financial accounting and reporting]. The Interna- 
tional Journal of Accounting. 1976 Sep; 12(1): 27-43. 
Methodology: deductive descriptive. 

Study of differences in accounting policies and practices followed by compa- 
nies in the same industry in different European countries. 

138. Chang, Lucia S.; Most, Kenneth S., United States/United Kingdom/New Zealand 

(Florida International UniversityZ/Florida International University). An Interna- 
tional Comparison of Investor Uses of Financial Statements [economics and 
development]. The International Journal of Accounting. 1981 Sep; 17(1): 
43-60. 

Methodology: empirical descriptive. 

Survey of investors in the U.S., United Kingdom, and New Zealand which con- 
cludes that investors do use the financial statements for investment purposes. 

139. Chang, Young H., Taiwan (North Dakota State University, Fargo). Taiwan's 

Accounting Profession: A Response to National Economic Growth [profes- 
sional development]. The International Journal of Accounting. 1992; 27(1): 
57-68. 

Methodology: historical. 

Study providing a fundamental description of the accounting profession in Tai- 
wan as well as comparisons of Taiwan's and United States' growth in the 
accounting field. 

140. Chastain, Clark E., none (University of Michigan at Flint). Accounting and Society: 

A Behavioral View [social effects of accounting]. The International Journal of 

Accounting. 1973 Mar; 8(2): 1-20. 

Methodology: theoretical. 

Examination of the interdependent behavioral relationship between society and 

accounting. 

141. Chen, Kung H.; Balke. Thomas E.. United States (University of Nebrasbi/ZUniver- 

sity of Nebraska). Scale of Operation, Industry, and Financial Ratios 

[economics and development]. The International Journal of Accounting. 1979 

Mar; 14(2): 17-28. 

Methodology: empirical statistical. 

Statistical survey of six industries from 1969-73 using data from compustat. 

Seven ratios were analyzed according to the size and industry. Findings show 

that industry has an effect on capital turnover, inventory turnover, receivable 

turnover, short term liquidity, and cash position. The findings in relation to size 

indicate that only capital turnover is affected. 



72 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

142. Chen. Kung H.; Summers, Edward L., none (University of Nebraska/ZUniversity of 

Texas at Austin). Should Accounting Data Be Single- Valued Measurements? 

[accounting theory]. The International Journal of Accounting. 1977 Mar; 12(2): 

109-125. 

Methodology: theoretical. 

Study criticizing current accounting practices in single-valued measurements. 

Argues that more useful information would be available if the single-value 

methodology were changed to include multiple values. 

143. Cheng, Philip C, China/Taiwan (Northern Illinois University). Accounting in 

Nationalist China [financial accounting and reporting]. The International Jour- 
nal of Accounting. 1971 Mar; 6(2): 75-88. 
Methodology: deductive descriptive. 

Study of the modem accounting profession in Nationalist China which attempts 
to further the goal of better communications among nations. 

144. Cheng, Philip C; Jain, Tribhowan N., South Korea (Northern Illinois University// 

University of Florida). Economic Perspective and Accounting Practices in 

South Korea [economics and development]. The International Journal of 

Accounting. 1973 Mar; 8(2): 123-139. 

Methodology: deductive descriptive. 

Discussion of the economic activity in South Korea with emphasis on all 

aspects of accounting. 

145. Chesebrough, Harry E., United States/Japan (industrial consultant). American 

Management Expertise: Exportable? [miscellaneous]. The International Jour- 
nal of Accounting. 1975 Sep; 11(1): 145-159. 
Methodology: theoretical. 

Personal account of some of the conditions encountered by business people in 
their contacts with the Japanese. 

146. Chesley, G. R.; Scheiner, J. H.. Canada/United States (Dalhousie University, Can- 

ada//The University of Tennessee). The Statement of Changes in Financial 

Position: An Empirical Investigation of Canadian and U. S. Users in Nonpublic 

Companies [financial accounting and reporting]. The International Journal of 

Accounting. 1982 Mar; 17(2): 49-58. 

Methodology: empirical descriptive. 

Survey of the usefulness of the current "statement of changes." Concludes that 

this statement requires improvement. 

147. Chetkovich, Michael N., none (Deloitte & Touche). An Appeal for Unity in Estab- 

lishing Financial Accounting Standards [accounting theory]. The International 

Journal of Accounting. 1972 Sep; 8(1): 99-107. 

Methodology: theoretical. 

Discussion urging common international objectives and standards of 

accounting. 

148. Chetkovich, Michael N., Austraha/France/Germany/Canada/United Kingdom/ 

United States/Sweden (University of California at Berkeley). The International 
Federation of Accountants: Its Organization and Goals [financial accounting 



Bibliography 73 

and reporting]. 77?^ International Journal of Accounting. 1979 Sep; 15(1): 
13-20. 

Methodology: deductive descriptive. 

Discussion of the events and proceedings that led to the formation of the Inter- 
national Federation of Accountants. Maintains that financial difficulties and 
difficulties with authority slow the growth of international accounting stan- 
dards, but concludes that because of leadership and commitment the 
International Federation of Accountants will advance accounting at the interna- 
tional level. 

149. Cheung, Joseph K.; Li, Mandy; Wu, Anne, United States/Taiwan (George Mason 

University/ZUniversity of Maryland/ZNational Chengchi University, Taiwan). A 
Comparative Analysis of US and Taiwanese Finns' Decisions to Issue Earnings 
Forecasts [accounting theory]. The International Journal of Accounting. 1991; 
26(4): 264-276. 

Methodology: empirical statistical. 

Analysis of validity of U.S. positive accounting theories to the Taiwanese man- 
agement earnings forecasts. Concludes that institutional backgrounds are 
important to the application of such theories. 

150. Cho, Ik Soon; Park, Soong Hyun, Korea/United States (Korea University/ZRutgers 

University-The State University of New Jersey at Newark). The Korean Profes- 
sion: Its Role in the Economic Development of Korea [auditing]. Recent 
Accounting and Economic Developments in the Far East. Champaign, IL: Cen- 
ter for International Education and Research in Accounting; 1988 May: 97-1 13. 
Methodology: deductive descriptive. 

Discussion of the history of the accounting function in Korea listing social and 
economic pressures that may have an effect on the independence of the Korean 
auditor. 

151. Choi, Frederick D. S., ASEAN countries (University of Hawaii at Manoa). ASEAN 

Federation of Accountants: A New International Accounting Force [financial 

accounting and reporting]. The International Journal of Accounting. 1979 Sep; 

15(1): 53-75. 

Methodology: deductive descriptive. 

Discussion of the many professional and enviromental factors that led to the 

formation of the ASEAN Federation of Accountants. Concludes that the AFA is 

necessary to provide leadership and international representation to the ASEAN 

countries. 

152. Choi, Frederick D. S., Europe (University of Hawaii at Honolulu). Financial Dis- 

closure in Relation to the European Capital Market [economics and 
development]. The International Journal of Accounting. 1973 Sep; 9(1): 53-66. 
Methodology: theoretical. 
Study of the relationship between financial disclosure and capital markets. 

153. Choi, Frederick D. S., none (University of Hawaii at Honolulu). Price-Level 

Adjustments and Foreign Currency Translation: Are They Compatible? 
[accounting theory]. The International Journal of Accounting. 1975 Sep; 11(1): 
121-143. 



74 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Methodolog)': theoretical. 

Discussion of the restate-translate versus translate-restate controversy with 
arguments supporting each model. Draws on recent recommendations of the 
AICPA's Accounting Objectives Stud> Group, discussing the controversy from 
the perspective of a normative decision-framework. 

154. Choi. Frederick D. S.. Japan/United States (Uni\ersit\ of Hawaii at Honolulu]. Pri- 

mar) -Secondar\ Reporting: A Cross-Cultural Analysis [financial accounting 
and reporting]. The International Journal of Accounting. 1980 Sep: 16(1): 
83-104. 

Methodology: theoretical. 

Study of the conversion of the financial reports of a Japanese company to U.S. 
standards. Finds that this conversion led to a misleading financial representa- 
tion and calls for additional disclosure to enable users to identify social 
environmental concerns. 

155. Choi. Frederick D. S.: Bavishi. \'inod B.. United States/European Economic Com- 

munit\' (New York Uni\ersit\//L'ni\ersit> of Connecticut). Financial 
Accounting Standards: A Multinational Synthesis and Policy Framework 
[financial accounting and reporting]. The International Journal of Accounting. 
1982 Sep: 18(1): 159-183. 
Methodology: empirical descriptive. 

Survey of 1.000 international firms (with consolidated income greater than 520 
million) as to their adoption of international standards. Finds that these firms 
are slow in their adoption of international standards, a problem requiring the 
lASC to take a firmer leadership role. 

156. Choi. Frederick D. S.; Foote. Paul Sheldon. European Economic Community (New 

York University//New York University). Western European Accounting Data 
Bases for Managers, Investors, and Researchers: An Analytical Survey [infor- 
mation systems]. The Recent Accounting and Economic Developments in 
Western Europe. Champaign. IL: Center for International Education and 
Research in Accounting: 1985 May: 121-128. 
Methodology: empirical descriptive. 
Survey of the European databases available to users. 

157. Chow. Chee W.: Wong-Boren. Adrian. .Me.xico/L'nited States (San Diego State 

University//San Diego State University). Audit Firm Size and Audit Quality: 
Some Evidence from Mexico [auditing]. The International Journal of Account- 
ing. 1986 Mar; 21(2): 1-25. 
Methodology: empirical statistical. 

Study recording firm size and audit quality in Mexico. Finds that audit quality 
increases as a firm gets larger. 

158. Chu. Jose Manuel, Panama (Factores Integrados, S.A., Panama/Universidad Santa 

Maria La Antigua). Accounting Principles and Practices in Panama [public 
accounting]. The International Journal of Accounting. 1973 Sep: 9(1): -14-52. 
Methodology: deductive descriptive. 
General overview of the accounting principles and practices in Panama. 



Bibliography 75 

159. Chu, Kuo-Chang, China (National Taiwan University). Accountancy Education in 

the Republic of China [accounting education]. The International Journal of 

Accounting. 1969 Mar; 4(2): 75-91. 

Methodology: deductive descriptive. 

Study of the objectives of educational institutions that provides statistical data 

to show the present conditions of these institutes and that evaluates the present 

accountancy education system and suggests ways to remedy the defects. 

160. Chumachenko, Nikolai G.; Bedford Norton M.. Soviet Union/United States (Kiev 

Institute of National Economy, Soviet Union/AJniversity of Illinois at 
Urbana-Champaign). Some Distinctive Aspects of Accounting in the USSR 
[financial accounting and reporting]. The International Journal of Accounting. 
1968 Sep; 4(1): 29-40. 
Methodology: deductive descriptive. 

Comparative study of accounting in the Soviet Union and the U.S. offering sug- 
gestions for the further development of accounting principles and techniques. 

161. Churchill, A. A., none (International Bank for Reconstruction and Development). 

The Balanced Budget in Highway Finance: A Dangerous Concept [governmen- 
tal]. The International Journal of Accounting. 1968 Sep; 4(1): 101-110. 
Methodology: theoretical. 

Examination of the economics of road pricing. Holds that the orthodoxy of the 
balanced budget can lead to serious distortions in the allocation of resources. 

162. Clapp, Charles L., none (Deloitte & Touche). National Variations in Accounting 

Principles and Practices [accounting theory]. The International Journal of 
Accounting. 1967 Sep; 3(1): 29-42. 
Methodology: theoretical. 

Study of the variations in national accounting principles and practices to dis- 
cover what they indicate about the orientations and purposes of a given country. 

163. Clarke, F. L.; Dean, G. W., Holland (the Netherlands)/Germany (The University of 

Newcastle, Australia//The University of Sydney, Australia). The Views of 
Limperg and Schmidt: Discovering Patterns and Identifying Differences from 
Chaotic Literature [accounting history]. The International Journal of Account- 
ing. 1992; 27(4): 287-309. 
Methodology: historical. 

Comparative study of the literary contributions of Europeans Theodore Limp- 
erg and Fritz Schmidt to replacement price theory. 

164. Clarke, Frank; Craig, Russell; Amernic, Joel H., United Kingdom/United States 

(University of Newcastle, Australia/ZUniversity of Newcastle, Australia//Uni- 
versity of Toronto). Misplaced Trust in Reliance on Published Accounting Data 
for Wage Negotiation: An International Perspective [financial accounting and 
reporting]. The International Journal of Accounting. 1990; 25(3): 184-201. 
Methodology: theoretical. 

Study of the use of published accounting information in labor negotiations. 
Contends that "monetary equivalent" information should be used rather than 
traditional published data. 



76 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

165. Clay, Alvin A.. United States (Villanova University). Undergraduate International 

Accounting Education [accounting education]. The International Journal of 

Accounting. 1975 Sep; 11(1): 187-192. 

Methodology: deductive descriptive. 

Explanation of the approach used by Villanova University. 

166. Cohen, Jeffrey R.; Pant, Laurie W.; Sharp, David J., United States (Boston College/ 

/Suffolk University, Boston, Massachusetts//Boston College). An Empirical 
Investigation of Attitudinal Factors Affecting Educational Course Coverage of 
International Topics [accounting education]. The International Journal of 
Accounting. 1991; 26(4): 286-301. 
Methodology: empirical descriptive. 

Survey of identification of beliefs affecting inclusion of international account- 
ing issues in undergraduate accounting curriculum. Finds that favorable 
attitudes toward internationalization are significantly correlated with course 
coverage. 

167. Cohen, Jeffrey R.; Pant, Laurie W.; Sharp, David J., United States (Boston College/ 

/Suffolk University, Boston, Massachusetts//Boston College). A Methodologi- 
cal Methodology on Cross-cultural Accounting Ethics Research [social effects 
of accounting]. The International Journal of Accounting, 1996; 31(1): 55-66. 
Methodology: empirical descriptive. 

A report of an empirical test of the usefulness of Hofstede's five dimensions of 
culture to predict cross-cultural differences in ethical sensitivity. Demonstrates 
that these measures of culture can be used to develop directional hypothesis 
concerning cross-cultural differences in ethical perceptions. 

168. Comiskey, Eugene E.; Groves, Roger E. V., United KingdomAJnited States (Geor- 

gia Institute of Technology//The University of Wales Institute of Science and 
Technology). United Kingdom Developments in Interperiod Tax Allocation 
[taxation]. The International Journal of Accounting. 1981 Mar; 16(2): 1-9. 
Methodology: deductive descriptive. 
Comparison of the tax deferral practices of the U.S. to those of the U.K. 

169. Cooke, T. E., Japan (University of Exeter, England). An Assessment of Voluntary 

Disclosure in Annual Reports of Japanese Corporations [financial accounting & 
reporting]. The International Journal of Accounting. 1991; 26(3): 174-189. 
Methodology: empirical statistical. 

Discussion regarding voluntary disclosure of Japanese annual reports and the 
influences in which a company's size, stock market listing, and industry have 
on such disclosure. 

170. Copeland, Ronald M.; Ingram, Robert W., United States (University of South Caro- 

lina//University of South Carolina). An Evaluation of Accounting Alternatives 
for Foreign Currency Transactions [financial accounting and reporting]. The 
International Journal of Accounting. 1978 Mar; 13(2): 15-26. 
Methodology: theoretical. 

Presentation of the theoretical and empirical evidence in argument against 
SEAS 8. Suggests that deferral of interim foreign exchange gains and losses is a 
better alternative. 



Bibliography 77 

171. Costouros, George J., Greece (San Jose State University). Accounting Education 

and Practice in Greece [accounting education]. The International Journal of 
Accounting. 1975 Sep; 11(1): 95-106. 
Methodology: deductive descriptive. 

Survey of the contributions made by accounting education in Greece to the pro- 
fessional development of accounting and the socio-economic needs in both the 
private and public sectors. 

172. Costouros, George J., Greece (California State University at San Jose). Develop- 

ment of Banking and Related Bookkeeping Techniques in Ancient Greece 

(400-300 B.C.) [accounting history]. The International Journal of Accounting. 

1973 Mar; 8(2): 75-81. 

Methodology: historical. 

Brief review of the developments in banking and bookkeeping in Greece 

(400-300 B.C.). 

173. Craig, Russell J.; Diga, Joselito G., Brunei/Indonesia/Malaysia/Philippines/Sin- 

gapore/Thailand (The Australian National University). Financial Reporting 
Regulation in ASEAN: Features and Prospects [financial accounting and 
reporting]. The International Journal of Accounting, 1996; 31(2): 239-259. 
Methodology: deductive descriptive 

An analysis of similarities and differences in the financial reporting regulation 
practices of the six countries comprising the Association of South East Asian 
Nations (ASEAN). Similarities are observed in the objectives of financial 
reporting regulations and in the participation of the private sector in accounting 
standards setting and enforcement. Differences are discerned in each country's 
companies law requirements, securities market regulations, accounting stan- 
dards-setting procedures and accounting standards content. 

174. Cravens, Karen S.; Shearon, Jr. Winston T., United States (The University of Tulsa/ 

/Texas A&M University). An Outcome-Based Assessment of International 
Transfer Pricing Policy [miscellaneous]. The International Journal of Account- 
ing, 1996; 31(4): 419-443. 
Methodology: deductive descriptive. 

An analysis of the consequences of international transfer pricing for multina- 
tional entities in the US. It indicates that fimis employ international transfer 
pricing to meet a variety of objectives, and the dollar value of international 
transfers and the foreign sales percentage are both significant explanatory vari- 
ables for the financial outcomes of these objectives. 

175. Cummings, Joseph P., none (KPMG Peat Marwick). The International Accounting 

Standards Committee [auditing]. The International Journal of Accounting. 

1975 Sep; 11(1): 31-37. 

Methodology: deductive descriptive. 

Study of progress made by the lASC since 1973. Concludes that the lASC is 

willing to meet problems which go to the root of most published accounts, and 

that, due to its success in issuing strong standards, its future seems bright. 

176. da Costa, Richard C; Bourgeois, Jacques C; Lawson, William M., United States/ 

United Kingdom/Europe (Carleton University, Canada//Carleton University, 
Canada/ZCarleton University, Canada). A Classification of International Finan- 



78 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

cial Accounting Practices [financial accounting and reporting]. The 
International Joiinuil of Accounting. 1978 Mar; 13(2): 73-85. 
Methodology: empirical descriptive. 

Survey of the U.S., U.K., and European accounting models. Concludes that the 
U.K.'s model served as the basis for the other two. 

1 77. Dahmash, Nairn. Arab Countries (University of Jordan). External Financial Report- 

ing in the Arab Countries and Its Role in the Investment Decision-Making 
Process [financial accounting & reporting]. Changing International Financial 
Markets and Their Impact on Accounting. Champaign. IL: Center for Interna- 
tional Education and Research in Accounting, Department of Accountancy; 
1992: 155-174. 

Methodology: deductive descriptive. 

Evaluation of relationships between financial reporting and financial markets in 
the Arab Countries and various economic consequences of these relationships. 

178. Dahmash, Naim H., Jordan (University of Jordan). Accounting Aspects of Eco- 

nomic Development Planning in Jordan [economics and development]. The 

Multinational Corporation: Accounting and Social Implications. Champaign, 

IL: Center for International Education and Research in Accounting; 1977 Jan: 

139-149. 

Methodology: theoretical. 

Brief description of accounting history in Jordan. Proposes an economic model 

for economic growth. 

179. Dahmash, Naim H., Arab Countries (University of Jordan). Public Auditing Devel- 

opments in the Arab States: A Comparative Study [auditing]. TJie International 
Journal of Accounting. 1982 Sep; 18(1): 89-114. 
Methodology: empirical descriptive. 

Survey of the various auditing and reporting practices in the Arab states. Con- 
cludes that the Arab states should place more emphasis on operational auditing 
as a source of economic planning information. 

180. Dahmash, Naim H.; Zimmerman, V. K., Egypt/ Arab Countries (University of Jor- 

dan//University of Illinois at Urbana-Champaign). A Unified Governmental 

Accounting System for the Arab Countries [governmental]. The Recent 

Accounting and Economic Developments in the Middle East. Champaign, IL: 

Center for International Education and Research in Accounting; 1985 May; 

101-125. 

Methodology: deductive descriptive. 

Discussion of the governmental accounting systems in the Arab countries as 

proposed by the Arab Organization of Administrative Sciences in 1980. 

181. Dascher, Paul E.; Smith, Charles H.; Strawser, Robert H., none (Drexel University/ 

/Arizona State UniversityZ/Texas A & M University). Accounting Curriculum 

Implications of the Multinational Corporation [accounting education]. The 

International Journal of Accounting. 1973 Sep; 9(1): 81-97. 

Methodology: empirical descriptive. 

Study of the influence of the multinational corporation on future accounting 

curriculum. 



Bibliography 79 

182. Dau, Khalifa, none (University of Garyounis, Libya). A Probabilistic Income 

Determination Theory [accounting theory]. 77?^ International Journal of 

Accounting. 1978 Sep; 14(1): 39-56. 

Methodology: theoretical. 

Presentation of a statistical model to report a probability distribution of net 

income using generally accepted accounting principles. Concludes that such a 

model will enhance the usability of financial statements. 

183. Davidson, Ronald A.: Chrisman, Heidi Hadlich, Canada (Simon Fraser University, 

Bumaby, British Columbia/ZHautes Etudes Commercials, Montreal, Quebec). 
International Comparison of International Standards: The Case of Uncertainty 
Expressions [professional development]. The International Journal of Account- 
ing. 1993; 28(1): 1-16. 
Methodology: empirical descriptive. 

Comparative study examining differences in the translation of uncertainty 
expressions in international accounting standards in English and French-Cana- 
dian versions. 

184. Daynes, A.; Aiken, M., none (Victoria University of Wellington, New Zealand//La 

Trobe University, Australia). A. C. Littleton's Very Long-Term Perspective of 
Public Accounting Practice: Historical, International and Ethical Foundations 
[accounting theory]. The International Journal of Accounting. 1990; 25(1): 
1-18. 

Methodology: theoretical. 

Presentation of Littleton's framework in the long term sense. Presents the his- 
torical, philosophical, and social contexts. 

185. Deakin, Edward B.; Norwood, Gyles R.; Smith, Charles H., Japan (University of 

Texas at Austin/ZCoopers & Lybrand// Arizona State University). The Effect of 

Published Earnings Information on Tokyo Stock Exchange Trading [economics 

and development]. The International Journal of Accounting. 1974 Sep; 10(1): 

123-136. 

Methodology: capital markets. 

Study of the relationship between earnings announcements and vol- 

ume-and-price activity of stocks on the Tokyo Stock Exchange using tests for 

determining the correlation between the release of earnings information and 

activity in a company's stock. These tests were first applied to activity on the 

New York Stock Exchange. Concludes that the activity in a company's stock 

arises from the effect of earnings announcements on investor expectations and 

trading. 

186. Demirag, Istemi S., United States/United Kingdom (University of Sheffield, Great 

Britain). A Review of the Objectives of Foreign Currency Translation [financial 
accounting and reporting]. The International Journal of Accounting. 1987 Mar; 
22(2): 69-86. 
Methodology: theoretical. 

Study of the current factors regarding currency translation. Holds that transla- 
tion methods will not provide useful information until current value methods 
are adopted. 



80 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

187. Dheeriya, Prakash L., United States/Germany (North Texas State University). A 

Case for Special Drawing Rights as a Unit of Account [accounting theory]. The 
International Journal of Accounting. 1985 Sep; 21(1): 71-87. 
Methodology: theoretical. 

Presentation of the use of special drawing rights as a unit of account when for- 
eign currencies are involved. 

188. Dixon, Rob; Jaruga, A., Poland (University of Durham, England/ZUniversity of 

Lodz, Poland). The Changing Face of Accountancy in Poland [miscellaneous]. 

The New Europe: Recent Political and Economic Implications for Accountants 

and Accounting. Champaign, IL: Center for International Education and 

Research in Accounting; 1994: 233-252. 

Methodology: deductive descriptive. 

Presentation of present-day accounting in Poland and those influences which 

impact the Polish accounting system's reformation process. 

189. Donaldson, Bronwyn; Lai, Mohan, New Zealand (KPMG Peat MarwickZ/Univer- 

sity of Otago, New Zealand). Existence of and Needs for Informal Accounting 
Information Systems: A Case Study of New Zealand Companies [information 
systems]. The International Journal of Accounting. 1988 Mar; 23(2): 85-93. 
Methodology: empirical descriptive. 

Study of informal accounting information systems in New Zealand. Finds that 
such systems exist in an unstructured form and contribute to the formal system. 

190. Donaldson, Howard M.; Pai, Amar K., United States (International Group of the 

Burroughs Corporation/ZIntemational Group of the Burroughs Corporation/ 
Oakland University). Management and Performance Evaluation: An Interna- 
tional Perspective [managerial accounting]. Managerial Accounting: An 
Analysis of Current International Application. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1984 Jan: 1-21. 
Methodology: deductive descriptive. 

Discussion of the current and potential uses of the computer in management and 
performance evaluation. Concludes that such a system must be objective, pro- 
vide timely accountability, facilitate communication and be cost effective. 

191. Doost, Roger K., Africa/Australia/New Zealand/European Economic Community/ 

North America/Middle East/Central & South America (Clemson University). 

Alternative Techniques to Measure the Well-Being of a Region [economics and 

development]. The International Journal of Accounting. 1985 Mar; 20(2): 

95-101. 

Methodology: theoretical. 

Discussion of the limitations of per capita GNP. Presents some alternatives to 

per capita GNP. 

192. Doupnik, Timothy S., global (University of South Carolina). Evidence of Interna- 

tional Harmonization of Financial Reporting [financial accounting and 
reporting]. The International Journal of Accounting. 1987 Sep; 23(1): 47-67. 
Methodology: empirical statistical. 

Study of the financial reporting used in practices of several different countries. 
Substantial differences still exist. 



Bibliography 81 

193. Doupnik, Timothy S., Brazil/United States (University of Illinois at Urbana-Cham- 

paign). Indexation: Brazil's Response to Inflation [governmental]. The 
International Journal of Accounting. 1982 Sep; 18(1): 199-220. 
Methodology: theoretical. 

Discussion of the history of inflation accounting in Brazil. Calls for an investi- 
gation regarding the cost of implementing the U.S. system in Brazil. 

194. Doupnik, Timothy S.; Martins, Eliseu; Barbieri, Geraldo, Brazil (University of 

South Carolina/ZUniversidade de Sao Paulo/ZUniversity of South Carolina). 
Innovations in Brazilian Inflation Accounting [financial accounting & report- 
ing]. The InternationalJournal of Accounting. 1995; 30(4): 302-317. 
Methodology: empirical descriptive. 

Introduction and discussion of innovations of monetary corrections in inflation 
accounting in Brazil. 

195. Doupnik, Timothy S.; Salter, Stephen B., Global (University of South Carolina// 

Texas A&M University). External Environment, Culture, and Accounting Prac- 
tice: A Preliminary Test of A General Model of International Accounting 
Development [social effects]. The International Journal of Accounting. 1995; 
30(3): 189-207. 

Methodology: empirical statistical. 

Statistical examination of the relationship between countries' external environ- 
mental factors and their accounting practices. 

196. Doupnik, Timothy S.; Rolfe, Robert J., Europe/Asia/Africa/Far East/Middle East/ 

United States/United Kingdom/Canada/Central & South America (University 
of South Carolina/ZUniversity of South Carolina). Geographic Area Disclosures 
and the Assessment of Foreign Investment Risk for Disclosure in Accounting 
Statement Methodologies [financial accounting and reporting]. The Interna- 
tional Journal of Accounting. 1990; 25(4): 252-267. 
Methodology: empirical descriptive. 

Study of 520 CFAs regarding direct foreign investment risk. Shows that divid- 
ing a hemisphere into two components affects risk assessment. 

197. Drury, D. H., Canada/United States (McGill University, Canada). Earnings Per 

Share: A Canada-United States Comparison [financial accounting and report- 
ing]. The International Journal of Accounting. 1977 Sep; 13(1): 29-51. 
Methodology: modeling. 

Presentation of a model to detennine the difference between earnings per share 
in Canada and the U.S. Concludes that the Canadian model generally reflects a 
lower earnings per share. 

198. Duangploy, Orapin, United States (University of Wisconsin at Oshkosh). The Sen- 

sitivity of Earnings Per Share to Different Foreign Currency Translation 
Methods [financial accounting and reporting]. The International Journal of 
Accounting. 1979 Mar; 14(2): 121-134. 
Methodology: empirical statistical. 

Study using a computer model to measure the effects of different translation 
methods. States that during periods of little economic change all translation 
methods provide the same results and concludes that the temporal method pro- 
vides the best results. 



82 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

199. Duangploy, Orapin; Zieha, Eugene L.; Gray, Dahli, United States (University of 

Houston/ZUniversity of Maryland/University of Missouri at Columbia/ZUniver- 
sity of Notre Damej. SFAS No. 52 and the Statement of Changes in Financial 
Position: A Survey and Proposal for Change [financial accounting and report- 
ing]. The International Journal of Accounting. 1987 Mar; 22(2): 25-40. 
Methodology: empirical descriptive. 

Survey of the usefulness of the statement of changes in financial position, pre- 
senting a model statement of cash flows, which is compared to that of the 
FASB. 

200. Due. John F.. Third World Countries/Developing Countries (University of Califor- 

nia at Berkeley). The Institutional Environment and the Tax Structure in 

Developing Economies [taxation]. The International Journal of Accounting. 

1968 Sep; 4(1): 17-28. 

Methodology: theoretical. 

Discussion of four requirements for developing countries striving for a higher 

rate of growth including increased savings, foreign exchange, entrepreneurship, 

and infrastructure. Stresses the importance of government and taxation. 

201. Duerr. Edwin C; Duerr, Mitsuko S., Brazil (San Francisco State College/ZDaniel, 

Mann, Johnson and Mendenhall). Financing in Northeast Brazil: Problems and 
Opportunities in a Developing Area [economics and development]. The Inter- 
national Journal of Accounting. 1968 Mar; 3(2): 105-116. 
Methodology: theoretical. 

Examination of the particular problems of financing a new company in North- 
east Brazil, centering on what happens when local sources provide all of the 
funds. 

202. Dufey, Gunter. none (University of Michigan). The Outlook for the International 

Monetary System and Implications for Subsidiary Valuation [economics and 
development]. The International Journal of Accounting. 1970 Sep; 6(1): 25-33. 
Methodology: deductive descriptive. 
Outline of the current status of the international monetary system. 

203. Dufey, Gunter, none (University of Michigan). Recent Developments in Interna- 

tional Money and Capital Markets [economics and development]. The 
International Journal of Accounting. 1972 Mar; 7(2): 77-90. 
Methodology: deductive descriptive. 

Report on the sources of international funds and the mechanisms used in con- 
verting these funds into profitable real capital. 

204. Dykxhoorn, Hans J.; Sinning, Kathleen E.. United States/Germany (Western Mich- 

igan University /AVestem Michigan University). The Independence Issue 
Concerning German Auditors: A Synthesis [auditing]. The International Jour- 
nal of Accounting. 1981 Mar; 16(2): 163-181. 
Methodology: deductive descriptive. 

Discussion of the independence of the German auditor comparing the current 
situation in the U.S. and Germany. Concludes that the German profession will 
have to change both its requirements and public perceptions regarding auditors 
independence. 



Bibliography 83 

205. Edwards, James Don; Barrack, John B., United Kingdom/United States (University 

of Georgia/ZUniversity of Kentucky). Objectives of Financial Statements and 
Inflation Accounting: A Comparison of Recent British and American Proposals 
[financial accounting and reporting]. The International Journal of Accounting. 
1976 Mar; 11(2): 11-32. 
Methodology: deductive descriptive. 

Study comparing the recommendations of the Sandilands Committee with those 
of the Trueblood Study Group, which concludes that the Trueblood Report con- 
tains broad guidelines on what financial statements should seek to report and 
the Sandilands Report, guidance designed to alleviate accounting for effects of 
inflation. 

206. Eikharouf, Farouk Wasef, Saudi Arabia (Arab National Bank in Saudi Arabia). 

Generally Accepted Accounting Principles in Saudi Arabia [financial account- 
ing and reporting]. The Recent Accounting and Economic Developments in the 
Middle East. Champaign, IL: Center for International Education and Research 
in Accounting; 1985 May: 127-149. 
Methodology: empirical descriptive. 

Survey to determine the level of development and usefulness of Saudi Arabian 
GAAP. Indicates that Saudi Arabian GAAP are not meeting users' needs and 
must be better organized. 

207. Elam, Rick; Henaidy, Hamid, United States/Australia/Canada/Saudi Arabia (Uni- 

versity of Missouri at Columbia/ZKing Abdulaziz University, Saudi Arabia). 
Transfer Pricing for the Multinational Corporation [managerial accounting]. 
The International Journal of Accounting. 1981 Mar; 16(2): 49-65. 
Methodology: modeling. 

Presentation of a mathematical model to analyze resource allocation and trans- 
fer prices together rather than separately. 

208. Eikharouf, Farouk Wasef, Third World (Arab Bank. Ltd.). The Impact of Unified 

Risk Assets Ratios on International Banks and Accounting Standards [econom- 
ics & development]. Changing International Financial Markets and Their 
Impact on Accounting. Champaign, IL: Center for International Education and 
Research in Accounting, Department of Accountancy; 1992: 175-194. 
Methodology: capital markets. 

Examination of the impacts of proposed unified risk ratios and banks' manage- 
ment decisions and on the harmonization of accounting. 

209. Elliott, Edward L., Central & South America (University of Illinois at 

Urbana-Champaign). Accounting and Economic Development in Latin Amer- 
ica [economics and development]. The International Journal of Accounting. 
1972 Sep; 8(1): 89-97. 
Methodology: theoretical. 

Explanation of the role of the accountant in the economic development of Latin 
America. 

210. Elliott, Edward L., developing countries/third world countries (University of Illi- 

nois at Urbana-Champaign). The Managerial Role of Governmental 



84 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Accounting in Economic Development [economics and development]. The 
International Journal of Accounting. 1968 Sep; 4(1): 129-136. 
Methodology: theoretical. 

Report on government participation in economic growth which calls for the 
adoption of techniques designed to obtain efficient use of available resources. 
Contends that accounting offers one of the best means to attain the efficient 
allocation of resources and the coordination and control of governmental 
actions. 

211. Elvik. Kenneth, none (Iowa State University). Acquisition Cost Versus Revalua- 

tion: A Historical Perspective [accounting history]. The International Journal 

of Accounting. 1974 Mar; 9(2): 155-167. 

Methodology: theoretical. 

Study of the conventional model for long-lived asset accounting, which is based 

on acquisition cost. 

212. Emenyonu, Emmanuel N.; Gray, Sidney J., France/Germany/JapanAJnited Kin- 

dom/United States (Sacred Heart University, the University of Warwick). 
International Accounting Harmonization and the Major Developed Stock Mar- 
ket Countries: An Empirical Study [financial accounting and reporting]. The 
International Journal of Accounting, 1996; 31(3): 269-279. 
Methodology: empirical statistical 

An assessment of the extent to which the accounting measurement and associ- 
ated disclosure practices of large listed companies have become more 
harmonized internationally. Shows that while progress has been made in some 
respects, international accounting harmonization has remained an elusive goal. 

213. Enthoven, Adolf J. H., none (University of Illinois at Urbana-Champaign). The 

Unity of Accountancy in an International Context [accounting theory]. The 
International Journal of Accounting. 1973 Sep; 9(1 ): 113-133. 
Methodology: deductive descriptive. 

Discussion of the areas of unification, and standardization in international 
accounting. Emphasizes the need for cohesion between the branches of accoun- 
tancy and the disciplines of accounting and economics. 

214. Enthoven, Adolf J. H., Russia (University of Texas, Dallas). Joint Venture 

Accounting in the Former Soviet Union (USSR) [miscellaneous]. The New 

Europe: Recent Political and Economic Implications for Accountants and 

Accounting. Champaign, IL: Center for International Education and Research 

in Accounting; 1994: 193-210. 

Methodology: deductive descriptive. 

Analysis of the accounting aspects of joint ventures in the former USSR. 

215. Enthoven, Adolph J. H., none (University of Illinois at Urbana-Champaign). 

Accounting and Development Programming [economics and development]. 
The International Journal of Accounting. 1967 Sep; 3(1): 107-120. 
Methodology: theoretical. 

Study of interdependency of accounting and development programming. Con- 
cludes that accounting may assist economic progress in developing countries. 



Bibliography 85 

216. Enthoven, Adolph J. H., none (University of Texas at Dallas). International Man- 

agement Accounting: Its Scope and Standards [managerial accounting]. The 
International Journal of Accounting. 1982 Mar; 17(2): 59-74. 
Methodology: deductive descriptive. 

Discussion of international managerial accounting which concludes that, in 
order to develop, this area needs support from various professional organiza- 
tions worldwide. 

217. Estes, Ralph, none (Wichita State University). The Profession's Changing Hori- 

zons: A Survey of Practitioners on the Present and Future Importance of 
Selected Knowledge and Skills [accounting education]. The International Jour- 
nal of Accounting. 1979 Mar; 14(2): 47-70. 
Methodology: empirical descriptive. 

Discussion of a survey which asked both entry and senior level accountants to 
rank aspects of accounting education programs in the order of importance. 
Finds that communication, both written and verbal, is regarded as important. 

218. Evans, Bergen, none (Northwestern University). On Authority [social effects of 

accounting]. The International Journal of Accounting. 1970 Sep; 6(1): 1-14. 

Methodology: theoretical. 

Discussion of the various philosophies underlying human societies. 

219. Evans, Thomas G.; Folks, Jr William R., United States (University of South Caro- 

lina//University of South Carolina). SEAS No. 8: Conforming, Coping, 

Complaining, and Correcting! [accounting theory]. The International Journal 

of Accounting. 1979 Sep; 15(1): 33-43. 

Methodology: empirical descriptive. 

Survey of multinational corporations as to the effect SEAS no. 8 has had on 

them. Concludes that the FASB methodology toward SEAS is correct and 

argues that SEAS no. 8 must be changed. 

220. Evans, Thomas G.; Taylor, Martin E., United States/United Kingdom/JapanAVest 

Germany (University of South Carolina). 'Bottom Line Compliance" with the 

lASC: A Comparative Analysis [public accounting]. The International Journal 

of Accounting. 1982 Sep; 18(1): 115-128. 

Methodology: empirical descriptive. 

Study of five countries regarding their adoption of promulgated international 

standards. Finds that few international standards have been adopted. 

221. Falk, Haim, Canada/United Kingdom/United States/Australia (McGill University, 

Canada). Current Value Accounting Preferences: The Case for Canada [finan- 
cial accounting and reporting]. The International Journal of Accounting. 1979 
Mar; 14(2): 29-46. 
Methodology: empirical descriptive. 

Survey of financial analysts, bankers, and chartered accountants regarding the 
methodolgy used for current value accounting. Finds that the needs are deter- 
mined by the investment decision. 

222. Falk, Haim; Errunza, Vihang R., United StatesAVest Germany/United Kingdom/ 

Japan (McGill University, Canada/ZMcGill University, Canada). Risk and Prof- 
itability Differences Between National and Multinational Firms [managerial 
accounting]. The Multinational Corporation: Accounting and Social Implica- 



86 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

tions. Champaign, IL: Center for International Education and Research in 
Accounting: 1977 Jan: 63-91. 
Methodology: empirical statistical. 

Study of the ways in which multinational corporations differ in their profitabil- 
ity performance from similar domestic corporations. 

223. Falk, Haim: Frumer, Samuel; Heintz, James A., Israel/United States (Indiana Uni- 

versity/ZIndiana University/ZIndiana University). Accounting for Stock 
Reacquisitions: Israel and the United States Compared [public accounting]. The 
International Journal of Accounting. 1974 Mar: 9(2): 1 11-123. 
Methodology: deductive descriptive. 

Examination of the accounting treatment of stock transactions by corporations 
in the U.S. and Israel. Suggests that each of the legal and accounting require- 
ments can contribute to improving the traditional means of accounting for 
corporation stock acquisitions. 

224. Fang, Zhilong: Tang, Yunwei, China (Shanghai University of Finance & Econom- 

ics//Shanghai University of Finance & Economics). Recent Accounting 
Developments in China: An Increasing Internationalization [economics & 
development]. The International Journal of Accounting. 1991; 26(2): 85-103. 
Methodology: deductive descriptive. 

Discusses ideological evolution of Chinese accounting practices research and 
education and the socio-economic impact on them. 

225. Fantl, Irving L., United States (Baruch College, City University of New York). 

Control and the Internal Audit in the Multinational Firm [auditing]. The Inter- 
national Journal of Accounting. 1975 Sep; 11(1): 57-65. 
Methodology: theoretical. 

Study of some aspects of the accounting and control problems faced by multi- 
national firms. Emphasizes barriers in communication among nations and 
differences in attitudes towards business goals. 

226. Farag, Shawki M.. Developed Countries/Developing Countries (The American 

University, Egypt). Accounting in the 1990s: An International Perspective [pro- 
fessional development]. The International Journal of Accounting. 1991; 26(4): 
243-251. 

Methodology: theoretical. 

Comparison of responses of accounting the profession to economic conditions 
and changes. Urges adjustment of accounting practices to meet the needs of 
decision making. 

227. Farag, Shawki M., China (The American University, Egypt). Accounting Develop- 

ments in the People's Republic of China: A Commentary [financial accounting 

and reporting]. The International Journal of Accounting. 1988 Mar; 23(2): 

145-149. 

Methodology: deductive descriptive. 

Description of developments in China affecting the accounting profession. 

228. Farag, Shawki M., none (Cairo University, Egypt). Littleton's Views on Social 

Accounting— An Elaboration [social effects of accounting]. The International 
Journal of Accounting. 1967 Mar; 2(2): 123-132. 



Bibliography 87 

Methodology: deductive descriptive. 

Study elaborating on A. C. Littleton's views on social accounting. 

229. Farag, Shawki M., developing countries/Asia/Africa/Egypt (The American Univer- 

sity, Egypt). Management and Development: The Case of Performance 
Evaluation [financial accounting and reporting]. The Recent Accounting and 
Economic Developments in the Middle East. Champaign. IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 13-23. 
Methodology: deductive descriptive. 

Study of the effects that changing prices have on the growth of developing 
countries. Discusses management's responsibilities for such changes and calls 
for further research. 

230. Farag, Shawki M., none (World Bank). The Problem of Performance Evaluation in 

International Accounting [managerial accounting]. The International Journal of 
Accounting. 1974 Sep: 10(1): 45-53. 
Methodology: theoretical. 

Discussion of capital performance evaluation as the extension of the accounting 
function to record and report intercountry operations. Identifies this as a key 
problem in developing countries which need to expand their level of investment 
and the inflow of foreign capital, and concludes that it makes multinational per- 
formance evaluation a much-needed accounting function. 

231. Farag, Shawki M., third world countries/developing countries (Cairo University, 

Egypt). Project vs. General Development Financing: A Comment [economics 

and development]. The International Journal of Accounting. 1968 Sep; 4(1): 

115-120. 

Methodology: theoretical. 

Critique of favored project financing in developing countries, which offers a 

proposal for general development financing. 

232. Farag, Shawki M., none (Cairo University, Egypt). The Valuation of National Cap- 

ital and the Development of Accounting Theory [financial accounting and 
reporting]. The International Journal of Accounting. 1969 Sep; 5(1): 153-169. 
Methodology: deductive descriptive. 

Examination of the concept of national capital, its uses, and some of the prob- 
lems associated with its valuation. Advocates greater accounting research in 
capital to cover the macroaggregates because these aggregates are the summa- 
tion of the microvariables. 

233. Fechner, Harry H. E.; Kilgore, Alan, Global (University of Western Sydney, 

Nepean, Australia/AJniversity of Western Sydney). The Influence of Cultural 

Factors on Accounting Practice [public accounting]. The International Journal 

of Accounting. 1994; 29(3): 265-277. 

Methodology: deductive descriptive. 

Examination of various external influences, especially culture, on accounting 

practice. 

234. Fekrat, M. Ali, United States/Germany/European Economic Community (George- 

town University). Accounting for Forward Exchange Contracts [managerial 
accounting]. The International Journal of Accounting. 1984 Mar; 19(2): 83-92. 



88 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Methodology: theoretical. 

Critical examination of the present methodology for forward exchange con- 
tracts. Concludes that the methodology is inconsistent with GAAP. 

235. Fekrat, M. Ali. Mexico/developing countries (Georgetown University). Accounting 

Non-Response to the International Debt Crisis: A Positive Theory Perspective 
[accounting theory]. The International Journal of Accounting. 1989; 24(2): 
131-141. 

Methodology: theoretical. 

Presentation of the accounting profession's reaction to the less developed coun- 
tries debt crisis. 

236. Fekrat, M. Ali, Global (Georgetown University). Globalization of Financial Mar- 

kets and Financial Reporting Standards [professional development]. Changing 
International Financial Markets and Their Impact on Accounting. Champaign. 
IL: Center for International Education and Research in Accounting, Department 
of Accountancy; 1992: 195-211. 
Methodology: deductive descriptive. 

Study to determine w hich trends in the development of current accounting stan- 
dards have strengthened and weakened international accounting harmonization. 

237. Fekrat, M. Ali. Kuwait/Saudi Arabia/Libya/United Arab Emirates/Sudan (George- 

town University). Islamic Banking: Concepts, Practices, and Implications for 

Accounting: The Case of Kuwait [economics and development]. The Recent 

Accounting and Economic Developments in the Middle East. Champaign, IL: 

Center for International Education and Research in Accounting; 1985 May: 

177-182. 

Methodology: deductive descriptive. 

Discussion of the social and economic issues affecting the development of the 

Islamic banking system. 

238. Fekrat, M. Ali. none (Georgetown University). Multinational Accounting: A Tech- 

nical Methodology [accounting theory]. The International Journal of 
Accounting. 1979 Sep; 15(1): 95-103. 
Methodology: theoretical. 

Analysis of the conventional temporal method concludes that this method pro- 
duces inaccurate results and holds that an economic method that measures 
purchasing power would be more effective. 

239. Fekrat. M. Ali; Inclan. Carla; Petroni. David, Global (Georgetown Universiy and 

National Semiconductor). Corporate Environmental Disclosure: Competitive 
Disclosure Hypothesis Using 1991 Annual Report Data [Financial Accounting 
and Reporting]. The International Journal of Accounting, 1996; 31(2): 
175-195. 

Methodology: Empirical descriptive. 

Studies of the scope and accuracy of environmental disclosures made in corpo- 
rate annual reports. Examination of the scope of environmental disclosures for 
168 companies in six industries and 18 countries found that there are significant 
variations in environmental disclosures and hence no support for the voluntary 
disclosure hypothesis, and no apparent association between disclosure and 
environmental performance. 



Bibliography 89 

240. Felt, Howard M.. United States (Temple University). The Effort and Authority of 

the AICPA in the Development of 'Generally- Accepted Accounting Principles' 
[accounting theory]. The International Journal of Accounting. 1968 Mar; 3(2); 
11-27. 

Methodology: deductive descriptive. 

Study of the need for clarification of the principles which underlie accounting 
statements. Concludes that this effort will continue to be a primary responsibil- 
ity of the AICPA. 

241. Ferris, Kenneth R.; Hayes, David C, United Kingdom (Northwestern University// 

University of British Columbia). Some Evidence on the Determinants of Profit 
Forecast Accuracy in the United Kingdom [financial accounting and reporting]. 
The International Journal of Accounting. 1977 Mar; 12(2): 27-36. 
Methodology: empirical descriptive. 

Study of some of the determinants of profit forecast accuracy, as seen in profit 
forecasts in prospectuses from firms listed on the following exchanges: Lon- 
don, Belfast, Irish, Scottish, Northern, and Midlands and Western. 

242. Fieldcamp, Dale, Brazil (Caterpillar Tractor Company). International Accounting 

in an Inflationary Economy [financial accounting and reporting]. The Interna- 
tional Journal of Accounting. 1968 Sep; 4(1): 155-164. 
Methodology: deductive descriptive. 

Study of aspects of international accounting related to an inflationary economy 
and to a fluctuating foreign exchange rate. 

243. Firth, Michael, United Kingdom (Victoria University of Wellington, New 

Zealand). A Cross-Sectional Analysis of Qualified Audit Reports [auditing]. 
The International Journal of Accounting. 1980 Mar; 15(2): 47-59. 
Methodology: empirical statistical. 

Statistical study to determine if the characteristics were different in firms 
receiving uncertainty qualifications or procedural qualifications in the United 
Kingdom. Shows that these reports are not conelated to auditing firm, industry. 
or company size. 

244. Firth, Michael, United Kingdom (Victoria University of Wellington, New 

Zealand). A Study of the Consensus of the Perceived Importance of Disclosure 
of Individual Items in Corporate Annual Reports [financial accounting and 
reporting]. The International Journal of Accounting. 1978 Sep; 14(1): 57-70. 
Methodology: empirical descriptive. 

Results of a survey that asked users, auditors, and accountants about the impor- 
tance of financial disclosure. Finds that auditors and users place a higher level 
of importance on disclosure than do the internal sources of such disclosure. 

245. Fitzgerald, Richard D., United States/United Kingdom/Canada (Price Waterhouse 

& Company). International Harmonization of Accounting and Reporting 

[financial accounting and reporting]. The International Journal of Accounting. 

1981 Sep; 17(1): 21-32. 

Methodology: deductive descriptive. 

Discussion of factors affecting agreement on standards among the international 

organizations. Contends that politics may hamper international standard-setting 



90 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

and calls for cooperation among the different organizations following the lead 
of recent cooperation among the U.S., Canada, and the U.K. 

246. Folks, Jr William R.; Evans, Thomas G.; Jilling, Michael, none (College of Busi- 

ness Administration, Columbia/ZUniversity of South Carolina/ZUniversity of 
South Carolina at Spartanburg). Foreign Exchange Risk Management at Ameri- 
can Multinationals: Social Responsibility or Earnings Protection? [financial 
accounting and reporting]. The Multinational Corporation: Accounting and 
Social Implications. Champaign, IL: Center for International Education and 
Research in Accounting; 1977 Jan: 47-61. 
Methodology: empirical descriptive. 

Survey of multinational firms with regard to their foreign exchange risk man- 
agement policies. 

247. Foo, See Liang, Indonesia/Singapore/United Kingdom/Japan/Holland/United 

States (Nanyang Technological Institute, Singapore). Accounting Educational 

Systems in Southeast Asia: The Indonesian and Singaporean Experiences 

[accounting education]. The International Journal of Accounting. 1988 Mar; 

23(2): 125-136. 

Methodology: deductive descriptive. 

Discussion and comparison of the historical, political, social, and economic 

influences on accounting education in Indonesia and Singapore. 

248. Foroughi, Tahirih Khodadoust, Iran (University of Nevada at Reno). Accounting in 

Developing Countries Before and After Social Crisis: The Case of Iran [finan- 
cial accounting and reporting]. The International Journal of Accounting. 1981 
Sep; 17(1): 181-223. 
Methodology: deductive descriptive. 

Comparison of a study of the Iranian accounting system before the 1978-79 rev- 
olution with a study of developing countries conducted by the American 
Association of Accountants. Concludes that accounting education must 
undergo further development in these countries. 

249. Foroughi, Tahirih Khodadoust, Iran (University of Tehran, Iran). Potentials of 

Inflation Accounting in Iran [financial accounting and reporting]. The Impact 
of Inflation on Accounting: A Global View. Champaign, IL: Center for Interna- 
tional Education and Research in Accounting; 1979 May: 55-86. 
Methodology: empirical descriptive. 

Survey of Iranian accountants about their attitudes and practices toward infla- 
tion accounting. 

250. Foroughi, Tahirih Khodadoust; Reed, Barbara, United States/Canada/United King- 

dom/New Zealand (American Graduate School of International Management// 
American Graduate School of International Management). A Survey of the 
Present and Desirable International Accounting Topics in Accounting Educa- 
tion [accounting education]. The International Journal of Accounting. 1987 
Sep; 23(1): 70-82. 

Methodology: empirical descriptive. 

Survey of the differences among educators and executives regarding interna- 
tional accounting topics. 



Bibliography 91 

251. Foyo, Diego; Cunningham, Gary M.. Mexico (Valores Industriales, S.A. and Sub- 

sidiaries/Instituto Technologico de Monterrey/A^irginia Polytechnic Institute 
and State University). Accounting for Inflation in Mexico: A Major Firm's 
Approach [financial accounting and reporting]. The Impact of Inflation on 
Accounting: A Global View. Champaign. IL: Center for International Educa- 
tion and Research in Accounting; 1979 May: 103-148. 
Methodology: deductive descriptive. 
Discussion of the accounting policies of the Mexican company VISA. 

252. Francalanza. Charles A.. Malta/United Kingdom (University of Malta). Setting 

Accounting Standards for Malta [financial accounting and reporting]. The 
International Journal of Accounting. 1988 Mar; 23(2): 163-178. 
Methodology: deductive descriptive. 

Discussion of the regulatory, social, and environmental factors that have helped 
develop the accounting system in Malta. 

253. Fredrikson. E. Bruce, none (Syracuse University). The Valuation of Noncurrent 

Foreign Currency Monetary Claims [financial accounting and reporting]. The 
International Journal of Accounting. 1973 Sep; 9(1): 149-158. 
Methodology: theoretical. 

Presentation of arguments for the \ aluation of noncurrent foreign currency 
receivables and payables. 

254. Freedman. Martin; Stagliano. A. J.. European Economic Community (School of 

Management, Binghamton, New York//St. Joseph University, Philadelphia. 
Pennsylvania). European Unification. Accounting Harmonization, and Social 
Disclosures [financial accounting & reporting]. The International Journal of 
Accounting. 1992; 27(2): 112-122. 
Methodology: empirical descriptive. 

Comparison of the information provided in annual reports in selected firms in 
European Community countries, with emphasis on seeking inconsistencies on 
social disclosures made in the European Community. 

255. Frishkoff. Paul, none (University of Oregon). Capitalism and the Development of 

Bookkeeping: A Reconsideration [accounting theory]. The International Jour- 
nal of Accounting. 1970 Mar; 5(2): 29-37. 
Methodology: historical. 

Analysis of the causes of the adoption of bookkeeping during the late part of the 
middle ages. 

256. Fujita, Yukio, Japan (University of Illinois at Urbana-Champaign). The Evolution 

of Financial Reporting in Japan [financial accounting and reporting]. The Inter- 
national Journal of Accounting. 1966 Sep; 2(1 ): 49-75. 
Methodology: deductive descriptive. 

Discussion of the evolution of financial reporting in Japan with special refer- 
ence to the related legal background. 

257. Fujita. Yukio. United Nations (Waseda University and Earlham College). Recent 

Activities of the United Nations Toward International Harmonization in 
Accounting and Reporting [accounting history]. Changing International Finan- 
cial Markets and Their Impact on Accounting. Champaign. IL: Center for 



92 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1. 1998 

International Education and Research in Accounting. Department of Accoun- 
tancy: 1992:93-104. 
Methodology: historical. 

Historical perspective regarding the United Nations' efforts toward promoting 
harmonization in international accounting and reporting. 

258. Gamble, George O.: Hsu. Kathy: Jackson. Cynthia; Tollerson. Cynthia D.. Global 

(University of Houston). Environmental Disclosure in Annual Reports: An 
International Perspective [Financial Accounting and Reporting]. The Interna- 
tional Journal of Accounting, 1996: 31(3):293-331. 
Methodology: Empirical statistical. 

An investigation of the annual report disclosures of environmental information 
for 276 companies representing 9 industries and 27 countries for the years 1989 
through 1991. 

259. Gambling, Trevor E.. none (University of Birmingham, England). Toward a Gen- 

eral Theory of Accounting [accounting theory]. The International Journal of 

Accounting. 1971 Sep: 7(1): 1-13. 

Methodology: theoretical. 

Development of a distinct system of non-transferable cultural wealth to help 

explain the difficulties of cross-cultural income comparison. 

260. Gandhi. Natwar M.. none (University of Pittsburgh/Program Analysis Division, 

U.S. General Accounting Office). The Emergence of the Postindustrial Society 
and the Future of the Accounting Function [social effects of accounting]. The 
International Joun^al of Accounting. 1976 Mar; 11(2): 33-49. 
Methodology: theoretical. 

Study of the effects of monetary' unidimensional expression on accounting in a 
post-industrial society. Also discusses the significance of accounting to the 
societal process of adaptation. 

261. Garda, J. A., none (Overseas Division. International Harvester & Company). The 

Measurement of Financial Data in Evaluating Overseas Managerial Efficiency 

[managerial accounting]. The International Journal of Accounting. 1976 Sep; 

12(1): 13-17. 

Methodology: deductive descriptive. 

Discussion of changes in the way the International Harvester views overseas 

results. Shows that the company will continue to look at foreign currency 

results and. excluding exchange effect, measure the key quantitative goals in 

the performance of foreign managers. 

262. Gebhardt. Guenther. Germany/European Economic Community (Institut fur 

Untemehmungsfuhrung and Untemehmensforschung of the Ruhr-Uni\ersitat, 
Germany). The Usefulness of Different Accounting Disclosure Regulations: A 
German Experience [financial accounting and reporting]. The International 
Journal of Accounting. 1983 Mar: 18(2): 109-131. 
Methodology: empirical statistical. 

Survey of German firms indicating that current disclosure is useful in determin- 
ing failure. 



Bibliography 93 

263. Ghartey. Ato, Ghana (University of Ghana at Legon). A New Perspective for 

Accountancy Education in Ghana [accounting education]. The International 

Journal of Accounting. 1978 Sep; 14(1): 121-132. 

Methodology: deductive descriptive. 

Study of the current method of educating accountants in Ghana. Concludes that 

the current methods are inadequate and calls for reforms. 

264. Ghartey, J. B., Africa (Suffolk University). Accountability, the Threshold of Politi- 

cal Instability, Underdevelopment, and Misery: The Case of Africa [economics 
and development]. The International Journal of Accounting. 1985 Sep; 21(1): 
143-158. 

Methodology: deductive descriptive. 

Discussion of the instability on the African continent, which holds that accoun- 
tants could add to the future stability of the region. 

265. Ghosh, Dipankar; Grain, Terry L., none (University of Oklahoma, Norman//Uni- 

versity of Oklahoma, Norman). A Transfer Pricing Decision Model of 
Multinationals [managerial accounting]. The International Journal of Account- 
ing. 1993:28(2): 170-181. 
Methodology: theoretical. 

Introduction of a decision model to calculate the total profit function of a multi- 
national company. 

266. Ghosh, Santi Narayan, Bangladesh (University of Dhaka, Bangladesh). A Compar- 

ative International Study of the Education of Professional Accountants: A Case 
Study of Bangladesh [accounting education]. Comparative International 
Accounting Educational Standards. Champaign, IL: Center for International 
Education and Research in Accounting; 1990 Apr: 97-108. 
Methodology: deductive descriptive. 

Discussion of the accounting educational system of Bangledesh. Gives an insti- 
tutional view of the current system. 

267. Gilling, D. M., none (University of New Castle, Australia). Accounting and Social 

Change [social effects of accounting]. The International Journal of Accounting. 

1976 Mar; 11(2): 59-71. 

Methodology: deductive descriptive. 

Discussion of the factors that facilitate accounting change. Concludes that 

because accounting is a product of its environment, technology and society will 

continue to change accounting. 

268. Givoly, Dan; Lakonishok, Josef, Israel (Tel Aviv University/Carnegie Mellon Uni- 

versity//Tel Aviv University/University of North Carolina). Accounting for 

Construction Companies. Inflation, and Market Efficiency: Analysis of an 

Israeli Case [financial accounting and reporting]. The International Journal of 

Accounting. 1982 Mar; 17(2): 121-149. 

Methodology: deductive descriptive. 

Discussion of practices affecting construction accounting in Israel. 

269. Glautier, M. W. E., Italy (University of Sheffield). Roman Accounting: The Influ- 

ence of Socioeconomic Factors on the Development of Accounting Concepts 



94 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

[social effects of accounting]. The International Journal of Accounting . 1973 

Mar: 8(2): 59-74. 

Methodology: historical. 

Study of several approaches to the development of accounting in Roman times. 

270. Gniewosz. A., New Zealand (Churchlands College of Advanced Education, Austra- 

lia). The Equity Method of Accounting for Investments in Common Stock: The 
New Zealand Experience [financial accounting and reporting]. The Interna- 
tionalJounial of Accounting. 1980 Mar: 15(2): 115-128. 
Methodology: empirical descriptive. 

Study of the equity method used in New Zealand based on a survey of forty-one 
corporations. Indicates that this method is not always followed properly, but 
that those discrepancies occur infrequently when fully consolidated companies 
are carried by the equity method. 

27 1 . Goldschmidt, Yaaqov, Inflationary Countries (Tel Aviv University, Israel). Interna- 

tional Accounting Standard 29: Formulation and Clarification on Income 
Measurement in Hyperinflationary Economies [accounting theory]. The Inter- 
national Journal of Accounting. 1992:27(2): 137-150. 
Methodology: theoretical. 

Formulation and analysis of a model for income measurement in accordance 
with International Accounting Standard 29, with special attention given to 
interest expenses. 

272. Golub, Steven J., United States (Deloitte & Touche). A Global Perspective to 

Financial Reporting [financial accounting and reporting]. The International 
Journal of Accounting. 1982 Sep: 18(1): 37-44. 
Methodology: deductive descriptive. 

Discussion of the various issues affecting international accounting. Concludes 
that protecting investors should be the primary concern and that the develop- 
ment of international standards, providing market access and adequate 
regulation, is the methodology most likely to achieve this protection. 

273. Gonedes, Nicholas J., none (University of Texas at Austin). Perception Estimation 

and Verifiability [accounting theory]. The International Journal of Accounting. 

1969 Mar; 4(2): 63-73. 

Methodology: deductive descriptive. 

Study of verifiability and two methods of measuring it. 

274. Gorelik, George, Soviet Union/United States (University of British Columbia). 

Enterprise Profit and Profitability Measurements: Soviet-American Conver- 
gence [managerial accounting]. The International Journal of Accounting. 1971 
Mar; 6(2): 1-14. 
Methodology: theoretical. 

Study of similarities between ROI measures used in the two countries. Applies 
this use of similar information needs by top management to overall measures of 
performance of decentralized organizational subunits. 

275. Gorelik, George, Soviet Union (University of British Columbia). Methodologies on 

the Development and Problems of Soviet Uniform Accounting [accounting the- 
ory]. The International Journal of Accounting. 1973 Sep; 9(1): 135-148. 



Bibliography 95 

Methodology: deductive descriptive. 

Study of the historical development of Soviet uniform accounting which con- 
siders some of the major problems currently faced by Soviet accounting. 

276. Gorelik. George, none (University of British Columbia). On the Nature of Informa- 

tion [information systems]. The International Journal of Accounting. 1975 Mar: 
10(2): 109-125. 
Methodology: theoretical. 

Study of the nature of information in the context of systems that concludes that 
information appears as a composite in complex relationships, which are essen- 
tial to purposive systemic adaptations. 

277. Gorelik. George, United States/Canada/United Kingdom (University of British 

Columbia. Vancouver. Canada). The Setting of Accounting Standards: Canada. 

the United Kingdom, and the United States [professional development]. The 

International Journal of Accounting. 1994; 29(2): 95-122. 

Methodology: deductive descriptive. 

Comparative study questioning the viability of Canada's Accounting Standards 

Committee, the United States" Financial Accounting Standards Board, and the 

United Kingdom's Accounting Standards Commitee. 

278. Gorski. Janusz, none (University of Lodz, Poland). The Council for Mutual Eco- 

nomic Assistance (CMEA): Its Role in the Economic Integration of Socialist 
Countries [economics and development]. The International Journal of Account- 
ing. 1974 Sep; 10(1): 19-32. 
Methodology: deductive descriptive. 

Discussion of the CMEA's program to improve the national economics of 
socialist countries, as well as the industrial and technological base. 

279. Gorski. Janusz, Poland (University of Lodz. Poland/Ministry of Science, Higher 

Education and Technology in Poland). Theoretical and Practical Problems of 

Accounting for Changing Prices in Poland-Part I [financial accounting and 

reporting]. The Impact of Inflation on Accounting: A Global View. Champaign, 

IL: Center for International Education and Research in Accounting; 1979 May: 

87-92. 

Methodology: deductive descriptive. 

Discussion of the history and effects of inflation accounting on the Polish 

economy. 

280. Grady. Paul, none (Price Waterhouse & Company). Professionalism in Accounting 

[professional development]. The International Journal of Accounting. 1967 

Sep; 3(1): 87-99. 

Methodology: theoretical. 

Discussion of the key elements in the advancement of accounting 

professionalism. 

28 1 . Graebner, Norman A., United States/Soviet Union/Europe (University of Virginia). 

Whither Containment? [public accounting]. The International Journal of 
Accounting. 1969 Sep; 5(1): 17-33. 
Methodology: deductive descriptive. 



96 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Discussion of the role of containment in bringing the full power of the United 
States to bear on world politics. Considers how that power could best be used to 
serve the needs of a divided humanity. 

282. Graham. Lynford E.. China (Rutgers University). Setting a Research Agenda for 

Auditing Issues in the People's Republic of China [Auditing]. The International 

Journal of Accounting, 1996; 3 1(1): 19-37. 

Methodology: Deductive descriptive. 

A discussion of a number of potentially meaningful auditing research issues 

that arise from the dramatic changes currently taking place in China, identifying 

organizational, technical practice and economic issues that impact the practice 

of accounting and auditing. 

283. Graham, Roger C; Wang, Chi-Hsin Coco, Taiwan (Oregon State University//Ore- 

gon State University). Taiwan and the International Accounting Standards: A 
Comparison [financial accounting & reporting]. The International Journal of 
Accounting. 1995; 30(2): 149-167. 
Methodology: deductive descriptive. 

Comparative analysis of Taiwanese financial accounting standards with Inter- 
national Accounting Standards (IAS). 

284. Graves, O. Finley; Berry, Maureen H., East Germany/Europe/Eastem Bloc Coun- 

tries (University of Mississippi/AJniversity of Illinois at Urbana-Champaign). 
Accounting's Role in Successful Economic Development: Some Normative 
Evidence from the German Democratic Republic [economics and develop- 
ment]. The International Journal of Accounting. 1989; 24(3): 189-220. 
Methodology: deductive descriptive. 

Description of the development of the East German accounting system and its 
role in the economic growth. 

285. Gray, Dahli, none (University of Notre Dame). SEAS No. 52: Progress or Problem? 

[accounting theory]. The International Journal of Accounting. 1984 Sep; 20(1): 

109-119. 

Methodology: deductive descriptive. 

Discussion of the effects of SEAS No. 52, emphasizing its role in increasing the 

diversity of financial reports. 

286. Gray, H. Peter; Miranti, Paul J., United States/Italy/Japan/Mexico (Rensselaer 

Polytechnic Institute//Rutgers-The State University of New Jersey at Brun- 
swick). International Einancial Statement Translation: The Problem of Real and 
Monetary Disturbances [financial accounting and reporting]. The International 
Journal of Accounting. 1988 Mar; 23(2): 19-31. 
Methodology: theoretical. 

Presentation of a translation methodology contending that historical rates 
should be used for translations involving differences in international inflation 
rates and current rates should be used when terms of trade are altered. 

287. Gray, Jack; Morris, Deigan, United States (University of Minnesota//The European 

Institute of Business Administration). Comprehensive Controls for Multina- 
tional Corporations [managerial accounting]. Managerial Accounting: An 



Bibliography 97 

Analysis of Current International Application. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1984 Jan: 107-123. 
Methodology: theoretical. 

Presentation of six elements of a planning and control system, as well as a 
framework for the communication of the system to managers around the world. 

288. Gray, S. J., Central & South America/France/Germany/Netherlands/United King- 

dom/European Economic Community/United States/Australia/New Zealand/ 
South Africa/Soviet Union (University of Glasgow, United Kingdom). Interna- 
tional Accounting: A Review of Academic Research in the United Kingdom 
[professional development]. The International Journal of Accounting. 1983 
Sep; 19(1): 15-42. 

Methodology: deductive descriptive. 

Discussion of the past and current research in international accounting carried 
out in the U.K. Concludes that the majority of the research has been 
comparative. 

289. Gray, S. J., United States/Europe/Middle East/Africa/Soviet Union/China/Japan/ 

Asia/Australia/Central & South America (University of Glasgow, United King- 
dom). International Accounting Research: The Global Challenge [professional 
development]. The International Journal of Accounting. 1989; 24(4): 291-307. 
Methodology: deductive descriptive. 
Discussion of the role that international accounting has on accounting research. 

290. Gray, S. J., United Kingdom (University of Lancaster, England). Statistical Infor- 

mation and Extensions in European Financial Disclosure [financial accounting 

and reporting]. The International Journal of Accounting. 1978 Mar; 13(2): 

27-40. 

Methodology: empirical descriptive. 

Survey of the comparative disclosure of European countries. Concludes that the 

European disclosure lacks statistical information. 

291. Gray, Sidney J.; Meek, Gary K.; Roberts, Clare B., European Community (Univer- 

sity of Warwick, England/ZOklahoma State University, Stillwater, Oklahoma// 
University of Glasgow, Scotland). Financial Deregulation, Stock Exchange 
Listing Choice, and the Development of a European Capital Market [economics 
& development]. The New Europe: Recent Political and Economic Implications 
for Accountants and Accounting. Champaign, IL: Center for International Edu- 
cation and Research in Accounting; 1994: 171-192. 
Methodology: capital markets. 

A study of the trends of European Community companies of their listing behav- 
ior in various stock markets and the reasons for such preference. 

292. Gress, Edward J., Egypt/Iraq/Middle East/United States (Canisius College). Public 

Accounting in Selected Middle East Countries: A Historical Perspective [public 
accounting]. The Recent Accounting and Economic Developments in the Mid- 
dle East. Champaign, IL: Center for International Education and Research in 
Accounting; 1985 May: 167-175. 
Methodology: deductive descriptive. 



98 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Discussion of the development of the public accounting profession in the Mid- 
dle East. Places emphasis on the role of the Middle East Society of Associated 
Accountants. 

293. Grove, Hugh D.; Bazley, John D., Unknown (University of Denver, Colorado//Uni- 

versity of Denver, Colorado). Disclosure Strategies for Harmonization of 

International Accounting Standards [financial accounting & reporting]. The 

International Journal of Accountin}^. 1993; 28(2): 116-128. 

Methodology: modeling. 

Introduction to different strategies in reducing the number of international 

accounting alternatives in order to achieve harmonization. 

294. Gul, Ferdinand A.; Tsui, Judy, Hong Kong/Australia (The Chinese University of 

Hong Kong//City Polytechnic of Hong Kong). A Comparative Study of Audi- 
tors' Attitudes to Uncertainty Qualifications: An Empirical Test of the Strong 
Versus Weak Uncertainty Avoidance Hypothesis [auditing]. The International 
Journal of Accounting. 1993; 28(4): 356-364. 
Methodology: empirical descriptive. 

Empirical study examining the influences of uncertainty avoidance and cultural 
dimensions on Hong Kong and Australian auditors' perception of the "subject 
to" audit qualification. 

295. Gul, Ferdinand A.; Yap, Teoh Hai, Malaysia (University of Wollongong, Australia/ 

/University of Wollongong, Australia). The Effects of Combined Audit and 
Management Services on Public Perception of Auditor Independence in Devel- 
oping Countries: The Malaysian Case [auditing]. The International Journal of 
Accounting. 1984 Sep; 20(1): 95-107. 
Methodology: empirical descriptive. 

Survey of financial statement users in Malaysia to determine their perception of 
the auditor's independence. 

296. Hagigi, Moshe; Hubbard, Howard H., Saudi Arabia/Egypt/Pakistan (Boston Uni- 

versity//Fluor Corporation). Forging National Accounting Practices: The Saudi 

Arabian Experience in Taxation [taxation]. The International Journal of 

Accounting. 1988 Mar; 23(2): 151-162. 

Methodology: deductive descriptive. 

Discussion of the Saudi Arabian tax accounting system which compares this 

system with those used in other Middle Eastern countries. 

297. Hagigi, Moshe; McAuliffe, Terry Lynn, United States (Boston University//Rice 

University). Stock Price Reaction to 'Off-Balance-Sheet' Information: The 
Case of International Finance Subsidiaries [financial accounting and reporting]. 
The International Journal (f Accounting. 1989; 24(1): 21-28. 
Methodology: capital markets. 

Study of "off balance sheet" activities of forty-six international finance compa- 
nies. Finds that significant market reactions did not occur immediately. 

298. Hagigi, Moshe; Sponza, Andrea, Italy/United States/European Economic Commu- 

nity/Central & South America (Boston University//Boston University visiting 
from University of Venice). Financial Statements Ananlysis of Italian Compa- 
nies: Accounting Practices, Environmental Factors, and International Corporate 



Bibliography 99 

Performance Comparisons [financial accounting and reporting]. The Interna- 

tionalJournol of Accounting. 1990; 25(4): 234-251. 

Methodology: empirical descriptive. 

Study of the financial statements of thirty-four Italian companies. Discusses the 

factors affecting Italian accounting practices and the effect they had on the 

financial ratios. 

299. Hakansson, Nils H., none (Yale University). Normative Accounting Theory and the 

Theory of Decision [accounting theory]. The International Journal of Account- 
ing. 1969 Mar; 4(2): 33-47. 
Methodology: theoretical. 

Discussion of an approach to the construction of normative accounting theory 
with respect to both methodology and substance. 

300. Hall, L. LeVan, developing countries (Communities Economic Development Fund, 

Canada). The Multinational Corporation: Its Impact on Developing Countries 
[economics and development]. The Multinational Corporation: Accounting and 
Social Implications. Champaign. IL: Center for International Education and 
Research in Accounting; 1977 Jan: 93-106. 
Methodology: deductive descriptive. 

Explanation of the effects of the multinational corporation on developing coun- 
tries. Calls for controls to protect these countries. 

301. Hall, Thomas W.; Snavely, H. Jim. United States/global (University of Texas at 

Arlington/ZUniversity of Texas at Arlington). Translated Financial Statements 

Can Be Meaningful [financial accounting and reporting]. The International 

Journal of Accounting. 1984 Sep; 20(1): 153-170. 

Methodology: theoretical. 

Presentation of a method of translation, as compared with methods now used. 

302. Haller, Axel. Germany (University of Augsburg. Germany). The Relationship of 

Financial and Tax Accounting in Germany: A Major Reason for Accounting 

Disharmony [financial accounting & reporting]. The International Journal of 

Accounting. 1992; 27(4): 310-323. 

Methodology: deductive descriptive. 

Detailed study of the influence and relationship of tax accounting on financial 

accounting in Germany and other countries in the European Economic 

Community. 

303. Hamer. John G.; Kistler. Linda H.. United States (University of Lowell/ZUniversity 

of Lowell). The Statement of Cash Flow— An Analysis of Translation and 
Remeasurement Techniques for Foreign Subsidiaries [financial accounting and 
reporting]. The International Journal of Accounting. 1990; 25( 1 ): 29-41. 
Methodology: deductive descriptive. 

Discussion of the translation and remeasurement methods necessary when the 
statement of cash flows is prepared for foreign tlrms. 

304. Hamer, John G.; Kistler. Linda H.. United States (University of Lowell/ZUniversity 

of Lowell). The Impact of Foreign Currency Translations on the New FASB 
Statement of Cash Flows [financial accounting and reporting]. The Interna- 
tional Journal of Accounting. 1987 Sep; 23(1): 129-144. 
Methodology: deductive descriptive. 



100 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Discussion and presentation of the statement of cash flows. 

305. Hammer. Richard. United States (Price Waterhouse & Company). Financial Plan- 

ning to Avoid Tax Problems [taxation]. The International Journal of 
Accounting. 1972 Mar; 7(2): 23-34. 
Methodology: deductive descriptive. 

Discussion of (1) organizational methods needed to operate abroad, (2) tax-sav- 
ing opportunities available to corporation taxpayers through the WHTC and 
possessions corporation provisions, (3) tax problems arising from Section 502 
of the Internal Revenue Code, and (4) U.S. foreign tax credit rules. 

306. Hanna, John R., none (McMaster University, Canada). An Application and Evalua- 

tion of Selected Alternative Accounting Income Models [accounting theory]. 
The International Journal of Accounting. 1972 Sep; 8(1): 135-167. 
Methodology: empirical descriptive. 
Application of selected models to determine financial position and income. 

307. Hardman, D. J., Solomon Islands (The New South Wales Institute of Technology, 

Australia). Accounting Development in the Solomon Islands [professional 

development]. The International Journal of Accounting. 1984 Sep; 20(1): 

141-152. 

Methodology: deductive descriptive. 

Discussion of the development of the accounting profession in the Solomon 

Islands. Holds that modernizing and building a more indigenous accounting 

profession is necessary for the economic development of the Solomon Islands. 

308. Hartmann, Bemhard. none (Technical University of Berlin). The Effect of EDP 

Systems on the Internal Organization of the Firm [managerial accounting]. The 
International Journal of Accounting. 1966 Mar; 1(2): 101-117. 
Methodology: empirical descriptive. 

Discussion of the changes in the traditional organizational structure of the firm 
caused by EDP Systems. 

309. Hartnett, Neil A., Australia/United Kingdom/United States (University of Newcas- 

tle, New South Wales. Australia). Corporate Financial Forecast Accuracy: An 
Australian Study [financial accounting & reporting]. r/ie International Journal 
of Accounting. 1993; 28(3): 248-258. 
Methodology: capital markets. 

Study of corporate financial forecast accuracy behavior as denoted in revenue 
forecasts presented in prospectus and related published data of companies listed 
on the Australian Stock Exchange, with particular emphasis on revenue and net 
operating profit. 

310. Hassan, Naim A., United Kingdom/United States (University of Birmingham, 

England). Accounting Education and Training in the United Kingdom: The 
Search for a New Strategy [accounting education]. Comparative International 
Accounting Educational Standards. Champaign, IL: Center for International 
Education and Research in Accounting; 1990 Apr: 109-131. 
Methodology: deductive descriptive. 

Discussion of current practices in accounting education in the U.K. Compares 
the U.S.' programs with those used in the U.K. and calls for more research 
funding. 



Bibliography 101 

311. Hassan, Nairn A., United Kingdom/West Germany/France (University of Birming- 

ham, England). Different Business Accounting Policies as a Function of 
Macroaccounting Influences: A Comparative Study in Selected European 
Countries [financial accounting and reporting]. The Recent Accounting and 
Economic Developments in Western Europe. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 59-90. 
Methodology: empirical descriptive. 
Study of the macroaccounting models used in several European countries. 

312. Hassan, Naim A., United Kingdom/United States/Arab Countries/Kuwait (Univer- 

sity of Birmingham, England). International Accounting Standards: Desirable 
as a Short-term Solution in the Case of the Arab Gulf States? [financial 
accounting and reporting]. The Recent Accounting and Economic Develop- 
ments in the Middle East. Champaign, IL: Center for International Education 
and Research in Accounting; 1985 May: 69-100. 
Methodology: empirical descriptive. 

Survey of the annual reports of Arab Gulf States corporations, which reveals 
that the reports are the primary source of information of users in that area. 

313. Hausman, Donald I., United States (Deloitte & Touche). The Foreign Direct Invest- 

ment Program [economics and development]. The International Journal of 
Accounting. 1968 Sep; 4(1): 67-80. 
Methodology: deductive descriptive. 

A study of the Foreign Direct Investment Program, which emphasizes its limi- 
tations for overseas business activities. 

314. Hauworth, II William P., Argentina/Brazil/Mexico/Chile/United Kingdom/South 

Africa/Australia/Canada/Germany/Netherlands/New Zealand (Arthur Andersen 
& Company). A Comparison of Various International Proposals on Inflation 
Accounting: A Practitioner's View [financial accounting and reporting]. The 
International Journal of Accounting. 1980 Sep; 16(1): 63-82. 
Methodology: deductive descriptive. 

Study of the methodology used by each company for inflation accounting. Con- 
tends that most countries have just started to account for inflation and that a 
general lack of understanding exists as to the usefulness of this information. 
Concludes that in time inflation accounting will become more important to 
financial statement users. 

315. Hauworth, II William P., none (Arthur Andersen & Company). Problems in the 

Development of Worldwide Accounting Standards [financial accounting and 
reporting]. The International Journal of Accounting. 1973 Sep; 9(1): 23-34. 
Methodology: deductive descriptive. 

Outline of several problems which impede the development of worldwide 
accounting standards. 

316. Hayes, Donald J., Canada/United States/Europe (Arthur Young & Company). The 

International Accounting Standards Committee— Recent Developments and 
Current Problems [financial accounting and reporting]. The International Jour- 
nal of Accounting. 1980 Sep; 16(1): 1-10. 
Methodology: deductive descriptive. 



102 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Discussion of three problems facing the lASC: the lack of recognition, identifi- 
cation of objectives, and intervention by international bodies. Holds that the 
lASC is addressing these problems, but that it will need continued professional 
support. 

317. Heaston. Patrick H., United States/global (Drake University). Qualification 

Requirements for Public Accounting in Selected Foreign Countries: A Compar- 
ison with the United States [public accounting]. The International Journal of 
Accounting. 1984 Sep; 20(1): 71-94. 
Methodology: empirical descriptive. 

Comparison by country of the professional requirements necessary to become a 
professional public accountant. 

318. Heck, Jean Louis; Jensen, Robert E.; Cooley, Philip L., United States (Villanova 

University/ZTrinity University/ZTrinity University). An Analysis of Contribu- 
tors to Accounting Journals. Part II: The Individual Academic Accounting 
Journals [professional development]. The International Journal of Accounting. 
1991; 26(1): 1-17. 
Methodology: empirical statistical. 

Disaggregated analysis of contributors to 24 accounting journals. Finds that top 
contributors tend to spread their works among various journals. 

319. Heck, Jean Louis: Jensen, Robert E.; Cooley Philip L., United States (Villanova 

University/ZTrinity University/ZTrinity University). An Analysis of Contribu- 
tors to Accounting Journals. Part I: The Aggregate Performances [professional 
development]. The International Journal of Accounting. 1990; 25(3): 202-217. 
Methodology: empirical statistical. 

Study of twenty-four international accounting journals through 1988. Finds an 
increase in co-authorship and number of articles written. 

320. Heinen, Edmund, none (University of Munich). Goals in Managerial Economics 

[managerial accounting]. The International Journal of Accounting. 1976 Mar; 

11(2): 1-10. 

Methodology: theoretical. 

Presentation of the control and economic benefit to be obtained through use of 

management by objectives. 

321. Heinen, Edmund, none (University of Munich). Supplemented Multi-Purpose 

Accounting [accounting theory]. The International Journal of Accounting. 1978 

Sep; 14(1): 1-15. 

Methodology: theoretical. 

Presentations of the different methods of multipurpose accounting which holds 

that the multi-purpose accounting theory should be regarded not only as an 

accounting theory, but also as an internal communication theory. 

322. Heintz, James A.; Han, Jin-Soo, Korea/United States (Indiana University//Dongguk 

University, Korea). A Study of Audit Judgments of Korean CPAs [auditing]. 

The International Journal of Accounting. 1985 Sep; 21(1): 21-37. 

Methodology: theoretical. 

Comparison of internal control judgements with those observed in earlier 

research, which finds that present judgments are consistent with ones studied 

previously. 



Bibliography 103 

323. Hendriksen, Eldon S., United Kingdom (Washington State University). Disclo- 

sures — Insights Into Requirements in the United Kingdom [accounting theory]. 
The International Journal of Accounting. 1969 Mar; 4(2): 21-32. 
Methodology: deductive descriptive. 

Review of the 1967 Companies Act in Great Britain and its relevance to current 
proposals and discussions in the U.S. 

324. Hermanson, Dana, United States (Kennesaw State College, Marietta, Georgia). 

Multinational External Audit Planning [auditing]. The International Journal of 
Accounting. 1993; 28(3): 206-214. 
Methodology: empirical descriptive. 

Examination of how multinational companies are audited by Big Six compa- 
nies. Emphasis is given to numerous risk factors involving multinational audit 
planning. 

325. Hermanson, Heather M.; Hermanson, Dana R.; Carcello, Joseph V., United States 

(Kennesaw State University/University of Tennessee). An Analysis of Multina- 
tional "Audit Failures" [auditing]. The International Journal of Accounting, 
1996; 31(3): 281-291. 
Methodology: Empirical descriptive. 

An examination of the public clients of the Big Eight (Six) that declared bank- 
ruptcy from 1/1/88 through 12/31/92 and that had in excess of $40 million of 
revenue. Indicates that multinational factors are not associated with a large 
number of audit failures during the sample period. 

326. Higson, Andrew; Blake, John, United Kingdom/European Community (Loughbor- 

ough University Business School, Leicestershire, United KingdomZ/University 
of Central Lanashire, Preston, United Kingdom). The True and Fair View Con- 
cept-A Formula for International Disharmony: Some Empirical Evidence 
[financial accounting & reporting]. The International Journal of Accounting. 
1993; 28(2): 104-115. 
Methodology: deductive descriptive. 

Study of the increasing importance of the "true and fair view" concept in inter- 
national accounting. 

327. Ho, Joanna L.; Chang, Chengyee Janie, Taiwan/United States (University of Cali- 

fornia, Irvine//University of California, Irvine). Does National Culture or 
Professional Knowledge Affect Auditors' Probabilistic Conjunction Judg- 
ments? A Study of the United States Versus Taiwan [auditing]. The 
International Journal of Accounting. 1994; 29(3): 189-205. 
Methodology: empirical statistical. 

Comparative study of the influence of culture and job experience on the diag- 
nostic probability judgments of Taiwanese and American auditors. 

328. Ho, Simon S. M., United Kingdom (The Chinese University of Hong Kong). The 

Impact of Using Risk Analysis in Capital Budgeting on Earnings Performance: 

The UK Experience [managerial accounting]. The International Journal of 

Accounting. 1992; 27(1): 1-14. 

Methodology: empirical statistical. 

Examination of the effectiveness of probabilistic risk analysis in improving a 

firm's 9apital budgeting program over simple risk adjustment analysis. 



104 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

329. Holzer, H. Peter; Tremblay, Doria. Thailand/Tunisia (University of Illinois at 

Urbana-Champaign/ZLaval University in Quebec. Canada). Accounting and 
Economic Development: The Cases of Thailand and Tunisia [economics and 
development]. The International Journal of Accounting. 1973 Sep; 9(1): 67-80. 
Methodology: deductive descriptive. 

Outline of the needs for accounting in a developing country. Provides an analy- 
sis of the status of accounting in Thailand and Tunisia illustrates the extent to 
which the needs of accounting are being met in specific developing nations. 

330. Hooper. Paul; Liao. Li-Min, United States (University of Delaware/ZContel Service 

Corporation). Foreign Currency Accounting: A Review and Critique of Major 
Empirical Studies [financial accounting and reporting]. The International Jour- 
nal of Accounting. 1990; 25(2): 113-12^6. 
Methodology: theoretical. 

Presentation of the xarious research methodologies and factors affecting foreign 
currency accounting. 

331. Hooper. Paul; Page, John; Smith, Karen. United States/United Kingdom/Canada 

(University of Delaware/ZTulane Uni\ ersity/ZPrice Waterhouse & Company). 
Accountants" Legal Liability: An International Comparison [public account- 
ing]. The International Journal of Accounting. 1985 Mar; 20(2): 65-80. 
Methodology: deductive descriptive. 

Comparison of the accountants" legal liability in the U.S., the U.K., and 
Canada. 

332. Hopwood. Anthony G.: Johnson. H. Thomas, none (London School of Economics 

and Political Science/ZPacific Lutheran University). Accounting History's 
Claim to Legitimacy [accounting history]. The International Journal of 
Accounting. 1986 Mar; 21(2): 37-46. 
Methodology: theoretical. 

Presentation of Roger Cister's arguments regarding the legitimacy of account- 
ing histor\'. 

333. Hoque. Zahirul. Bangladesh (Victoria University of Wellington, Wellington, New 

Zealand). Budgetary Control Systems in Public Sector Enterprises in a Devel- 
oping Country: Some Evidence from Bangladesh [managerial accounting]. The 
International Journal of Accounting. 1995; 30(4): 344-355. 
Methodology: empirical statistical. 

Study to determine how managers perceive and utilize organizational tools such 
as budgeting systems in the jute mills of Bangladesh. 

334. Hoshower, I^on B.; Mandel, Linda Ann, United States (Pennsylvania State Uni- 

versity/ZComell University). Transfer Pricing Policies of Diversified U. 

S. -Based Multinationals [managerial accounting]. The International Journal of 

Accounting. 1986 Sep; 22(1); 51-59. 

Methodology: empirical descriptive. 

Surxey of U.S. -based multinational corporations regarding their transfer pricing 

policies. Finds that policies are decentralized. 

335. Hossain, Mahmud; Tan, Lin Mei; Adams. Mike, Malaysia (Massey University, 

Palmerston North. New Zealand/ZMassey University, Palmerston North, New 
Zealand/ZMassey University, Palmerston North, New Zealand). Voluntar>' Dis- 



Bibliography 105 

closure in an Emerging Capital Market: Some Empirical Evidence from 
Companies Listed on the Kuala Lumpur Stock Exchange [economics & devel- 
opment]. The International Journal of Accounting. 1994; 29(4): 334-351. 
Methodology: capital markets. 

Examination of characteristics which influence the level of voluntary disclosure 
in annual reports of companies listed on the Kuala Lumpur Stock Exchange. 

336. Hosseini, Ahmad; Aggarwal, Raj, United States (University of Detroit/ZUniversity 

of Toledo). Evaluating Foreign Affiliates: The Impact of Alternative Foreign 

Currency Translation Methods [managerial accounting]. The International 

Journal of Accounting. 1983 Sep; 19(1): 65-87. 

Methodology: modeling. 

Study of ROI as to its level of distortion using different translation methods. 

Contends that ROI was sensitive not only to the translation method used, but 

also to structure, dividend policy, and exchange rate fluctuations. 

337. Hosseini, Ahmad; Rezaee, Zabihollah, United States/global (University of Detroit// 

University of Detroit). Impact of SEAS No. 52 on Performance Measures of 

Multinationals [financial accounting and reporting]. The International Journal 

of Accounting. 1990; 25(1): 43-52. 

Methodology: empirical descriptive. 

Survey of 109 multinational companies regarding the effects of SEAS No. 52. 

338. Houghton, Keith A.; Bell, Richard, Australia (Western Australian Institute of Tech- 

nology/ZUniversity of Melbourne, Australia). Evaluations of Accounting and 
Finance Journals: The Australian View [professional development]. The Inter- 
national Journal of Accounting. 1984 Sep; 20(1): 179-187. 
Methodology: empirical descriptive. 

Survey of Australian educators regarding the quality of a number of accounting 
journals. Finds that factors such as "reading frequency," "content familarity," 
and whether or not the journal had published the respondents' work affected the 
evaluation. 

339. Hove, Mfandaidza R., developing countries/Developed Countries/United Kingdom 

(University of Zimbabwe). Accounting Practices in Developing Countries: 
Colonialism's Legacy of Inappropriate Technologies [economics and develop- 
ment]. The International Journal of Accounting. 1986 Sep; 22(1): 81-99. 
Methodology: deductive descriptive. 

Discussion of the influences that investing countries have had on the less devel- 
oped countries. 

340. Hove, Mfandaidza R., developing countries (University of Zimbabwe). The Inap- 

propriateness of International Accounting Standards in Less Developed 
Countries: The Case of International Accounting Standard Number 24 — 
Related Party Disclosures — Concerning Transfer Prices [financial accounting 
and reporting]. The International Journal of Accounting. 1989; 24(2): 165-179. 
Methodology: theoretical. 

Discussion of the transfer pricing methodology and disclosure used by transna- 
tional corporations in less developed countries. 

341. Hoyt, Ronald E., United States/Soviet Union (University of Arkansas). Profit Mea- 

surement in East- West Trade and Industrial Cooperation: Concepts, Criteria, 



106 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

and Special Problems [financial accounting and reporting]. The International 
Journal of Accounting. 1978 Mar; 13(2): 119-144. 
Methodology: theoretical. 

Presentation of the different models and practices involved in East- West trade. 
States that generally accepted accounting principles do not present these trans- 
lations properly and concludes that a change is needed. 

342. Hoyt, Ronald E.; Maples, Lawrence D., Soviet Union/China/United States/Canada 

(University of Laval, Canada/ZUniversity of Louisville). Accounting for Joint 
Ventures with the Soviet Bloc and China [financial accounting and reporting]. 
The InternationalJournai of Accounting. 1980 Sep; 16(1): 105-124. 
Methodology: deductive descriptive. 

Discussion of the consolidation practices necessary when a firm is involved in a 
joint venture with an Eastern bloc country. Concludes with a discussion of the 
implications of U.S. tax laws on East-West trade. 

343. Hsu, Tsun Tsien, China (Wuhan University, The People's Republic of China). 

Recent Business and Accounting Developments in China [financial accounting 

and reporting]. The International Journal of Accounting. 1981 Sep; 17(1): 

157-160. 

Methodology: deductive descriptive. 

Discussion of the various factors necessary for the modernization of China. 

344. Hudack, Lawrence R.: Orsini, Larry L., Japan (St. Bonaventure University, New 

York//St. Bonaventure University, New York). A Methodology of Caution to 
Users of Japanese Financial Reports: A Demonstration of an Enlarged Exo- 
genist Approach [social effects]. The International Journal of Accounting. 
1992:27(1): 15-26. 
Methodology: deductive descriptive. 

Examination of how the socio-economic environment undermines the funda- 
mental objectives of Japanese financial reporting. 

345. Hunziker, A. E., United States/United Kingdom (Caterpillar Tractor Company). 

Commentary to Discussion on International Accounting Challenges [financial 

accounting and reporting]. The International Journal of Accounting. 1968 Sep; 

4(1): 99-100. 

Methodology: theoretical. 

Comparison between the foreign growth of Caterpillar and of Dow Chemical 

Company. 

346. Hussein, Mohamed Elmutassim, United States/Central & South America/France/ 

United Kingdom (University of Connecticut). Translation Problems of Interna- 
tional Accounting Standards [financial accounting and reporting]. The 
International Journal of Accounting. 1981 Sep; 17(1): 147-155. 
Methodology: theoretical. 

Discussion of the language translation methods used by the International 
Accounting Standards Committee. 

347. Hussein, Mohamed Elmutassim, United States/Netherlands (University of Con- 

necticut). A Comparative Study of Cultural Influences on Financial Reporting 



Bibliography 107 

in the U.S. and the Netherlands [financial accounting and reporting]. The Inter- 
national Journal of Accounting, 1996; 31(1): 95-120. 
Methodology: empirical statistical. 

An argument that financial reporting and its regulation have multiple purposes 
reflecting each country's social, cultural, and political environment. Presents a 
comparison of financial reporting in US and Netherlands within their respective 
cultures. 

348. lino, Toshio, Japan (Hitotsubashi University, Japan). Accounting Principles and 

Contemporary Legal Action in Japan [financial accounting and reporting]. The 

International Journal of Accounting. 1967 Mar; 2(2): 65-87. 

Methodology: deductive descriptive. 

Discussion of the philosophy of the accounting provisions of the Japanese 

Commercial Code applicable to stock corporations and of the regulation for 

corporate balance sheets and income statements of Japan. 

349. Ijiri, Yuji, Global (Carnegie Mellon University). Global Financial Reporting Using 

a Composite Currency: An Aggregation Theory Perspective [accounting the- 
ory]. The International Journal of Accounting. 1995; 30(2): 95-106. 
Methodology: modeling. 

Introduction to a model for determining composite currency for multinational 
corporation with semi-permanent foreign investments. 

350. Ings, William C, United States (Arthur Young & Company). The Function of the 

Managerial Accountant in Planning and Control [managerial accounting]. Man- 
agerial Accounting: An Analysis of Current International Application. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1984 Jan: 125-137. 
Methodology: deductive descriptive. 
Discussion of the accountant's role in planning and control. 

35 1 . Ivancevich, Daniel Michael. United Kingdom/United States (University of Nevada, 

Las Vegas). Acquisitions and Goodwill: The United Kingdom and the United 

States [economics & development]. The International Journal of Accounting. 

1993:28(2): 156-169. 

Methodology: empirical statistical. 

Empirical study seeking to find evidence of differences in recording purchased 

goodwill in companies taken over by American and British firms. 

352. Jacob, Hans-Joachim, Germany (BDO Germany). Ethical Concerns and Regula- 

tions of the German Certified Public Accountant (Wirtschaftsprufer) 
[professional development]. Ethical Considerations in Contemporary Interna- 
tional Accounting Practice. Champaign, IL: Center for International Education 
and Research in Accounting, Department of Accountancy; 1992: 19-30. 
Methodology: deductive descriptive. 

Descriptive summary of the regulations and the consequential ethical issues 
involving the German certified public accountant. 

353. Jacobi, Michael H., Netherlands/Germany/Sweden/United States (a Swiss multina- 

tional chemical company). The Unit of Account in Consolidated Financial 



108 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Statements of Multinational Enterprises [financial accounting and reporting]. 
The InternationalJownal of Accounting. 1980 Mar; 15(2): 17-34. 
Methodology: deductive descriptive. 

Presentation of the use of special drawing rights as a uniform method of restat- 
ing foreign denominated financial statements. Concludes that because people 
lack an understanding of special drawing rights, this method will provide state- 
ments that are at first hard to understand. 

354. Jagerhom. Reginald. Finland/United States (Swedish Graduate School of Econom- 

ics and Business Administration of Helsinki). Some Aspects of Finnish 
Financial Reporting Practices [financial accounting and reporting]. The Inter- 
national Journal of Accounting. 1970 Sep: 6( 1 ): 15-23. 
Methodology: deductive descriptive. 

General comparison of the annual reporting of Finnish firms and U.S. firms, 
accompanied by a discussion of legislative reform. 

355. Jagetia. Lai C: Nwadike, Evaristus C.. Nigeria/United States/United Kingdom 

(Cleveland State University/Zassociated with the Nigerian government). 
Accounting Systems in Developing Nations: The Nigerian Experience [eco- 
nomics and development]. The International Journal of Accounting. 1983 Mar; 
18(2): 69-81. 

Methodology: deductive descriptive. 

Discussion of the considerations involved in developing an accounting system 
for developing countries. Concludes that accounting systems should be devel- 
oped on a subjective basis. 

356. Jaggi. Bikki L., Developing Countries (State University of New York at Bingham- 

ton). Accounting Studies of Developing Countries: An Assessment [economics 

and development]. The International Journal of Accounting. 1973 Sep; 9(1): 

159-170. 

Methodology: deductive descriptive. 

Assessment of the progress of international accounting. Examines the potential 

for further research in this field. 

357. Jaggi, Bikki L.. Germany (State University of New York at Binghamton). An Anal- 

ysis of Corporate Social Reporting in Germany [social effects of accounting]. 

The International Journal of Accounting. 1980 Mar; 15(2): 35-45. 

Methodology: deductive descriptive. 

Discussion of social reporting in Germany. Concludes that German firms have 

made progress in social accounting and that other countries could follow their 

example. 

358. Jaggi, Bikki L., none (State University of New York at Binghamton). The Impact of 

the Cultural Environment on Financial Disclosures [social effects of account- 
ing]. The International Journal of Accounting. 1975 Mar; 10(2): 75-84. 
Methodology: theoretical. 

Study of the impact of the cultural environment and individual value orienta- 
tions on information disclosures. Offers a hypothesis as to the reliabilit\ of 
financial disclosures. 



Bibliography 109 

359. Jaggi, Bikki L., India (State University of New York at Binghamton). A Review of 

the Accounting Profession in India [professional development]. The Interna- 
tional Journal of Accounting. 1970 Sep; 6(1): 35-51. 
Methodology: deductive descriptive. 

A brief historical perspective, followed by a discussion of some issues faced by 
the accounting profession in India and of the present status of the profession. 

360. Jaggi, Bikki; Zhao, Ronald, Hong Kong (Rutgers University/City University of 

Hong Kong). Environmental Perfomance and Reporting Perceptions of Manag- 
ers and Accounting Professionals in Hong Kong [financial accounting and 
reporting]. The International Journal of Accounting, 1996; 31(3): 333-346. 
Methodology: Empirical statistical. 

An evaluation of Hong Kong managers' perceptions of envirionmental disclo- 
sures by their firms. It examines professional accountants' perceptions of 
environmental disclosures and finds that there was a gap between perceived 
importance of environmental performance and actual environmetnal 
disclosures. 

361. Jaruga, Alicja A., Poland (University of Lodz, Poland). Problems of Uniform 

Accounting Principles in Poland [financial accounting and reporting]. The 

International Journal of Accounting. 1972 Sep; 8(1): 25-41. 

Methodology: deductive descriptive. 

Analysis of current uniform accounting principles, with emphasis placed on 

existing problems and emerging needs. 

362. Jaruga, Alicja A., Poland (University of Lodz, Poland). Recent Developments in 

Polish Accounting: An International Transaction Emphasis [financial account- 
ing and reporting]. The International Journal of Accounting. 1974 Sep; 10(1): 
1-18. 

Methodology: deductive descriptive. 

Study of problems associated with the increase in Poland's foreign trade, result- 
ing from the development of the Polish economy and accounting system. 

363. Jaruga, Alicja A., Poland (University of Lodz, Poland). Recent Developments of 

the Auditing Profession in Poland [auditing]. The International Journal of 

Accounting. 1976 Sep; 12(1): 101-109. 

Methodology: deductive descriptive. 

Analysis of the development of the auditing profession in Poland and the role 

the PAA has played in this general development. 

364. Jaruga, Alicja A., Poland (University of Lodz, Poland). Theoretical and Practical 

Problems of Accounting for Changing Prices in Poland-Part II [financial 

accounting and reporting]. The Impact of Inflation on Accounting: A Global 

View. Champaign, IL: Center for International Education and Research in 

Accounting; 1979 May: 93-102. 

Methodology: theoretical. 

Theoretical description of the accounting practices in Socialist Poland. 

365. Jeffrey, Cynthia; Weatherholt, Nancy; Lo, Steven. Taiwan (Iowa State University/ 

The University of Missouri-Kansas City/Grant Thornton, LLP). Ethical Devel- 
opment, Professional Committement and Rule Observance Attitudes: A Study 



110 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

of Auditors in Taiwan [professional development]. The International Journal of 
Accounting, 1996; 31(3): 365-379. 
Methodology: Empirical statistical. 

An examination of ethical reasoning and professional commitment in Taiwan 
by focusing on the relation between professional commitment, ethical develop- 
ment of accountants, and accountants' attitudes towards following rules. 

366. Jegers, Marc; Buijink, Willem, European Economic Community/Belgium (Univer- 

sity of Antwerp, Belgium/ZUniversity of Limburg, the Netherlands). The 
Reliability of Financial Accounting Data Bases: Some Belgian Evidence [finan- 
cial accounting and reporting]. The International Journal of Accounting. 1987 
Sep; 23(1): 1-21. 

Methodology: empirical statistical. 

Study of the reliability of the financial statements of Belgian firms available on 
data base. Finds numerous discrepencies among these statements. 

367. Jensen, Daniel L., none (Purdue University). Professional Responses to Reporting 

the Impact of Inflation: A Discussion-Part I [financial accounting and report- 
ing]. The Impact of Inflation on Accounting: A Global View. Champaign, IL: 
Center for International Education and Research in Accounting; 1979 May: 
179-182. 

Methodology: deductive descriptive. 
Discussion of the issues raised by Alain M. Oberrotman in his paper. 

368. Jensen, Daniel L., United States (Purdue University). The Role of Interest in 

Revolving Capital Plans for Cooperative Enterprise [economics and develop- 
ment]. The International Journal of Accounting. 1974 Mar; 9(2): 105-109. 
Methodology: theoretical. 

Discussion of the role of interest in revolving capital plans, which argues that 
the failure to pay interest may lead to instability in the cooperative organization 
and aggravate capital accumulation problems. Recommends that interest be 
imputed to member-capital accounts by credit based on contributed capital and 
offsetting charges based on patronage. 

369. Jermakowicz, Eva; Rinke, Dolores F., Hungary/Poland/Czech Republic/Slovak 

Federal Republic (University of Southern Indiana/ZPurdue University-Calu- 
met). A Comparative Analysis of New Accounting Standards in Hungary, 
Poland, and the Czech and Slovak Federal Republics with International 
Accounting Standards and the European Community Directives [miscella- 
neous]. The New Europe: Recent Political and Economic Implications for 
Accountants and Accounting. Champaign, IL: Center for International Educa- 
tion and Research in Accounting; 1994: 253-274. 
Methodology: deductive descriptive. 

Descriptive review of new accounting regulations enacted in various former 
Soviet bloc countries and an examination of these regulations to determine the 
degree of harmony with the standards of lASC and the European Community. 

370. Johansson, Sven-Erik, Sweden (Stockholm School of Economics). An Appraisal of 

the Swedish System of Investment Reserves [financial accounting and report- 
ing]. The International Journal of Accounting. 1965 Sep; 1(1): 85-92. 



Bibliography 111 

Methodology: deductive descriptive. 

Brief description of the basic structure and function of the Swedish system of 

investment reserves and a tentative evaluation of the current system. 

371. Johnson, Eldon L., none (University of Illinois at Urbana-Champaign). Interna- 

tional University Reponsibilities [accounting education]. The International 
Journal of Accounting. 1968 Sep; 4(1): 121-128. 
Methodology: theoretical. 

Discussion of the inadequacies in international policy education at the univer- 
sity level. 

372. Johnson, Eldon L., United States/Soviet Union/China/Africa (University of Illinois 

at Urbana-Champaign). Universities and Our Other Citizenship [accounting 

education]. The Recent Accounting and Economic Developments in Western 

Europe. Champaign, IL: Center for International Education and Research in 

Accounting; 1985 May: 115-120. 

Methodology: deductive descriptive. 

Discussion of the role of the university on the international level. 

373. Johnson, Gene H.; Byington, J. Ralph, United States/Spain (Louisiana Tech Uni- 

versity, Ruston, Louisiana/ZLouisiana Tech University, Ruston, Louisiana). 
Accounting Competence, Machiavellianism, and Budget-Related Behavior: A 
Comparative Study of U.S. and Spanish Managers [managerial accounting]. 
The International Journal of Accounting. 1993; 28(4): 335-346. 
Methodology: empirical descriptive. 

Comparative study to determine how American and Spanish managers differ in 
budget-related attitudes and behavior. 

374. Johnson, Van E.; Khurana, Inder, United States (Northern Illinois University//Uni- 

versity of Missouri-Columbia). Voluntary Disclosures and the SEC: Rule 144a 

Private Debt Placements [professional development]. The International Journal 

of Accounting. 1994; 29(2): 136-145. 

Methodology: empirical descriptive. 

Study providing preliminary evidence on the extent of voluntary disclosures 

based upon Securities and Exchange Commission's Rule 144a. 

375. Jones, Gardner M.; Kinfu, Johannes, Ethiopia/developing countries (Michigan 

State University/ZHaile Selassie I University, Ethiopia). The Birth of an 
Accounting Profession: The Ethiopian Experience [public accounting]. 77/^' 
International Journal of Accounting. 1971 Sep; 7(1): 89-98. 
Methodology: deductive descriptive. 

Presentation of the historical circumstances leading in the development of 
accounting in Ethiopia. Emphasizes the changes that are needed in institutions, 
laws, and customs so as to create a full-fledged accounting profession in that 
country. 

376. Kafer, Karl, Europe/United States/Germany/Austria/France/Switzerland (Univer- 

sity of Zurich). European National Uniform Charts of Accounts [accounting 
theory]. The International Journal of Accounting. 1965 Sep; 1(1): 67-83. 
Methodology: theoretical. 

Brief history of the national charts of accounts, accompanied by a discussion of 
the pros and cons of such a system and the design of a uniform chart. 



112 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

377. Kafer, Karl: Zimmerman. V. K., United States/Europe (University of Zurich//Uni- 

versity of Illinois at Urbana-Champaign). Methodologies on the Evolution of 
the Statement of Sources and Applications of Funds [accounting theory]. The 
International Journal of Accounting. 1967 Mar: 2(2): 89-121. 
Methodology: deductive descriptive. 

Application of A. C. Littleton's theories to the history of the modern funds 
statements from its approximate origin in 1900 to the present. 

378. Kantor, Jeffrey; Grosh, Michael, Canada (University of Windsor/ZMassey Univer- 

sity. New Zealand). Deferred Income Tax Accounting: Opinions of Canadian 

Accountants [financial accounting and reporting]. The International Journal of 

Accounting. 1987 Sep; 23(1): 83-93. 

Methodology: empirical descriptive. 

Survey of Canadian chartered accountants regarding deferred income tax 

accounting. 

379. Kaocharem, Sukri. Thailand (Securities Exchange of Thailand (SET)). The Devel- 

opment of the Securities Exchange in Thailand [financial accounting and 
reporting]. The International Journal of Accounting. 1976 Sep; 12(1): 19-26. 
Methodology: deductive descriptive. 

Summary of the development of the securities exchange in Thailand which con- 
tends that Thailand's goal is to force the growth of a capital market. 

380. Karnes, Allan; Sterner, Julie; Welker, Robert; Wu, Frederick, Taiwan/United States 

(Southern Illinois University/ZSouthem Illinois University/ZSouthem Illinois 
UniversityZZSouthem Illinois University). A Bicultural Study of Independent 
Auditors" Perceptions of Unethical Business Practices [social effects of 
accounting]. The International Journal of Accounting. 1989; 24(1): 29-41. 
Methodology: empirical statistical. 

Study comparing the social, cultural, and ethical concerns of public accountants 
in the U.S. and Taiwan. 

381. Karnes. Allen: Sterner, Julie. United States (Southern Illinois University-Carbon- 

daleZZSouthem Illinois University-Carbondale). An Empirical Investigation of 
Morality Judgments by CPAs and Non-CPAs: Implications for Peer Reviews 
[professional development]. Ethical Considerations in Contemporary Interna- 
tional Accounting Practice. Champaign, IL: Center for International Education 
and Research in Accounting, Department of Accountancy; 1992: 31-48. 
Methodology: empirical statistical. 

Comparative examination of a hypothetical self-monitored review program as 
opposed to the current peer review system in place. 

382. Katano, Ichiro, none (Hitotsubashi University, Japan). Structure of Accounting for 

Changing Money Values [accounting theor>']. The International Journal of 

Accounting. 1967 Mar; 2(2); 21-36. 

Methodology: deductive descriptive. 

Study of the structure of accounting for changing money value. 

383. Katsuyama, Susumu, Japan (Nihon University, Japan). Recent Problems of the 

Financial Accounting System in Japan [financial accounting and reporting]. 
The International Journal of Accounting. 1976 Sep; 12(1): 121-131. 



Bibliography 113 

Methodology: theoretical. 

Discussion of the problems of financial accounting systems in Japan, with spe- 
cial reference to international accounting. 

384. Kazenski, Paul M.; Wong, Elaine Yin Ling, People's Republic of China (Univer- 

sity of Hawaii at Manoa/ZUniversity of Hawaii at Manoa). Unifying Accounting 
in the People's Republic of China [professional development]. The Interna- 
tional Journal of Accounting. 1994; 29(4): 352-363. 
Methodology: historical. 

Study of the underlying reasons for the recent improvements with the account- 
ing system in the People's Republic of China. 

385. Keasey, Kevin; McGuiness, Paul, United Kingdom (University of Leeds, United 

Kingdom/ZChinese University of Hong Kong). An Examination of the Accu- 
racy and Bias Prospectus Earnings Forecasts: UK Evidence [accounting 
theory]. The International Journal of Accounting. 1991; 26(4): 252-263. 
Methodology: theoretical. 

Examination of accuracy and bias of prospectus earnings forecasts (PEFs). 
Reveals that PEP is a conservative but more accurate estimation of future earn- 
ings while positively related to the time horizon of forecasts. 

386. Kenny, Sara York; Larson, Robert K., Global (University of Utah, Salt Lake City// 

Pennsylvania State University at Harrisburg). The Development of Interna- 
tional Accounting Standards: An Analysis of Constituent Participation in 
Standard-Setting [miscellaneous]. The International Journal of Accounting. 
1995; 30(4): 211. 

Methodology: empirical descriptive. 

Analysis determining the major organizational participants in the standard-set- 
ting process of the International Accounting Standards Committee (lASC). 

387. Kern, Werner, Germany (University of Cologne). The Accounting Concept in Ger- 

man Labor-Oriented Business Management [information systems]. The 
International Journal of Accounting. 1975 Mar; 10(2): 23-35. 
Methodology: theoretical. 

Discussion of the "labor-oriented business management" proposal, originating 
in the Institute for Economic and Social Sciences of the German Federation of 
Trade Unions, to create a more informative accounting system. Shows that this 
concept is intended to be a counterpart to traditional business management. 

388. Keyserlingk, Alexander N., none (International Finance Corporation). International 

Public Accounting: An Underdeveloped Profession [public accounting]. The 
International Journal of Accounting. 1975 Sep; 11(1): 15-22. 
Methodology: theoretical. 

Study of why auditing and accounting professions have failed to expand world- 
wide. Also discusses the expansion abroad of large audit firms in response to 
the growth of international audit firms. 

389. Keyserlingk, Alexander N.; Tetley, John C. N., United States (International 

Finance CorporationZ/International Finance Corporation). Management Con- 
trols of Investments in an International Development Bank [managerial 
accounting]. Managerial Accounting: An Analysis of Current International 



114 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Application. Champaign, IL: Center for International Education and Research 
in Accounting; 1984 Jan: 23-39. 
Methodology: deductive descriptive. 

Discussion of the management control system of the International Finance Cor- 
poration (IFC). Describes the relationships of IPC with the World Bank and the 
control system for investments before and after approval. 

390. Kim, Jeong-Bon; Krinsky, Itzhak; Lee, Jason, Korea (Concordia University, Mont- 

real, Quebec/ZMacMaster University, Hamilton, Ontario/ZMacMaster 

University, Hamilton, Ontario). The Valuation of Initial Public Offerings and 

Accounting Disclosures in Prospectuses: New Evidence from Korea [financial 

accounting & reporting]. The International Journal of Accounting. 1994; 29(1): 

46-61. 

Methodology: capital markets. 

Study involving the correlation between the valuation of initial public offerings 

(IPOs) in Korea and the different motives having an impact of such valuations. 

391. Kim, Seung H.; Kuzdrall, Paul J., United States/United Kingdom/Switzerland/ 

Chile/Colombia/Uruguay (Saint Louis University/ZUniversity of Akron). The 

Simulation of Financial Strategy under Fluctuating Exchange Rates Conditions 

[miscellaneous]. The International Journal of Accounting. 1977 Mar; 12(2): 

93-107. 

Methodology: modeling. 

Discussion of the simulation models for accounting for exchange rate changes. 

Presents models both for developed countries and for less developed countries. 

392. Kirsch, Robert J.; Becker-Dermer, Dawn, United States/Canada/United Kingdom/ 

Australia/New Zealand (Southern Connecticut State UniversityZ/Ludlow Com- 
posites Corporation, Fremont, Ohio). Proposed Revisions of International 
Accounting Standard No. 21 and their Implications for Translation Accounting 
in Selected English-Speaking Countries [financial accounting & reporting]. The 
International Journal of Accounting. 1995; 30(1): 1 - 24. 
Methodology: deductive descriptive. 

Presentation of proposed revisions to reduce the alternatives allowed in report- 
ing foreign exchange rates translations in an effort toward accounting 
harmonization. 

393. Kirsh, Robert J.; Evans, Thomas G., United States (Southern Connecticut State 

University/ZUniversity of Central Florida). The Implementation of SEAS 52: 
Did the Functional Currency Approach Prevail? [economics & development]. 
The International Journal of Accounting. 1994; 29(1): 20-33. 
Methodology: empirical statistical. 

Examination of the foreign environmental influence on the currency determina- 
tion process as presented in SFAS 52. Results of this analysis do not support 
U.S. dollar approach to currency translation. 

394. Kirsh, Robert J.; Johnson, Wayne, United States (Bowling Green State University// 

Bowling Green State University). The Impact of Fluctuating Exchange Rates 
on US Multinational Corporate Budgeting for, and Performance Evaluation of. 



Bibliography 115 

Foreign Subsidiaries [managerial accounting]. The International Journal of 

Accounting. 1991; 26(3): 149-173. 

Methodology: empirical statistical. 

Evaluation of methods used to implement foreign exchange rates in preparing 

operating budgets of foreign subsidiaries of US based multinational 

corporations. 

395. Koch, Helmut, Germany (Westfalische Wilhelms Universitat, Germany). The Con- 

cept of Synchronized Profit and Loss Accounting in Response to Continuous 

Increases or Decreases in Prices [managerial accounting]. The International 

Journal of Accounting. 1986 Mar; 21(2): 133-144. 

Methodology: theoretical. 

Discussion of profit and loss accounting during changes in prices. Presents a 

model for "synchronized profit and loss accounting.." 

396. Kohler, Eric L., United States (accounting consultant). Methodologies on Activity 

Accounting [managerial accounting]. The International Journal of Accounting. 

1967 Mar; 2(2): 59-64. 

Methodology: deductive descriptive. 

Outline of the principle features of activity accounting. 

397. Kohler, Eric L., United States (accounting consultant). On Developing Interna- 

tional Accounting Meanings [financial accounting and reporting]. The 
International Journal of Accounting. 1965 Sep; 1(1): 35-40. 
Methodology: deductive descriptive. 

Discussion of the simplification and overuse of terms in the accounting profes- 
sion and the difficulties with defining and translating such terms. 

398. Kortan, Jerzy, Eastern bloc countries (Institute for Organization and Management/ 

University of Lodz, Poland). International Economic Organizations and Joint 
Enterprises in Socialist Countries — Principles of Operation and Management 
[economics and development]. The International Journal of Accounting. 1976 
Sep; 12(1): 147-165. 
Methodology: deductive descriptive. 

Discussion of the roles and benefits of cooperative organizations such as joint 
international organizations, joint international economic organizations, and 
joint enterprises. 

399. Kosiol, Erich E., none (Free University of Berlin). Accounting Models as Bases of 

Managerial Decisions [accounting theory]. The International Journal of 

Accounting. 1969 Sep; 5(1): 47-59. 

Methodology: theoretical. 

Study of the need for cooperation between theory and practice in order to 

jointly construct accounting models for use in practical applications. 

400. Kosiol, Erich E., none (Free University of Berlin). An Axiomatic Approach to the 

Pagatoric Theory of Financial Income Determination [accounting theory]. The 

International Journal of Accounting. 1970 Mar; 5(2): 1-28. 

Methodology: theoretical. 

Outline of the pagatoric theory of income determination, which describes all 

entries, transactions, items, and statements of the financial bookkeeping system 



116 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

in terms of payments by reducing the amounts to various types of receipts and 
disbursements. 

401. Kosiol, Erich E., Germany (Free University of Berlin). Price Changes, Money 

Value, and Profit Distribution Within the Framework of Financial Accounting 

[accounting theory]. The International Journal of Accounting. 1966 Sep; 2(1): 

1-24. 

Methodology: deductive descriptive. 

Discussion of the German concepts of income determination which originated 

as a result of the inflationary pressures on accounting after World War I. 

402. Kosiol, Erich E., none (Free University of Berlin). A Proposal for a General Con- 

cept of Cost [accounting theory]. The International Journal of Accounting. 
1967 Sep; 3(1): 1-19. 
Methodology: theoretical. 

Study of the value of using a general cost concept in the development of a pre- 
cise theoretical foundation of the cost accounting field. 

403. Krasensky, Hans, United States (Hochschule fur Welthandel, Austria). The Con- 

cept of a Business Asset [accounting theory]. The International Journal of 

Accounting. 1967 Mar; 2(2): 47-58. 

Methodology: theoretical. 

Study of the difficulty of determining whether or not a good belongs to the 

assets of a firm. Discusses the circumstances in which a general economic good 

becomes an accountable business asset. 

404. Krieg, Emile, none (Ingenieur E.C.P.). New Landmarks for Accountancy [account- 

ing theory]. The International Journal of Accounting. 1969 Mar; 4(2): 93-1 13. 
Methodology: theoretical. 

Proposal for the abandonment of conventional double-entry principles of objec- 
tive historical costs and the adoption of a new type of double-entry principles. 

405. Kubin, Konrad W., United States (Virginia Polytechnic Institute and State Univer- 

sity). The Changing Nature of International Accounting Courses [accounting 
education]. The International Journal of Accounting. 1973 Sep; 9(1): 99-1 11. 
Methodology: deductive descriptive. 

Discussion of the changing nature of international accounting courses. Provides 
some thoughts and encouragement to colleagues who contemplate establishing, 
or participating in, an international accounting course. 

406. Kubota, Keiichi, Japan (Musaski University, Japan). Information Content of 

Accounting Numbers: Evidence on Tokyo Stock Exchange Firms [accounting 
theory]. The International Journal of Accounting. 1980 Mar; 15(2): 61-76. 
Methodology: capital markets. 

Study of the correlation between the accounting disclosure of Japanese firms 
with the return of the firms' securities. Does not pinpoint a specific part of the 
information as a cause. 

407. Kullberg. Duane R., United States/Switzerland (Arthur Andersen & Company). 

Management of a Multinational Public Accounting Firm [public accounting]. 
The International Journal of Accounting. 1981 Sep; 17(1): 1-5. 
Methodology: deductive descriptive. 



Bibliography 117 

Description of the managerial structure and internal environment of Arthur 
Anderson & Company. 

408. Kupzhasar, Naribaev, Soviet Union (Alma-Ata Institute of National Economy, 

USSR). Computer Applications in Soviet Accounting [information systems]. 
The International Journal of Accounting. 1974 Sep; 10(1): 33-43. 
Methodology: theoretical. 

Study of the use of computers in accounting in the Soviet Union and how com- 
puter use has influenced organizational and educational processes. 

409. Kurisaka. Yoshiro, Japan/United States (International Affairs of the Keizai Koho 

Center in Japan). Lessons and Opportunities in International Communication 
[economics and development]. Recent Accounting and Economic Develop- 
ments in the Far East. Champaign, IL: Center for International Education and 
Research in Accounting; 1988 May: 229-234. 
Methodology: deductive descriptive. 

Discussion of the trade relationship between the U.S. and Japan finding that 
Japan's markets are far more open than many U.S. markets. Calls for less com- 
petition and greater friendship between the two countries. 

410. Kwang, Ching-Wen, China/United Nations (California State College at Hayward). 

The Economic Accounting System of State Enterprises in Mainland China 

[financial accounting and reporting]. The International Journal of Accounting. 

1966 Mar; 1(2): 61-99. 

Methodology: theoretical. 

Study of the concept of "economic accounting" as it is used in mainland China 

and the implementation of the economic accounting system in various Chinese 

state enterprises. 

411. Lainez, Jose A.; Callao, Susana; Jarne, Jose I., Global (University of Zaragoza). 

International Hannonization of Reporting Required by Stock Markets [financial 

accounting and reporting]. The International Journal of Accounting, 1996; 

31(4): 405-418. 

Methodology: capital market 

An evaluation of the degree of reporting required on the part of the different 

stock markets from those companies which wish to be quoted on them, testing 

whether the degrees of requirements are homogeneous at an international level. 

412. Lai, Mohan; Dunk, Alan S., Smith, Gregory D.. Global (Massey University/The 

University of Western Sydney/KPMG Peat Marwick). The Propensity of Man- 
agers to Create Budgetary Slack: A Cross-National Re-Examination using 
Random Sampling [managerial accounting]. The International Journal of 
Accounting, 1996; 31(4): 483-496. 
Methodology: empirical statistical 

An examination of how managers' propensity to create budgetary slack is influ- 
enced by the importance of meeting the budget, the degree of participation 
allowed, the level of technology employed and the ability of superiors to detect 
slack. 

413. Lassila, Dennis R.; Smith, L. Murphy, United States (Texas A & M University// 

Texas A & M University). An Analysis of Alternative Tax Treatments of the 



118 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 1, 1998 

Net Income of Controlled Foreign Subsidiaries of US Multinational Corpora- 
tions [taxation]. The International Journal of Accounting. 1991; 26(1): 27-50. 
Methodology: deductive descriptive. 

Analysis of U.S. tax burden on net income of U.S. corporations' foreign subsid- 
iaries under current law and three proposals to change the law. Concludes that 
the low flat rate alternative is both simple and comparable to the current one. 

414. Laswad, Fawzi; Mak, Y. T., New Zealand/ Australia/United States/Canada/United 

Kingdom (Victoria University of Wellington. New Zealand/A^ictoria Univer- 
sity of Wellington, New Zealand). An International Comparison of Uncertainty 
Expressions in Accounting Standards [financial accounting & reporting]. The 
International Journal of Accounting. 1994:29(1): 1-19. 
Methodology: deductive descriptive. 

Discussion of uncertainty expressions used in various accounting situations and 
the consistency of their use across different countries. 

415. Latanich, Gary A.; Kaminarides, John. United States (Arkansas State University// 

Arkansas State University). Performance of Accountants in International Busi- 
ness [professional development]. The International Journal of Accounting. 
1984 Mar; 19(2): 157-164. 
Methodology: empirical statistical. 

Discussion of a survey that found a lack of productivity among accountants at 
the international level. 

416. Lau, Amy Hing-Ling; Yang, Ji-Liang, China (Oklahoma State University //Shang- 

hai Academy of Social Sciences, People's Republic of China). Auditing in 
China: Historical Perspective and Current Developments [auditing]. The Inter- 
national Journal of Accounting. 1990; 25(1): 53-62. 
Methodology: deductive descriptive. 

Discussion of the historical, governmental, social, and economic influences on 
the auditing profession in China. 

417. Lawson, G. H., United Kingdom (University of Manchester, England). The Mea- 

surement of Corporate Profitability on a Cash-Flow Basis [managerial 
accounting]. The International Journal of Accounting. 1980 Sep; 16(1): 11-46. 
Methodology: theoretical. 

Study of the negative effects that current methods of interest and taxation have 
on corporations in the U.K. and, by implication, all other democratic countries. 
Concludes that if current trends continue, lending institutions will assume con- 
trol of the corporations in the U.K. 

418. Lebow. Marc I.: Tondkar, Rasoul H., Soviet Union (Virginia Union University// 

Virginia Commonwealth University). Accounting in the Soviet Union [govern- 
mental]. The InternationalJoumal of Accounting. 1986 Sep; 22(1): 61-79. 
Methodology: deductive descriptive. 

Discussion of the historical, social, and economic influences on the Soviet 
Union's accounting system. 

419. Lee, Dominica S., Hong Kong/United States (Chinese University of Hong Kong, 

Shatin. Hong Kong). Further Evidence on Auditor Concentration: The Case of a 



Bibliography 119 

Growing Market [auditing]. The International Journal of Accounting. 1994; 

29(3): 234-250. 

Methodology: empirical descriptive. 

Comparative study of auditor concentration in Hong Kong and the United 

States and some of the underlying reasons. 

420. Lee, John Y.; Monden, Yasuhiro, United States/Japan (Pace University/University 

of Tsukuba, Japan). An International Comparison of Manufacturing-Friendly 
Cost Management Systems [managerial accounting]. The International Journal 
of Accounting, 1996; 31(2): 197-212. 
Methodology: deductive descriptive 

An international comparison of cost management systems which have claimed 
as manufacturing-friendly in US and Japan, specifically between activity-based 
costing and target costing and kaizen costing regarding their relative merits in 
strategic cost management and operational improvement and control. 

421. Lee, Samuel S. O., Korea (Korean Industrial Bank). Some Accounting and Philo- 

sophical Aspects of the Third Korean Property Revaluation Law [financial 

accounting and reporting]. The International Journal of Accounting. 1968 Mar; 

3(2): 117-123. 

Methodology: deductive descriptive. 

Study of the Korean Property Revaluation Law of 1965, suggesting areas for 

improvement. 

422. Leech, Stewart A.; Pratt, Denis J.; Magill, W. G. W., Australia (University of Tas- 

mania/ZUniversity of Tasmania/ZUniversity of Tasmania). Asset Revaluations 
and Inflation in Australia, 1950 to 1975: An Industry Study [financial account- 
ing and reporting]. The International Journal of Accounting. 1982 Mar; 17(2): 
23-34. 

Methodology: empirical descriptive. 

Study of fourteen industries in Australia regarding asset revaluation. Finds that 
six of the industries had a tendency to revalue based on increases of the compa- 
nies' outputs. 

423. Leech, Stewart A.; Pratt, Denis J., United Kingdom/New Zealand/Australia (Uni- 

versity of Tasmania/ZUniversity of Tasmania). Current Cost Accounting in 
Australia, New Zealand, and the United Kingdom: A Comparative Study 
[financial accounting and reporting]. The International Journal of Accounting. 
1978 Mar; 13(2): 105-118. 
Methodology: deductive descriptive. 

Comparison of the current cost accounting methods in the United Kingdom. 
New Zealand, and Australia. Concludes that these countries will gradually 
move to current cost accounting as the basis for financial reporting. 

424. Lefebvre, Chris J. L., Belgium/European Economic Community (Katholieke Uni- 

versitiet Leuven, Belgium). Development of Belgian Accounting Standards 

Within the European Economic Community Framework [financial accounting 

and reporting]. The International Journal of Accounting. 1981 Sep; 17(1): 

103-132. 

Methodology: deductive descriptive. 



120 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Overview of the impact that the European Economic Community has had on 
Belgian accounting. 

425. Lefebvre, Chris J. L., Belgium (Katholieke Universitiet Leuven, Belgium). The 

Impact of Accounting Education on Accounting Research and Practice in Bel- 
gium [accounting education]. Comparative International Accounting 
Educational Standards. Champaign, IL: Center for International Education and 
Research in Accounting; 1990 Apr: 71-95. 
Methodology: deductive descriptive. 

Synopsis of the historical and social effects on accounting research in Belgium. 
Concludes that accounting research is not highly regarded in Belgium, thus 
making accounting education more practical than theoretical. 

426. Lefebvre, Chris J. L.; Lin, Liang-qi, China (Katholieke Universitiet Leuven, Bel- 

giumy/Katholieke Universitiet Leuven, Belgium). Internationalization of 
Financial Accounting Standards in the Peoples' Republic of China [financial 
accounting and reporting]. The International Journal of Accounting. 1990; 
25(3): 170-183. 

Methodology: deductive descriptive. 

Analysis of the regulations, capital structure, financial reporting, and methodol- 
ogies responsible for the current accounting practices in China. Contends that 
Chinese financial statements may be translated accurately. 

427. LeMelle, Wilbert J., none (International Division for the Middle East and African 

Overseas Development program of the Ford Foundation). The Imperative of an 
Economic Development Program [economics and development]. The Interna- 
tional Journal of Accounting. 1967 Sep; 3(1): 101-106. 
Methodology: theoretical. 

Study of two aspects of development programming, the organizational require- 
ment for effective program administration and project construction and 
implementation. 

428. Lemon, W. Morley, Canada (University of Waterloo. Canada). Current Interna- 

tional Accounting Education Standards-Canada [accounting education]. 
Comparative International Accounting Educational Standards. Champaign, IL: 
Center for International Education and Research in Accounting; 1990 Apr: 
133-145. 

Methodology: deductive descriptive. 

Outline of the professional and educational requirements of the major account- 
ing bodies in Canada (CICA, SMAC, and CGAAC). Describes the accounting 
program of the Waterloo University. 

429. Leonard, Thomas B., United States (Price Waterhouse & Company). The Auditor's 

Review of Management Reports and Records [auditing]. Managerial Account- 
ing: An Analysis of Current International Application. Champaign, IL: Center 
for International Education and Research in Accounting; 1984 Jan: 83-91. 
Methodology: deductive descriptive. 

Discussion of the use of management reports by auditors, emphasizing the 
effect that management information systems have had on reporting and 
reliability. 



Bibliography 121 

430. Leung, Victor K. L., United StatesAJnited Kingdom/Canada/Australia (The Chi- 

nese University of Hong Kong). An Institutional Analysis of Authorship in the 
International Journal of Accounting Education and Research [miscellaneous]. 
The InternationalJournal of Accounting. 1988 Mar; 23(2): 179-187. 
Methodology: deductive descriptive. 

Discussion and analysis of the countries and affiliations of the contributors of 
articles published in the International Journal of Accounting. 

431. Lev, Baruch, Israel/United States (Tel Aviv University). The Formulation of 

Accounting Standards and Rules: A Comparison of Efforts in Israel and the 
United States [financial accounting and reporting]. The International Journal of 
Accounting. 1976 Mar; 11(2): 121-131. 
Methodology: deductive descriptive. 

Comparison of the development of accounting standards and rules in Israel and 
the U.S. Provides some general observations on the problem of accounting prin- 
ciples formulation. 

432. Lin, Liangqi; Lefebvre, Chris, Belgium (Catholic University, Leuven/ZCatholic 

University, Leuven). Defining a Subsidiary: A Comparison of IAS 27, EC Sev- 
enth Directive, and the Belgian Royal Decree on Consolidation 
[miscellaneous]. The New Europe: Recent Political and Economic Implications 
for Accountants and Accounting. Champaign, IL: Center for International Edu- 
cation and Research in Accounting; 1994: 1-16. 
Methodology: deductive descriptive. 

Comparative discussion of the IAS No. 27, EC Seventh Directive, and the Bel- 
gian Royal Decree on Consolidation in terms of European accounting harmony. 

433. Lin, Liang-Qi; Lefebvre, Chris; Kantor. Jeffrey, Asian Pacific (Katholieke Univer- 

siteit Leuven, Belgium/ZKatholieke Universiteit Leuven, Belgium/ZKatholieke 
Universiteit Leuven, Belgium/AVindsor University, Canada). Economic Deter- 
minants of International Transfer Pricing and the Related Accounting Issues, 
with Particular Reference to Asian Pacific Countries [economics and develop- 
ment]. The International Journal of Accounting. 1993; 28(1): 49-70. 
Methodology: deductive descriptive. 
Study of international transfer pricing in various Asian Pacific countries. 

434. Lin, Zhijun; Deng, Shengliang, China (University of Lethbridge, Alberta, Canada// 

University of Saskatchewan, Saskatoon, Canada). Educating Accounting in 

China: Current Experiences and Future Prospects [accounting education]. The 

Inte motioned Journal of Accounting. 1992; 27(2): 164-177. 

Methodology: historical. 

A historical overview of accounting in China and an outlook on the reform of 

Chinese accounting education. 

435. Lindsay, Daryl, Australia/Canada (University of Saskatchewan, Saskatoon. Can- 

ada). Auditor-Client Conflict Resolution: An Investigation of the Perceptions of 
the Financial Community in Australia and Canada [auditing]. The International 
Journal of Accounting. 1992; 27(4): 342-364. 
Methodology: empirical statistical. 



122 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Examination of Canadian and Australian auditors' ability to maintain objectiv- 
ity during significant conflicts over accounting issues by investigating various 
environmental factors. 

436. Linowes, David F., United States (Laventhol, Krekstein. Horwath & Horwath). 

Commentary on the Foreign Direct Investment Program [economics and devel- 
opment]. The International Journal of Accounting. 1968 Sep; 4(1): 81-82. 
Methodology: theoretical. 
A brief commentary on the Foreign Direct Investment Program. 

437. Linowes, David F., Canada/United States/France (University of Illinois at 

Urbana-Champaign). The Implications of Transborder Data-Flow Development 

for the Accounting Profession [accounting theory]. The International Journal 

of Accounting. 1981 Sep; 17(1): 33-41. 

Methodology: deductive descriptive. 

Description of the technological innovations currently involved in international 

telecommunications. Also discusses various regulations placed in the flow of 

this information. 

438. Linowes, David F., Saudi Arabia/Kuwait/Soviet Union/United States (University 

of Illinois at Urbana-Champaign). International Business and Morality [social 

effects of accounting]. The Multinational Corporation: Accounting and Social 

Implications. Champaign, IL: Center for International Education and Research 

in Accounting; 1977 Jan: 151-158. 

Methodology: deductive descriptive. 

Description of several different countries' approaches to ethics. 

439. Linowes, David F., United States (Laventhol, Krekstein, Horwath & Horwath). 

Strategies for the Survival of Our Democratic Institutions [social effects of 
accounting]. The International Journal of Accounting. 1973 Sep; 9(1): 1-12. 
Methodology: theoretical. 

Critique of the inefficiencies of government and social institutions. Recom- 
mends a socioeconomic accounting and management approach to the problem. 

440. Lister, Roger J., United States/United Kingdom (University of Liverpool, 

England). Accounting as History [accounting history]. The International Jour- 
nal of Accounting. 1983 Mar; 18(2): 49-68. 
Methodology: theoretical. 

Study that concludes that accounting history should be viewed as a series of dis- 
connected episodes rather than as a thoughtful development. 

441. Littleton. A. C, none (University of Illinois at Urbana-Champaign). The Continu- 

ing Importance of Basic Concepts [accounting theory]. The International 

Journal of Accounting. 1965 Sep; 1(1): 55-65. 

Methodology: theoretical. 

Study that rejects the deductive approach in accounting research in favor of the 

inductive approach. 

442. Littleton, A. C, none (University of Illinois at Urbana-Champaign). The Signifi- 

cance of Interrelated Concepts in Accounting [accounting theory]. The 
International Journal of Accounting. 1966 Sep; 2(1): 25-34. 
Methodology: theoretical. 



Bibliography 123 

Discussion of the interrelationships among accounting concepts used in enter- 
prise accounting. 

443. Lubbert, Jens, United States/Europe (University of Hamburg). National Account- 

ing — Its Scope and Purpose [public accounting]. The International Journal of 

Accounting. 1966 Mar; 1(2): 43-59. 

Methodology: theoretical. 

Brief survey of the history and purposes of national accounting and of basic 

accounting problems that are dealt with in research. 

444. Luck, Wolfgang, Germany (Phillips-Universitat Marburg, Germany). The Educa- 

tion of Professional Accountants in West Germany: A Comparative 
International Study [professional development]. Comparative International 
Accounting Educational Standards. Champaign, IL: Center for International 
Education and Research in Accounting; 1990 Apr: 41-60. 
Methodology: deductive descriptive. 

Discussion of the development of professional accounting education in West 
Germany, giving both a historical and institutional overview. Concludes that 
the system will move toward international accounting education concerns. 

445. Luck, Wolfgang, Germany (Technical University of Berlin). The Impact of Interna- 

tional Standards and Other Developments on the German Accounting 
Profession [financial accounting and reporting]. The International Journal of 
Accounting. 1982 Sep; 18(1): 45-56. 
Methodology: deductive descriptive. 

Discussion of the international and domestic influences on the German account- 
ing profession. Concludes that these influences will affect the German 
profession more in the future than they have in the past. 

446. Luck, Wolfgang, Germany (Phillips-Universitat Marburg, Gemiany). Problems of 

International Corporate Consolidations: A German View [financial accounting 
and reporting]. The Multinational Corporation: Accounting and Social Implica- 
tions. Champaign, IL: Center for International Education and Research in 
Accounting; 1977 Jan: 159-181. 
Methodology: theoretical. 

Discussion of the German accounting practices for consolidating the multina- 
tional enterprise. Also includes a desscription of the translation methods used. 

447. Luck, Wolfgang, Germany (director of special education for public accounting 

firms in Germany). Recent Changes in the German Professional Certified Pub- 
lic Accountant (Wirtschaftsprufer) Examination [public accounting]. The 
International Journal of Accounting. 1977 Sep; 13(1): 131-140. 
Methodology: deductive descriptive. 

Discussion of the current requirements to become a CPA in Germany, including 
historical backgrounds. 

448. Luther, Robert, Australia/United States/South Africa/Canada/United Kindom (Uni- 

versity of Exeter). The Development of Accounting Regulation in the 
Extractive Industries: An International Review [financial accounting and 
reporting]. The International Journal of Accounting, 1996; 31(1): 67-93. 
Methodology: deductive descriptive 



124 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

A review of the development of accounting regulations and practices in the 
extractive industries in five countries. Exposes possible explanations for the 
lack of conformity and dearth of extractive industry accounting regulation. 

449. Lynn, Murray; McGuiness, Paul, Hong Kong (Chinese University of Hong Kong// 

Chinese University of Hong Kong). The Incidence. Nature, and Impact of 
Extraordinary Items on Earnings: An Exploratory Study for Hong Kong [finan- 
cial accounting & reporting]. The International Journal of Accounting. 1995; 
30(1): 62-82. 

Methodology: empirical statistical. 

Examination of reported extraordinary items by Hong Kong companies over a 
five-year period. 

450. MacArthur, John B.. Global (Uiversity of North Florida). An Investigation into the 

Influence of Cultural Factors in the International Lobbying of the International 
Accounting Standards Committee: the Case of E32, Comparability of Financial 
Statements [financial accounting and reporting]. The International Journal of 
Accounting, 1996; 31(2): 213-237. 
Methodology: empirical descriptive 

An investigation of the influence of cultural factors on the corporate comment 
letters sent on the International Accounting Standard Committee's E32, Com- 
parability of Financial Statements, to test Gray's hypothesized linkages 
between accounting values and the cultural values identifed by Hofstede. 

451. Macharzina, Klaus R., Germany (Hohenheim University, Germany). The Impact of 

Inflation on German Accounting: Theoretical Background and Professional 
Issues [financial accounting and reporting]. The Impact of Inflation on 
Accounting: A Global View. Champaign, IL: Center for International Educa- 
tion and Research in Accounting; 1979 May: 225-240. 
Methodology: deductive descriptive. 

Discussion of the German approach to inflation accounting, compared with 
approaches followed in other European countries. 

452. Macharzina, Klaus R.; Coenenberg, Adolf G., Germany/Europe/United Kingdom/ 

United States (University of Hohenheim at Stuttgart. Germany//University of 
Augsburg, Federal Republic of Germany). Current-Cost or Current Purchas- 
ing-Power Accounting? An Internationally Based Assessment of FASB 
Statement No. 33 on Financial Reporting and Changing Prices [accounting the- 
ory]. The International Journal of Accounting. 1981 Mar; 16(2): 149-162. 
Methodology: theoretical. 

Comparison of the German model for inflation accounting with those of the 
U.S. and U.K. Concludes that information regarding price-level change is not 
necessary to users. 

453. Macve, Richard; Liu, Zhi Yu, China (North Dakota State University//North Dakota 

State University). A Proposal to Form a Unified Chinese Public Accountancy 
Profession: An Academic Perspective [professional development]. The Interna- 
tional Journal of Accounting. 1995; 30(1): 48-61. 
Methodology: deductive descriptive. 



Bibliography 125 

Proposals to regulate Chinese public accounting and auditing professions as 
well as the necessity to create a formal Certified Public Accountant designation 
as a professional qualification. 

454. Maingot, Michael, United Kingdom/Canada/United States (University of Ottawa). 

Published Interim Reports in the United Kingdom [financial accounting and 
reporting]. The International Journal of Accounting. 1983 Mar; 18(2): 133-149. 
Methodology: empirical descriptive. 

Survey of firms in the U.K. regarding financial disclosure. Finds that firms in 
the U.K. should disclose on an interim basis. 

455. Mak. Y. T., New Zealand/United States/United Kingdom (Victoria University of 

Wellington. New Zealand). The Determinants of Accuracy of Management 
Earnings Forecasts: A New Zealand Study [managerial accounting]. The Inter- 
national Journal of Accounting. 1989; 24(3): 267-280. 
Methodology: empirical statistical. 

Analysis of the accuracy of earnings forecasts, through a comparison of com- 
pany, industry segment, and economic conditions. 

456. Maldonado, Rita M., United States (New York University). Recording and Classi- 

fying Transactions in the Balance of Payments [financial accounting and 
reporting]. The International Journal of Accounting. 1979 Sep; 15(1): 105-133. 
Methodology: theoretical. 

Discussion of the balance of payments method of accounting for foreign 
exchange. Concludes that because of the complexity of the collection of data, a 
balancing entry is required to offset errors. 

457. Mande, Vivek, Japan/United States (University of Nebraska). A Comparison of US 

and Japanese Analysts' Forecasts of Earnings and Sales [miscellaneous]. The 

International Journal of Accounting, 1996; 31(2): 143-160. 

Methodology: empirical statistical 

An examination of whether there are significant differences in the forecast 

accuracy of US and Japanese analysts in sales and earnings. Explains the source 

of Japanese analysts' forecast superiority in sales. 

458. Markell, William, Israel (University of Delaware). Accounting Education— Its 

Importance in Developing Countries: Israel — A Case Study [accounting educa- 
tion]. The International Journal of Accounting. 1968 Mar; 3(2): 125-33. 
Methodology: deductive descriptive. 

Case study of accounting education in Israel used to emphasize the importance 
of accounting to the economic health and growth of developing nations, the 
need for trained personnel in accounting, and the importance of managing such 
development in businesses. 

459. Markell, William, New Zealand/United States/United Kingdom (University of Del- 

aware). A Comparison of Preparation for the Accounting Profession among 
New Zealand, the United Kingdom, and the United States [accounting educa- 
tion]. TVit' //!fernc/r/o7j^//yo/<rn<://o/'Acrr;M/7rmg. 1980 Mar; 15(2): 101-114. 
Methodology: deductive descriptive. 

Comparison of the accounting education systems in New Zealand, the U.K.. 
and the U.S. Concludes that all are similar with a few exceptions. The trend in 
the U.S. is toward a five-year program. Programs in the United Kingdom are 



126 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

moving towards a longer educational period and a better balance between the- 
ory and practice. In New Zealand the need is for a professional examination 
prior to public practice. 

460. Markell, William, Botswana/United States (University of Delaware). Development 

of Accounting Education and the Accounting Profession in Third World Coun- 
tries: Botswana [accounting education]. The International Journal of 
Accounting. 1985 Sep; 21(1): 99-105. 
Methodology: deductive descriptive. 

Description of the accounting profession in Botswana, centering on the 
accounting program at the University of Botswana. 

461. Martens, Stanley C; McEnroe, John E., United States (DePaul University, Chi- 

cago, Illinois). Accounting Standard Setting in the United States: Are Public 
Accountants Serving on FASB Influenced by their Former Firms? [professional 
development]. The IntemationalJournal of Accounting. 1993:28(2): 147-155. 
Methodology: empirical descriptive. 

Study to determine the independence (or influence) of public accountants serv- 
ing on the Financial Accounting Standards Board (FASB) from their former 
employers. 

462. Mauritz. E. Waldo, none (International Finance Corporation). Observations on 

Accounting in International Finance [financial accounting and reporting]. The 

International Journal of Accounting. 1969 Sep; 5(1): 61-69. 

Methodology: deductive descriptive. 

Review of the developments in international accounting. Contends that 

accounting has failed to communicate compatible information from one country 

to another. 

463. Mautz, R. K., United States (University of Illinois at Urbana-Champaign). The 

Direction of Accounting Education [accounting education]. The International 
Journal of Accounting. 1967 Mar; 2(2): 37-46. 
Methodology: theoretical. 

Review of the changes in accounting education, projecting developments which 
appear unavoidable if present tendencies continue. Suggests the steps accoun- 
tancy must take in order to meet current needs and to prepare for the future. 

464. Mautz, Robert K., Unknown (University of Illinois). Ethics — A Philosophical 

Analysis [professional development]. Ethical Considerations in Contemporary 
International Accounting Practice. Champaign, IL: Center for International 
Education and Research in Accounting, Department of Accountancy; 1992: 
1-10. 

Methodology: deductive descriptive. 

A philosophical summary of the term ethics, its underlying principles, and eth- 
ics in regard to its application to public accounting. 

465. McEnroe, John E., Global (DePaul University). An Examination of Attitudes 

Involving Cash Flow Accounting: Implications for the Content of Cash Flow 
Statements [financial accounting and reporting]. The International Journal of 
Accounting. 1996; 31(2): 161-174. 
Methodology: empirical descriptive. 



Bibliography 127 

A survey of the attitudes of several segments of the financial community 
towards additional cash flow disclosures as well as their perceptions regarding 
certain professed attributes of Cash Flow Accounting. 

466. McCall, Owen S.; Popoff, Boris, New Zealand (Deloitte & Touche/AJniversity of 

Otago, New Zealand). The Income and Rate of Return of Fanning Enterprises: 

A New Zealand Case Study [managerial accounting]. The International Journal 

of Accounting. 1987 Sep; 23(1): 105-127. 

Methodology: empirical descriptive. 

Case study of the accounting implications on a sheep farm in New Zealand. 

467. McClure, Malcolm M., Soviet Union/Poland/Rumania/East GermanyA^ugoslavia 

(Illinois State University). An Overview of Rumanian Accounting [financial 

accounting and reporting]. The International Journal of Accounting. 1983 Sep; 

19(1): 131-156. 

Methodology: deductive descriptive. 

Discussion of the structure and theory of Rumanian accounting. Provides a 

background of methods and statement requirements. 

468. McComb, Desmond, Europe/Germany/Ireland/Netherlands/France/Greece/Bel- 

gium/Lux emburg/Italy/Denmark/ United Kingdom (University of 
Southampton, England). Harmonization of European Coiporate Financial 
Reporting [economics and development]. The Recent Accounting and Eco- 
nomic Developments in Western Europe. Champaign, IL: Center for 
International Education and Research in Accounting; 1985 May: 31-58. 
Methodology: deductive descriptive. 

Description of the effects of the seventh and eighth directives on the European 
Economic Community. 

469. McComb, Desmond, United States/European Economic Community (University of 

Southampton, England). International Accounting Standards and the EEC Har- 
monization Program: A Conflict of Disparate Objectives [financial accounting 
and reporting]. The International Journal of Accounting. 1982 Mar; 17(2): 
35-48. 

Methodology: deductive descriptive. 

Discussion of the development of international accounting standards. Discusses 
the main topics which have had an influence on these standards. 

470. McComb, Desmond, United Kingdom/FranceAVest Germany (University of 

Southampton, England). The International Harmonization of Accounting: A 
Cultural Dimension [financial accounting and reporting]. The International 
Journal of Accounting. 1979 Mar; 14(2): 1-16. 
Methodology: deductive descriptive. 

Discussion of the many influences on the development of international account- 
ing standards. Contends that an understanding of those influences is necessary 
to achieve better international standards. 

471. McGuinness, Paul, Hong Kong (Chinese University of Hong Kong). The Financial 

Characteristics of Hong Kong Tender Offer Targets [economics & develop- 
ment]. The International Journal of Accounting. 1993; 28(3): 215-231. 
Methodology: empirical statistical. 



128 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Investigation of financial attributes of companies which are most susceptible to 
coqjorate takeovers in Hong Kong. Statistical analysis on data taken revealed 
that target firms had higher profit growth levels and liquidity while having 
lower gearing levels. 

472. McKeown. James, none (University of Illinois at Urbana-Champaign). Professional 

Responses to Reporting the Impact of Inflation: A Discussion-Part II [financial 
accounting and reporting]. The Impact of Inflation on Accounting: A Global 
View. Champaign. IL: Center for International Education and Research in 
Accounting; 1979 May: 183-188. 
Methodology: deductive descriptive. 
Discussion of issues raised by Felix Pomeranz. 

473. McKinnon, Jill. Japan/United States (Macquarie University, Australia). Cultural 

Constraints on Audit Independence in Japan [auditing]. The International Jour- 
nal of Accounting. 1984 Sep; 20(1): 17-43. 
Methodology: deductive descriptive. 
Discussion of the social and legal factors affecting independence in Japan. 

474. McKinnon. S. M.; Janell, Paul, global (Northeastern University/ZNortheastem Uni- 

versity). The International Accounting Standards Committee: A Performance 
Evaluation [financial accounting and reporting]. The International Journal of 
Accounting. 1984 Mar; 19(2); 19-34. 
Methodology; deductive descriptive. 

Critique of the role of the lASC in implementing international standards. Con- 
tends that shortcomings of the lASC are due to internal constraints within 
individual countries which will be lifted as companies look for international 
financing. 

475. McMahon, Terrence J.. Brazil/Developing Countries (United States Agency for 

International Development Mission. Brazil). Brazil: A Maturing Capital Market 
Seeks Accelerated Improvements in Accountancy [economics and develop- 
ment]. The International Journal of Accounting. 1972 Sep; 8(1): ll-Sl. 
Methodology: deductive descriptive. 

Review of how the demand for the FUMCAP program evolved, with sugges- 
tions as to how this program can accomplish its purpose. 

476. Meek, Gar}. United States/Japan/Netherlands/Philippines/United Kingdom/Israel 

(Oklahoma State University). Interim Earnings Announcements in the United 
States by Non-U. S. Multinational Corporations-Responses by the U.S. Securi- 
ties Market [financial accounting and reporting]. The International Journal of 
Accounting. 1985 Mar; 20(2): 1-18. 
Methodology: capital markets. 

Study of the effects of financial announcements made abroad and of the foreign 
stock markets in which a company's securities are traded. Finds that these 
announcements do affect stock prices abroad, however not equally, from one 
country to another. 

477. Meek. Gary, United States/IsraeL/Japan/Netherlands/Philippines/United Kingdom 

(Oklahoma State University). The Multiple Earnings Announcements of 
Non-U. S. Multinational Enterprises — Implications of Observed Patterns [finan- 



Bibliography 129 

cial accounting and reporting]. The International Journal of Accounting. 1983 

Sep; 19(1): 115-130. 

Methodology: empirical statistical. 

Study of non U.S. multinational companies regarding their reporting practices. 

Concludes that a great many reporting deficiencies exist world wide. 

478. Meek, Gary; Gray, Sidney J., United States/EEC (Oklahoma State University//Uni- 

versity of Glasgow). The Impact of Stock Market and Corporate Globalization 
on Disclosure Trends in International Financial Reporting [financial accounting 
& reporting]. Changing International Financial Markets and Their Impact on 
Accounting. Champaign, IL: Center for International Education and Research 
in Accounting, Department of Accountancy; 1992: 43-66. 
Methodology: capital markets. 

Analysis of the effects of global stock market transactions have on the financial 
reporting process of multinational corporations (MNCs). 

479. Mehta, Dileep R.; Thapa, Samanta, United States (Georgia State University/ AVest- 

ern Kentucky University). FAS-52, Functional Currency, and the 
Non-Comparability of Financial Reports [financial accounting & reporting]. 
The International Journal of Accounting. 1991; 26(2): 71-84. 
Methodology: theoretical. 

Examines the notion of functional currency and its potential of non-comparabil- 
ity of financial reports by presenting empirical evidence of some MNCs. Five 
recommendations to enhance comparability. 

480. Meng, Tan Teck; Hoong, Pang Yang; Liang, Foo See, Singapore (Nanyang Techni- 

cal University, Singapore/ZNanyang Technical University, Singapore/ZNanyang 
Technical University, Singapore). Accounting Education and Practice: The Sin- 
gapore Experience [accounting education]. The International Journal of 
Accounting. 1994; 29(2): 161-183. 
Methodology: deductive descriptive. 

Study of the demand and responsiveness of accounting education in Singapore 
and the relationship between accounting and Singapore's business and indus- 
trial base. 

481. Mensah, Yaw M.; Biagioni, Louis F., none (Indiana University/Indiana Univer- 

sity). The Predictive Ability of Financial Ratios Using Alternative Translation 
Methods for Foreign-Currency Financial Statements: A Simulation Study 
[accounting theory]. The International Journal of Accounting. 1980 Sep; 16(1): 
221-245. 

Methodology: empirical statistical. 

Study of a model to determine the predictability of financial ratios using differ- 
ent translation methods. Indicates that none of the translation methods was 
more predictable than the others. 

482. Mensah-Mireku, Yaw, Ghana (University of Illinois at Urbana-Champaign). 

Accounting Aspects of Economic Development in Ghana [economics and 
development]. The Multinational Corporation: Accounting and Social Implica- 
tions. Champaign, IL: Center for International Education and Research in 
Accounting; 1977 Jan: 127-138. 
Methodology: historical. 



130 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Historical description of accounting and economics in Ghana, concluding with 
a description of future requirements for economic development. 

483. Merei. Issam J., Saudi Arabia/Egypt/United States (Arab Society of Certified 

Accountants). Design and Application of Professional Standards in a Develop- 
ing Country: The Case in Saudi Arabia [professional development]. The Recent 
Accounting and Economic Developments in the Middle East. Champaign, IL: 
Center for International Education and Research in Accounting; 1985 May: 
43-68. 

Methodology: deductive descriptive. 

Discussion of the current and possible trends in the development of professional 
standards in Saudi Arabia. 

484. Messier, Jr William F., United States (University of Florida). SEAS No. 8: Some 

Implications for MNCs [accounting theory]. The International Journal of 

Accounting. 1979 Mar; 14(2): 101-119. 

Methodology: deductive descriptive. 

Discussion of past accounting practices, giving reasons for the adoption of 

SEAS no. 8 and considering the potential impact of this ruling. 

485. Mette, Jr William R., Erance/Germany/United StatesAJnited Kingdom/Canada/ 

Australia (Alexander Grant Tansley Witt). A Discussion of Current Interna- 
tional Accounting and Reporting Problems [financial accounting and 
reporting]. The Multinational Corporation: Accounting and Social Implications. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1977 Jan: 183-212. 
Methodology: empirical descriptive. 

Survey of the differences in accounting and reporting standards of France, Ger- 
many, U.S., United Kingdom, Canada, and Australia. 

486. Mielke, David E.: Giacomino, Don E., United States/Europe (Marquette Univer- 

sity//Marquette University). Cash-Flow Reporting: A Step Toward 

International Harmonization [financial accounting and reporting]. The Intema- 

tionalJoumal of Accounting. 1987 Mar; 22(2): 143-152. 

Methodology: deductive descriptive. 

Review of the international standards affecting cash-flow accounting. Contends 

that the international standard-setting bodies should promulgate uniform 

standards. 

487. Millar, James A.; Nunthirapakom, Ted, United States/Canada (University of 

Arkansas/ZNational Institute of Development Administration, Bank of Thai- 
land). A Comparison of Earnings Per Share Reporting for United States and 
Canadian Companies [financial accounting & reporting]. The International 
Journal of Accounting. 1992; Vo. 27(1): 38-44. 
Methodology: empirical statistical. 

Statistical analysis to validate differences in earnings per share (EPS) reporting 
between United States and Canadian companies. Results of such analysis could 
not validate the hypothesis. 

488. Min, H. K.; Song, Ja; Kim, J. S., Korea (University of Wisconsin, Whitewater// 

Yonsei University, Seoul, KoreaZ/Yonsei University, Seoul, Korea). Account- 
ing Education in Korea: Current Trends and the Challenge for the Future 



Bibliography 131 

[accounting education]. The International Journal of Accounting. 1993; 28(1): 

78-87. 

Methodology: deductive descriptive. 

Study of accounting education in Korea. Topics include accounting origins, 

educational models and curricula, and recent important trends. 

489. Mintz, Steven M., United States (California State University at Hayward). Interna- 

tionalization of the Accounting Curriculum [accounting education]. The 
International Journal of Accounting. 1980 Sep; 16(1): 137-151. 
Methodology: empirical descriptive. 

Survey of the international members of the AAA and schools with an interna- 
tional curriculum, indicating a trend toward more of an international 
curriculum. 

490. Mirghani, Mohamed A., developing countries (Miami University, Ohio). A Frame- 

work for a Linkage between Microaccounting and Macroaccounting for 

Purposes of Development Planning in Developing Countries [economics and 

development]. The International Journal of Accounting. 1982 Sep; 18(1): 

57-68. 

Methodology: theoretical. 

Presentation of a framework for connecting micro and macro accounting, and 

the use of this framework for development purposes. Concludes that developing 

countries must adopt strategic plans for accounting development. 

491. Moller, George, United States/Canada (international consultant). The Multinational 

Executive: Patroit or Traitor [managerial accounting]. The International Jour- 
nal of Accounting. 1972 Mar; 7(2): 69-75. 
Methodology: theoretical. 

Presentation of a mock trial which examines the legal problems faced by top 
management of multinational enterprises. 

492. Moores, Ken; MacGregor, Alan C, New Zealand/United States (Bond University, 

Queensland, Australia/ZUniversity of Otago, Dunedin, New Zealand). Account- 
ing Education in New Zealand [accounting education]. The International 
Journal of Accounting. 1992; 27(1): 69-79. 
Methodology: empirical descriptive. 

Analysis of the progression of accounting education in New Zealand and its 
interrelationship with that country's socioeconomic history and future. 

493. Mora, Jr Ricardo, Mexico (Firm Despacho Freyssinier Morin, S.C., Mexico). The 

Accounting Profession in Mexico— And Why [financial accounting and report- 
ing]. The International Journal of Accounting. 1972 Sep; 8(1): 17-24. 
Methodology: historical. 

Review of the history of the accounting profession in Mexico, with a discussion 
of current practices. 

494. Morgan, Robert A., United States/Brazil (Caterpillar Tractor Company). The Mul- 

tinational Enterprise and Its Accounting Needs [taxation]. The International 
Journal of Accounting. 1967 Sep; 3(1): 21-28. 
Methodology: deductive descriptive. 



132 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Study of the problems that arise in accounting needs for multinational enter- 
prises. Discusses solutions that have been used, and problems that remain 
unresolved. 

495. Morse. Dale, Global (University of Oregon, Eugene, Oregon). Explaining the Inter- 

national Supply of Auditors [auditing]. The International Journal of 

Accounting. 1993; 28(4): 347-355. 

Methodology: empirical statistical. 

Study involving 62 different countries to compare the proportion of auditors to 

each country's population. Results show that countries with an established 

financial sector and former British colonies tend to have a larger number of 

auditors. 

496. Morsicato, Helen G.; Diamond, Michael A., United States (University of Oregon// 

California State University at Los Angeles). An Approach to 'Environmentaliz- 
ing' Multinational Enterprise Performance Evaluation Systems [managerial 
accounting]. The International Journal of Accounting. 1980 Sep; 16(1): 
247-266. 

Methodology: deductive descriptive. 

Discussion of the use of environmental considerations in the evaluation of mul- 
tinational enterprise performance. Centers on the Farmer-Friedman Model for 
incorporating environmental issues in the evaluation system. 

497. Morsicato, Helen G.; Radebaugh, Lee H., United States (University of Oregon// 

Pennsylvania State University). International Performance Evaluation of Multi- 
national Enterprise Operations [managerial accounting]. The International 
Journal of Accounting. 1979 Sep; 15(1): 77-94. 
Methodology: empirical descriptive. 

Study of the currency used by multinational corporations for internal reporting. 
Concludes that local currency should be used in measuring performance. 

498. Most, Kenneth S., France (Texas A & M University). The French Accounting 

Experiment [financial accounting and reporting]. The International Journal of 
Accounting. 1971 Sep; 7(1): 15-27. 
Methodology: deductive descriptive. 

Application of an accounting model of a French firm to a wide range of com- 
mercial and industrial activities so that elegant variations and unnecessary 
proliferations could be eliminated. 

499. Moustafa, Mohamed Eid, Saudi Arabia (California State University at Long 

Beach). Framework for the Role of Accounting in the Economic Development 
in Saudi Arabia [financial accounting and reporting]. The Recent Accounting 
and Economic Developments in the Middle East. Champaign, IL: Center for 
International Education and Research in Accounting; 1985 May: 197-211. 
Methodology: deductive descriptive. 

Discussion of the economic, social, and regulatory effects of the Saudi Arabian 
accounting profession. 

500. Mueller. Gerhard G., none (University of Washington). Academic Research in 

International Accounting [professional development]. The International Jour- 
nal of Accounting. 1970 Sep; 6(1): 67-81. 
Methodology: theoretical. 



Bibliography 133 

Proposal of topics suitable for theoretical inquiry. Defines applied and theoreti- 
cal research in accounting, as correlated with the international dimensions of 
the discipline. 

501. Mueller, Gerhard G., United States (University of Washington). Accounting Princi- 

ples Generally Accepted in the United States Versus Those Generally Accepted 

Elsewhere [accounting theory]. The International Journal of Accounting. 1968 

Mar; 3(2): 91-103. 

Methodology: theoretical. 

Empirical evaluation of the complexities of accounting principles followed in 

several countries. 

502. Mueller, Gerhard G., none (University of Washington). An International View of 

Accounting and Disclosure [public accounting]. 77?^ International Journal of 

Accounting. 1972 Sep; 8(1): 117-134. 

Methodology: theoretical. 

Discussion of an international trend toward increased financial disclosure that 

has developed since the mid-1960s. Holds that disclosure improvements offer 

more hope for financial reporting than accounting development during the 

1970s. 

503. Mueller, Gerhard G., United States (University of Washington). St. Louis to 

Munich: The Odyssey of the International Congresses of Accountants [financial 

accounting and reporting]. The International Journal of Accounting. 1979 Sep; 

15(1): 1-12. 

Methodology: deductive descriptive. 

History of the International Congress of Accountants listing the major topics of 

each congress. Concludes that the congress has been instrumental in bringing 

together international accounting principles and methods of disclosure. 

504. Mugan, Can Simga, United States (Bilkent University, Ankara, Turkey). Exploring 

the Effect of Non-Financial Indicators on Returrn on Investment in Multina- 
tional Companies [managerial accounting]. The International Journal of 
Accounting. 1992; 27(2): 123-136. 
Methodology: empirical statistical. 

Introduction and explanation of a performance evaluation model for analyzing 
correlation of investment (ROI) and nonfinancial indicators of performance on 
multinational companies in the United States and abroad. 

505. MuUer, Welf, Europe (Klynveld Main Goerdeler/Johann- Wolfgang-Goethe 

Univesitat, Germany). Eighth Council Directive on the Approval of Persons 
Responsible for Statutory Audits of Accounting Documents [financial account- 
ing and reporting]. The Recent Accounting and Economic Developments in 
Western Europe. Champaign, IL: Center for International Education and 
Research in Accounting; 1985 May: 15-30. 
Methodology: deductive descriptive. 

Discussion of the effects that the eighth directive will have on the European 
Economic Community and international auditing. 

506. Murphy, George J., Canada/United States/United Kingdom (University of 

Saskatchewan, Canada). Financial Statement Disclosure and Corporate Law: 



134 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

The Canadian Experience [public accounting]. The International Journal of 
Accounting. 1980 Mar; 15(2): 87-99. 
Methodology: historical. 

History of financial statement disclosure in Canada starting in 1 877 comparing 
the forces currently affecting disclosure in the U.K.. U.S., and Canada. Con- 
cludes that the Canadian situation is different than that in the U.K. and the U.S. 
because the Canadian Institute's recommendations have been passed as 
legislation. 

507. Murphy, George J.; Fizzell, M. R.; Lindsay, W. D., Canada/United States (Univer- 

sity of Saskatchewan, Canada/AJniversity of Saskatchewan, Canada// 
University of Saskatchewan, Canada). Revaluation of Assets in Canada, 
1920-36 [financial accounting and reporting]. The International Journal of 
Accounting. 1988 Mar; 23(2): 33-45. 
Methodology: empirical statistical. 

Study of Canadian corporations regarding their revaluation of assets from 1920 
to 1936. Finds that these revaluations were infrequent and were not undertaken 
to increase earnings or equity. 

508. Nair, R. D.; Frank, Werner G., United States/Europe/Central & South America 

(University of Wisconsin at Madison//University of Wisconsin at Madison). 
The Harmonization of International Accounting Standards, 1973-1979 [finan- 
cial accounting and reporting]. The International Journal of Accounting. 1981 
Sep; 17(1): 61-77. 

Methodology: empirical descriptive. 

Survey of the international accounting practices used by 37 countries. Con- 
cludes that since the inception of the international accounting standards 
commission a growing acceptance of international standards has occurred. 

509. Nakajima, Seigo, Japan (International Christian University, Japan). Economic 

Growth and Corporate Financial Reporting in Japan [public accounting]. The 

International Journal of Accounting. 1973 Sep; 9(1): 35-41. 

Methodology: deductive descriptive. 

Discussion of the development of accounting in Japan, corporate financial 

reporting in Japan, and of the economic growth in Japan during the sixties. 

510. Nakano, Isao, none (Kobe University, Japan). On Monetary-Sacrifice-Based 

Depreciation [accounting theory]. The International Journal of Accounting. 
1978 Mar; 13(2): 41-55. 
Methodology: theoretical. 

Presentation of a model for monetary-sacrifice-based depreciation. Presents 
arguments that this method is technically and theoretically more valid, and gen- 
erally more useful, than current depreciation techniques. 

511. Nance, Jon R.; Roemmich, Roger A., United States/West Germany/United King- 

dom (University of Nebraska/ZUniversity of Georgia). Financial Statement 

Impact of Foreign Currency Translation Alternatives [financial accounting and 

reporting]. The International Journal of Accounting. 1983 Sep; 19(1): 89-113. 

Methodology: empirical statistical. 

Study of different translation methods as to their effect on the financial 

statements. 



Bibliography 135 

512. Nance, Jon R.; Roemmich, Roger A., global (University of Nebraska/ZUniversity of 

Georgia). Foreign Currency Translation: An Evaluation [financial accounting 

and reporting]. The International Journal of Accounting. 1983 Mar; 18(2); 

29-48. 

Methodology: deductive descriptive. 

Evaluation of different currency translation methodologies. 

513. Narayanaswamy, R., India (Indian Institute of Management, Bangalore, India). 

Accounting for Leases in India: Some Evidence of Economic Impact [financial 

accounting & reporting]. The International Journal of Accounting. 1992; 27(3): 

255-261. 

Methodology: empirical descriptive. 

Investigation of lease accounting in India, with emphasis given to off-balance 

sheet financing and capitalization. 

514. Nbudzu, Gordian A.; Tsetsekos, George P.. United States (Drexel University, 

Philadephia, Pennsylvania/ZDrexel University, Philadephia, Pennsylvania). 
Functional Currency Smoothing and Managerial Incentives: An Empirical Test 
[financial accounting & reporting]. The International Journal of Accounting. 
1992: 27(1): 27-37. 
Methodology: empirical statistical. 

Examination of income smoothing methods that do not require disclosure, with 
particular emphasis on SFAS No. 52, which allows foreign currency adjustment 
to be included in earnings. 

515. Ndubizu, Gordian A., United Nations (Drexel University, Philadelphia, Pennsylva- 

nia). Accounting Disclosure Methods and Economic Development: A Criterion 
for Globalizing Capital Markets [financial accounting & reporting]. The Inter- 
national Journal of Accounting. 1992; 27(2): 151-163. 
Methodology: capital markets. 

Study determining the relationship between capital markets and accounting dis- 
closure methods and their influences on economic development. 

516. Ndubizu, Gordian A., developed countries/third world countries (North Texas State 

University). Accounting Standards and Economic Development: The Third 
World in Perspective [economics and development] . The International Journal 
of Accounting. 1984 Mar; 19(2): 181-196. 
Methodology: theoretical. 

Examination of the effect that accounting standards have on economic develop- 
ment. Concludes that the current situation adversely affects the third world 
countries. 

517. Ndubizu, Gordian A., United States (Drexel University). Management Preferences 

for Foreign Currency Standards: An Empirical Analysis [managerial account- 
ing]. The International Journal of Accounting. 1987 Mar; 22(2): 115-130. 
Methodology: empirical descriptive. 

Study of financial controllers and managers of muUinational corporations 
regarding their early adoption of SFAS No. 52. Determined that the stan- 
dard-setting process was political and that early adoption depended on 
favorable effects on earnings. 



136 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

518. Needles, Jr Belverd E., Hong Kong/Indonesia/Japan/Malaysia/Philippines/Sin- 

gapore/South Korea/Taiwan/Thailand (DePaul University). Auditing Standards 
in the Far East: An Overview [auditing]. Recent Accounting and Economic 
Developments in the Far East. Champaign, IL: Center for International Educa- 
tion and Research in Accounting; 1988 May: 65-95. 
Methodology: empirical descriptive. 

Study of the various standards and qualifications necessary to be an auditor in 
the Far East. Survey questions included issues affecting the auditor, indepen- 
dence, attestation, and reports. 

519. Needles, Jr Belverd E.; Powers, Marian; Revsine, Lawrence, France/Germany/the 

Netherlands/Sweden/Switzerland/United Kingdom (DePaul University//Uni- 
versity of Illinois at Chicago/ZNorthwestem University). Financial Disclosures 
and Institutional Characteristics: Pension Reporting Differences Across Six 
Countries [financial accounting & reporting]. The International Journal of 
Accounting. 1991; 26(3): 190-205. 
Methodology: empirical descriptive. 

Analysis of pension and retirement benefits reporting and disclosure practices 
of six European countries. 

520. Needles, Jr Belverd E., none (University of Illinois at Urbana-Champaign). Imple- 

menting a Framework for the International Transfer of Accounting Technology 
[financial accounting and reporting]. The International Journal of Accounting. 
1976 Sep; 12(1): 45-62. 
Methodology: theoretical. 

Proposal for a conceptual framework by which a country may formulate a strat- 
egy for the international transfer of accounting technology as a part of its 
overall economic plan. A three-phase plan is described for the implementation 
of this framework. 

521. Needles, Jr Belverd E., global (DePaul University). International Auditing 

Research: Current Assessment and Future Direction [auditing]. The Interna- 
tional Journal of Accounting. 1989:24(1): 1-20. 
Methodology: deductive descriptive. 

Discussion of the need for international auditing research. Reviews publications 
from 1978-1987, discovering that few articles were written then, making sug- 
gestions for improvement. 

522. Needles, Jr Belverd E., Developing Countries (DePaul University). A Profile, 

Annotated Bibliography, and Index of Accounting Research on Developing 
Countries: 1965-1990 [professional development]. The International Journal of 
Accounting. 1995; 30(2): 107-128. 
Methodology: deductive descriptive. 

Bibliographical compilation involving international accounting research arti- 
cles concerning developing countries from 1965 to 1990. 

523. Needles, Jr Belverd E., The Netherlands/United Kingdom/ Italy/France/Germany/ 

Sweden (DePaul University, Chicago, Illinois). The Regulation of Auditing 
Standards: An Assessment of Six European Countries [auditing]. The New 
Europe: Recent Political and Economic Implications for Accountants and 



Bibliography 137 

Accounting. Champaign, IL: Center for International Education and Research 

in Accounting; 1994: 61-96. 

Methodology: deductive descriptive. 

Identification of the similarities and differences in auditing procedures and 

standards in six European countries. 

524. Needles, Jr Belverd E., Europe (DePaul University). Standards for International 

Accounting Education: A Consideration of the Issues [accounting education]. 
Comparative International Accounting Educational Standards. Champaign, IL: 
Center for International Education and Research in Accounting; 1990 Apr: 
1-29. 

Methodology: theoretical. 

Discussion of the international standards necessary for the education of quali- 
fied accountants. Provides a methodology for the analysis and implementation 
of such standards. 

525. Nehrt, Lee C, Tunisia (Indiana University). Evaluating the Political Climate for 

Private Investment with Special Application to Tunisia [economics and devel- 
opment]. The International Journal of Accounting. 1969 Sep; 5(1): 109-122. 
Methodology: theoretical. 

Study of the terms "investment climate" and "political climate." Evaluates the 
political climate for private investment and the general applicability of this 
model. 

526. Neuhauser, Lenz. United States (KPMG Peat Marwick). Analyzing Management 

Information Systems of Multinational Companies: An External Auditor's 
Viewpoint [information systems]. Managerial Accounting: An Analysis of Cur- 
rent International Application. Champaign. IL: Center for International 
Education and Research in Accounting; 1984 Jan: 41-51. 
Methodology: deductive descriptive. 

Discussion of the role of management information systems in international 
accounting. Suggests that certain elements regarding currency translation, infla- 
tion, intercompany pricing, performance criteria, and risk analysis be 
incorporated in these systems. 

527. Neumann. Frederick L., United States (University of Illinois at Urbana-Cham- 

paign). Career Education in Accounting in the United States: A Current 

Appraisal [accounting education]. The International Journal of Accounting. 

1974 Mar; 9(2): 169-179. 

Methodology: theoretical. 

Discussion of the trend in accounting toward post-secondary schools, arguing 

against this trend. 

528. Ng. Patrick P. H.; Fung, S. M.; Tai, Benjamin Y. K.. Hong Kong (City Polytechnic 

of Hong Kong//City Polytechnic of Hong Kong//City Polytechnic of Hong 
Kong). Auditing Firm Reputation and the Underpricing of Initial Public Offer- 
ings in Hong Kong: 1989-1991 [auditing]. The International Journal of 
Accounting. 1994; 29(3): 220-233. 
Methodology: empirical statistical. 



138 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Presentation of the results of empirical tests to determine the relationship 
between auditing firm reputation and the underpricing of initial public offerings 
in Hong Kong. 

529. Niehus. Rudolph J., Germany (Deloitte & Touche). Generally Accepted Auditing 

Principles in Germany [auditing]. The International Journal of Accounting. 

1969 Mar; 4(2): 113-124. 

Methodology: deductive descriptive. 

Review of the importance and significance of newly adopted auditing rules in 

Germany. 

530. Niehus. Rudolph J., Germany/Europe (Deloitte & Touche). Harmonized European 

Economic Community Accounting— A German View of the Draft Directive for 
Uniform Accounting Rules [public accounting]. The International Journal of 
Accounting. 1972 Mar; 7(2): 91-125. 
Methodology: deductive descriptive. 

Summary of the features of the European Economic Community valuation 
requirements. Explains the German perspective on the format of financial state- 
ments, disclosures, and reporting rules. 

531. Niehus, Rudolph J., West Germany/United States (Dr. WoUert-Dr. Elmendorff 

K.G., Germany). Stock Corporation Law Reform in Germany and the Public 

Accountant [financial accounting and reporting]. The International Journal of 

Accounting. 1966 Mar; 1(2): 25-41. 

Methodology: deductive descriptive. 

Summary and explanation of the changes in the Stock Corporation Law of 1965 

in West Germany. 

532. Ninsuvannakul, Pianchai. Thailand (University of Illinois at Urbana-Champaign). 

Education for Accountancy in Thailand [accounting education]. The Interna- 
tional Journal of Accounting. 1966 Sep; 2(1): 77-1 1 1. 
Methodology: deductive descriptive. 

Study of education for accountancy in Thailand which evaluates professional 
activities pertaining to the training of competent accountants. 

533. Ninsuvannakul. Prawit. Indonesia/Malaysia/Philippines/Singapore/Thailand/Bru- 

nei (Chulalongkom University, Thailand/Ministry of Science and Technology, 
Thailand). The Development of the Accounting Profession of the ASEAN 
Countries: Past, Present, and Future [professional development]. Recent 
Accounting and Economic Developments in the Far East. Champaign, IL: Cen- 
ter for International Education and Research in Accounting; 1988 May: 
115-148. 

Methodology: deductive descriptive. 

Study of the history and characteristics of the accounting profession in the 
ASEAN countries. Concludes that accountants in the ASEAN countries should 
be more active and up to date with the accounting environment. 

534. Nishimura, Akira. Japan (Kyushu University, Fukuoka, Japan). Transplanting Japa- 

nese Management Accounting and Cultural Relevance [managerial 
accounting]. The International Journal of Accounting. 1995; 30(4): 318-330. 
Methodology: empirical descriptive. 



Bibliography 139 

Study of the transfer of Japanese management accounting and cultural tech- 
niques to countries abroad. 

535. Niskanen, Jyrki; Kinnunen, Juha; Kasanen, Eero, Finland (Helsinki School of Eco- 

nomics. Finland/ZHelsinki School of Economics, Finland/ZHelsinki School of 
Economics, Finland). The Association of Stock Returns with International 
Accounting Standards Earnings: Evidence from the Finnish Capital Market 
[economics & development]. The Intemational Journal of Accounting. 1994; 
29(4): 283-296. 
Methodology: capital markets. 

Comparative study of the incremental market information of earnings figures 
based on Finnish accounting rules and those based on IAS' rules. 

536. Nissan, Samir; Otaka, Reijun; Kamata, Nobo, Japan (California State University, 

Chico/ZNanzan University, Nagoya, Japan/ZNanzan University, Nagoya, Japan). 

Cash Reporting in Japan [financial accounting & reporting]. 77?^ International 

Journal of Accounting. 1995; 30(2): 168-180. 

Methodology: deductive descriptive. 

Presentation of the format used for the Japanese fund (cash) flow statement and 

its restatement in accordance with American generally accepted accounting 

principles. 

537. Nobes, C. W., United States/United Kingdom/France/Germany/Netherlands (Uni- 

versity of Exeter, England). Harmonization of Accounting within the European 
Communities: The Fourth Directive on Company Law [financial accounting 
and reporting]. The International Journal of Accounting. 1980 Mar; 15(2): 
1-16. 

Methodology: deductive descriptive. 

Discussion of accounting differences in the European Economic Community. 
Concludes that the Fourth directive should help to alleviate legal and presenta- 
tion differences, but that differences in methods of inflation accounting may 
hinder the directive. 

538. Oberrotman, Alain M., United StatesAJnited Kingdom/Canada (Deloitte & Tou- 

che). Financial Information for Internal Decision Making Under Inflation 

[managerial accounting]. The Impact of Inflation on Accounting: A Global 

View. Champaign, IL: Center for Intemational Education and Research in 

Accounting; 1979 May: 163-178. 

Methodology: deductive descriptive. 

Description of the policies and strategies used by business administrators in 

decision making during periods of inflation. 

539. Obersteiner. Erich, none (Bucknell University). The Management of Liquid Fund 

Flows Across National Boundaries [economics and development]. The Interna- 
tional Journal of Accounting. 1976 Mar; 1 1(2): 91-101. 
Methodology: deductive descriptive. 

Discussion of the problems of international fund flows within the constraints of 
a multinational firm. 

540. O'Connor, Walter F., United States (Fordham University). Accounting Education 

Worldwide from the Perspective of Accounting Practice [accounting educa- 
tion]. Comparative International Accounting Educational Standards. 



140 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Champaign, IL: Center for International Education and Research in Account- 
ing; 1990 Apr: 61-70. 
Methodology: deductive descriptive. 
Discussion of the effect of current developments on accounting education. 

541. Ogan, Pekin, Turkey (Indiana University). Turkish Accountancy: An Assessment 

of Its Effectiveness and Recommendations for Improvement [accounting edu- 
cation]. The International Journal of Accounting. 1978 Sep; 14(1): 133-154. 
Methodology: deductive descriptive. 

Study that finds the accounting profession in Turkey to be inadequate, unregu- 
lated, and poorly regarded. Suggests solving these problems through legislation 
and the development of a professional organization of accountants. 

542. Ogundele. Babatunde. Nigeria (University of Illinois at Urbana-Champaign). The 

Accounting Profession in Nigeria: An International Perspective [financial 

accounting and reporting]. The International Journal of Accounting. 1969 Sep; 

5(1): 101-106. 

Methodology: deductive descriptive. 

Review of the accounting profession in Nigeria. 

543. Ohno, Kimiyoshi; Ichikawa, Hideo; Kodama. Atsuyoshi. Japan (Oita University, 

Japan// Aichi-Gakuin University, Japan// Aichi University of Education, Japan). 
Recent Changes in Accounting Standards in Japan [financial accounting and 
reporting]. The International Journal of Accounting. 1975 Sep; 11(1): 107-120. 
Methodology: theoretical. 

Discussion of the problems brought on by the amendment of BAP"s. Covers the 
background of the reconciliation between the BAP's and the commercial code 
and changes in the accounting method for allowances, and in the form of finan- 
cial statements. 

544. Okike. Elewechi N. M., Nigeria (University of Exeter, United Kingdom). Curious 

Auditing Regulations in Nigeria: A Case Study of Cultural/Political Influences 

of Auditing Practice [auditing]. The International Journal of Accounting. 1994; 

29(1): 78-91. 

Methodology: deductive descriptive. 

Study of Nigeria's auditing profession and the various influences effecting it. 

Factors discussed include the political, cultural, and institutional influences. 

545. Okopny. Robert D.; Strawser, Robert H., United States (Eastern Michigan Univer- 

sity//Texas A & M University). International Internal Audit Planning 

[auditing]. The International Journal of Accounting. 1989; 24(4): 308-319. 

Methodology: empirical descriptive. 

Study of four factors that affect the planning decisions of international internal 

auditors: scope, external environment, communication, and working and social 

environments. 

546. Olbert, Lars, Sweden (University of Lund, Sweden). Stock Valuation Methods of 

Financial Analysts in a Thin Stock Market in Sweden, with Comparisons to the 
United Kingdom and the United States [financial accounting & reporting]. The 
International Journal of Accounting. 1994; 29(2): 123-135. 
Methodology: empirical descriptive. 



Bibliography 141 

A study which is an appUcation of previous research of U.S. and British finan- 
cial analysts' methods of security valuation to Sweden's stock market. Results 
indicate that Swedish analysts do not use technical analysis (past price history) 
as frequently as American and British analysts. 

547. Ooghe, Hubert; Joos, Peter; De Bourdeaudhuij, Carl, Belguim (University of 

Ghent, Belguim/ZStanford University/ZUniversity of Ghent, Belguim). Financial 

Distress Models in Belguim: The Results of a Decade of Empirical Research 

[economics & development]. The International Journal of Accounting. 1995; 

30(3): 245-274. 

Methodology: empirical statistical. 

Presentation of a ten-year study of financial accounting distress models used in 

analyzing Belgian companies. 

548. Ooghe, Hubert; Verbaere, Eric, Belgium (State University of Ghent, Belgium// 

State University of Ghent, Belgium). Predicting Business Failure on the Basis 
of Accounting Data: The Belgian Experience [economics and development]. 
The International Journal of Accounting. 1985 Mar; 20(2): 19-44. 
Methodology: empirical statistical. 

Study of the predictive value of financial information to determine bankruptcy 
in Belgium. 

549. Oppong, Andrews, Zimbabwe (Dalhousie University, Halifax, Nova Scotia). 

Price-Earnings Approach and Emerging Capital Market: The Case of Zimba- 
bwe [economics & development]. The International Journal of Accounting. 
1993; 28(1): 71-77. 
Methodology: capital markets. 

Analysis of price-earnings accounting in the Zimbabwe Stock Exchange. 
Results presented in this article emphasize the need for further research in 
emerging capital markets in developing countries. 

550. Osiegbu, Patrick I., Nigeria (University of Port Harcourt, Nigeria). The State of 

Accounting Education in Nigeria [accounting education]. The International 

Journal of Accounting. 1987 Mar; 22(2): 57-68. 

Methodology: deductive descriptive. 

Description of the history, educational requirements, and the professional 

requirements affecting the Nigerian accounting profession. 

551. Park, Soong Hyun, Korea/United States (National University of Singapore. Sin- 

gapore). Competition, Independence and Audit Quality: The Korean 

Experience [auditing]. The International Journal of Accounting. 1990; 25(2): 

71-86. 

Methodology: empirical statistical. 

Study of the audit opinions of Korean firms during a six-year period, regarding 

the effects of competition on such opinions. Discusses the implications for the 

international community as well. 

552. Park, Soong Hyun, Korea/United States (Rutgers University-The State University 

of New Jersey at Newark). The Use of Foreign Financial Statements for Risk 
Analysis: An Empirical Test (Korea) [financial accounting and reporting]. The 
International Journal of Accounting. 1984 Sep; 20(1): 1-15. 
Methodology: empirical statistical. 



142 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 1, 1998 

Study of the difference between the information contained in U.S. and in 
Korean financial statements. 

553. Parker, L. D., United States/United Kingdom/New Zealand (Monash University, 

Australia). Corporate Annual Reports: A Failure to Communicate [public 
accounting]. The International Journal of Accounting. 1981 Mar; 16(2): 35-48. 
Methodology: empirical descriptive. 

Study of the level of disclosure in corporate reporting. Finds that reports are too 
complex for the average investor and concludes that the profession must 
address the situation. 

554. Pasewark, William R.; Heagy, Cynthia D.; Godfrey, James T., United States/Japan/ 

Europe (University of Georgia/ZUniversity of Georgia/ZGeorge Mason Univer- 
sity). Impact of Socially Motivated Quality Cost Control Policies on Cost 
Behavior [managerial accounting]. The International Journal of Accounting. 
1988 Mar; 23(2): 71-83. 
Methodology: modeling. 

Presentation of a model for quality cost measurement. Discusses the social fac- 
tors and possible constraints to implementing such a model. 

555. Pavlock, Ernest J., United States (Deloitte & Touche). Training Accountants for the 

Future [accounting education]. The International Journal of Accounting. 1977 

Sep; 13(1): 141-158. 

Methodology: deductive descriptive. 

List of the current educational and continuing education requirements of the 

profession. Concludes that future accountants must be ready to cope with 

change. 

556. Peche, Tadeusz, none (Central School of Planning and Statistics, Poland). Instruc- 

tional Problems in the Modernization of Accounting Theory [accounting 
education]. The International Journal of Accounting. 1978 Mar; 13(2): 87-104. 
Methodology: theoretical. 
Presentation of the financial accounting theory using the matrix approach. 

557. Pena, Pablo A., Colombia/United States (University of Bogota). Special Report: A 

Comparison of the Accounting Profession of Colombia and the United States 

[financial accounting and reporting]. The International Journal of Accounting. 

1976 Mar; 11(2): 143-177. 

Methodology: deductive descriptive. 

Study of Columbian accounting developments after 1956, including a review of 

the country's historical, geographical, and governmental facts. 

558. Pendlebury, Maurice; Jones, Rowan, United States/United Kingdom (University of 

Wales Institute of Science and Technology/ZUniversity of Birmingham, 

England). Municipal Disclosure in England: Another Market for Excuses? 

[governmental]. The International Journal of Accounting. 1983 Mar; 18(2): 

83-93. 

Methodology: empirical descriptive. 

Survey of municipalities disclosure in the U.K. Holds that this disclosure is 

controlled by special interest groups. 

559. Pendrill, David, New Zealand/United Kingdom/United States (University College, 

Cardiff). Contrasting Income Treatment of Monetary Items in Recent Account- 



Bibliography 143 

ing Standards in New Zealand, the United Kingdom, and the United States 

[accounting theory]. The International Journal of Accounting. 1985 Mar; 20(2): 

139-154. 

Methodology: theoretical. 

Study of the effects of price-level accounting on financial statements in New 

Zealand, the U.K., and the U.S. 

560. Perera, M. H. B., United States/European Economic Community/Germany/France/ 

United Kingdom/Netherlands/global (Massey University, New Zealand). 

Towards a Framework to Analyze the Impact of Culture on Accounting [social 

effects of accounting]. The International Journal of Accounting. 1989; 24(1): 

42-56. 

Methodology: theoretical. 

Discussion of the effect that culture has on accounting and international 

standards. 

561. Piper, Andrew G., United Kingdom (University of Birmingham, England). 

Accounting for Overseas Currencies [accounting theory]. The International 

Journal of Accounting. 1976 Sep; 12(1): 63-90. 

Methodology: deductive descriptive. 

Discussion of accounting for overseas currency translations, using examples 

from the published accounts of companies with registered offices in the U.K. . 

562. Piper, Andrew G., United Kingdom/United States/Canada (University of Birming- 

ham, England). A Methodology on Translation for Interim Accounts 
[accounting theory]. The International Journal of Accounting. 1979 Sep; 15(1): 
45-52. 

Methodology: theoretical. 

Study of the Unilever Corporation's practice of disclosure for changing cur- 
rency rates, citing this as a model for disclosing exchange rates. 

563. Polimeni, Ralph S., United States (Hofstra University). Accounting for Forward 

Exchange Contracts [accounting theory]. The International Journal of Account- 
ing. 1977 Sep; 13(1): 159-168. 
Methodology: theoretical. 
Presentation of techniques for dealing with currency futures. 

564. Pomeranz, Felix, none (Coopers & Lybrand). International Auditing Standards 

[auditing]. The International Journal of Accounting. 1975 Sep; 11(1): 1-13. 
Methodology: theoretical. 

Perspective on recent developments in international auditing. Discusses audit 
procedures relating to inventory, accounts receivable, and reporting standards. 
Uses case study drawn from Coopers & Lybrand" s experience in developing an 
international practice. . 

565. Pomeranz, Felix, United States/European Economic Community (Coopers & 

Lybrand). Prospects for International Accounting and Auditing Standards — 
The Transnationals in Governmental Regulations [financial accounting and 
reporting]. The International Journal of Accounting. 1981 Sep; 17(1): 7-19. 
Methodology: deductive descriptive. 



144 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol, 33, No. 1 , 1 998 

Discussion of three organizations having an effect on the development of inter- 
national standards: the Organization for Economic Cooperation and 
Development, the European Economic Community, and the United Nations. 

566. Pomeranz, Felix, United States/United Kingdom/South Africa/France/Brazil/Ger- 

many/Holland/Netherlands (Coopers & Lybrand). Reporting the Effects of 
Inflation: An Accountant's View [financial accounting and reporting]. The 
Impact of Inflation on Accounting: A Global View. Champaign, IL: Center for 
International Education and Research in Accounting; 1979 May: 149-161. 
Methodology: deductive descriptive. 

Description of the practices and options available to the accountant when 
reporting for inflation. Gives a description of foreign practices in this area. 

567. Pomeranz, Felix; Haqiqi, Abdul Wassay, Kuwait (Coopers & Lybrand/ZMutual 

Life of America). The Collapse of the Souk al-Manakh: A Chronicle [econom- 
ics and development]. The Recent Accounting and Economic Developments in 
the Middle East. Champaign, IL: Center for International Education and 
Research in Accounting; 1985 May: 151-166. 
Methodology: deductive descriptive. 

Discussion of the social and governmental consequences of the failure of the 
stock exchange in Kuwait. 

568. Popoff, Boris, New Zealand (University of Otago, New Zealand). The Price Level 

Adjustment and Accounting Realism: A Case Study of a New Zealand Com- 
pany [accounting theory]. The International Journal of Accounting. 1971 Mar; 
6(2): 15-35. 

Methodology: empirical descriptive. 

Study of price-level adjustment as against more traditional accounting methods 
based on unadjusted historic cost. Contends that the price-level adjustment may 
produce misleading results on the operating statement, and that some problems 
in the production of reliable company reports do not arise from changing prices. 

569. Popoff, Boris, New Zealand/United Kingdom (University of Otago, New Zealand). 

Some Conceptualizing on the True and Fair View [accounting theory]. The 
International Journal of Accounting. 1983 Sep; 19(1): 43-54. 
Methodology: theoretical. 

Theoretical discussion of the concept of a true and fair view, as it pertains to 
financial accounting. Discusses problems and advantages of the concept. 

570. Porcano, Thomas M., Europe (Miami University, Ohio). The Perceived Efficacy of 

Government Incentives: A Comparative Study of Seven European Community 
Countries [governmental]. The International Journal of Accounting. 1986 Sep; 
22(1): 135-157. 

Methodology: empirical descriptive. 

Survey of large corporations in Europe as to the effects of government sup- 
ply-side manipulation. 

571 . Pound, G. D.; Pollard, B. M., United States/United Kingdom/ Australia (University 

of New England, Australia/ZUniversity of New England, Australia). Accounting 
Theory and History — Lessons to be Learned [accounting history]. The Interna- 
tional Journal of Accounting. 1981 Mar; 16(2): 99-123. 
Methodology: historical. 



Bibliography 145 

Historical account of the development of accounting standards and theory in the 
U.S., U.K., and Australia. Concludes that the theoretical approach to standard 
setting has been proven by history. 

572. Powelson, John P., Central & South America (University of Colorado). National 

Income Estimates in Latin America [public accounting]. The International 

Journal of Accounting. 1967 Sep; 3(1): 55-65. 

Methodology: deductive descriptive. 

Review of the systems of national accounts in Latin America, highlighting 

progress and problems in these systems. 

573. Pratt, Jamie; Behr, Giorgio, Switzerland/United States (University of Washington// 

international consultant). Environmental Factors, Translation Costs, and Exter- 
nal Reporting: A Cross-National Comparison [financial accounting and 
reporting]. The International Journal of Accounting. 1987 Mar; 22(2): 1-24. 
Methodology: theoretical. 

Comparison of the market factors in Switzerland and the U.S. that drive 
standard-setting. 

574. Previts, Gary John, United States (Case Western Reserve University). A Centennial 

Sketch of Accountancy Education in the United States [accounting history]. 

Comparative International Accounting Educational Standards. Champaign, IL: 

Center for International Education and Research in Accounting; 1990 Apr: 

31-40. 

Methodology: historical. 

Description of the history of accounting in the United States. Concludes that 

more attention must be paid to culture in the U.S. educational system. 

575. Previts, Gary John, none (University of Alabama). On the Subject of Methodology 

and Models for International Accountancy [accounting theory]. The Interna- 
tional Journal of Accounting. 1975 Mar; 10(2): 1-12. 
Methodology: theoretical. 

Study of a methodology for reviewing and synthesizing global accounting 
developments, considering the international relationships which have arisen 
during the 20th century. Emphasizes developments in American accountancy 
during this era. 

576. Purcell, Thomas J. Ill; Scott, James P., European Economic Community (Creighton 

University//Creighton University). An Analysis of the Feasibility of Harmoniz- 
ing Financial Reporting Practices Between Member Countries of the EEC and 
the OECD [financial accounting and reporting]. The International Journal of 
Accounting. 1986 Mar; 21(2): 109-131. 
Methodology: empirical statistical. 

Study that groups the OECD and EEC countries by accounting and disclosure 
practices. 

577. Queenan, John W., United States/United Kingdom (Deloitte & Touche). Chal- 

lenges in International Auditing [economics and development]. The 
International Journal of Accounting. 1965 Sep; 1(1): 43-51. 
Methodology: deductive descriptive. 

Explanation of the problems facing U.S. and British auditors practicing in a for- 
eign country. 



146 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

578. Qureshi. Mahmood A., Pakistan (DePauI University). Private Enterprise Account- 

ing and Economic Development in Paki.stan [economics and development]. The 
International Journal of Accounting. 1974 Mar; 9(2): 125-141. 
Methodology: empirical descriptive. 

wStudy of the potential of private enterpri.se accounting as a tool in the develop- 
ment of an emerging economy such as Pakistan. Discusses capital formation, 
foreign investment, and management capability. 

579. Radebaugh, Lee H., Peru (Pennsylvania State University). Environmental Factors 

Influencing the Development of Accounting Objectives, Standards, and Prac- 
tices in Peru [financial accounting and reporting]. The International Journal of 
Accounting. 1975 Sep; 11(1): 39-56. 
Methodology: theoretical. 

Discussion of the major environmental factors that influence the development 
of accounting objectives, standards, and practices. Cites current developments 
in Peru as an example. 

580. Radebaugh, Lee H., United States (Brigham Young University). The Impact of a 

Strengthening Dollar, Weak World Economy, and New Accounting Standard 
on Performance Evaluation of Foreign Operations [managerial accounting]. 
Managerial Accounting: An Analysis of Current International Application. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1984 Jan: 53-70. 
Methodology: theoretical. 

Discussion of the effects that exchange rates, economic growth, strength of the 
dollar, and FASB 52 have had on the earnings of foreign operations. 

581. Radebaugh, Lee H., United States (Pennsylvania State University). International 

Corporate Bribery: A New Dimension In Accounting [social effects of account- 
ing]. The Multinational Corporation: Accounting and Social Implications. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1977 Jan: 21-39. 
Methodology: deductive descriptive. 

Study of the causes for bribery, explaining the role of government in regards to 
it. 

582. Radebaugh, Lee H., United States (Pennsylvania State University). The Interna- 

tional Dimension of the Financial Accounting Standards Board: Translation and 
Disclosure of Foreign Operations [financial accounting and reporting]. The 
International Journal of Accounting. 1974 Sep; 10(1): 55-70. 
Methodology: theoretical. 

Discussion of the translation of foreign currency into parent currency for con- 
solidation with domestic operations, and on the disclosure of translation-related 
information. 

583. Radebaugh, Lee H.; Krylova, Tatiana B.; Rahman, Zubaidur, Russia (Brigham 

Young University/ZMoscow State University/ZState University of New 
York-Plattsburgh). The Evolution of Accounting in the Former Soviet Union: 
Historical Perspectives and Global Influences [accounting history]. The New 
Europe: Recent Political and Economic Implications for Accountants and 



Bibliography 147 

Accounting. Champaign, IL: Center for International Education and Research 

in Accounting; 1994: 131-148. 

Methodology: historical. 

Historical overview of the evolution of the accounting system of Russia, from 

the reign of Tsar Peter the Great to the present. 

584. Rahman, A. R.; Perera, M. H. B.; Tower, G. D., Australia/New Zealand (Massey 

University, Palmerston North, New Zealand/ZMurdoch University, Perth, Aus- 
tralia). Accounting Harmonization Between Australia and New Zealand: 
Towards a Regulatory Union [miscellaneous]. The International Journal of 
Accounting. 1994; 29(4): 316-333. 
Methodology: deductive descriptive. 

Discussion of the degree of accounting harmonization in New Zealand and 
Australia and ways to further hamionize both countries' accounting systems. 

585. Rahman, M. Zubaidur, United Kingdom/BangladeshAJnited States (State Univer- 

sity of New York at Plattsburgh). The Local Value Added Statement: A 

Reporting Requirement for Multinationals in Developing Host Countries 

[financial accounting and reporting]. The International Journal of Accounting. 

1990; 25(2): 87-98. 

Methodology: theoretical. 

Study of the uses and benefits of the local value added statement. 

586. Rappaccioli, Donna; Schiff, Allen, Unknown (Fordham University, New York, 

New York//Fordham University, New York, New York). An Enhancement to 
IAS 8: "Unusual and Prior Period Items and Changes in Accounting Policies" 
[financial accounting & reporting]. The International Journal of Accounting. 
1993; 28(1): 40-48. 
Methodology: empirical statistical. 

Examination of the deficiencies regarding the presentation of gain and loss in 
the income statement in accordance with International Accounting Standards 
(IAS) 8 and 14. This study recommends a modification of IAS 8 to include a 
materiality threshold to improve the quality of income statements issued by 
members of the lASC. 

587. Ray, Manash R.; Gupta, Parveen P., United States (Lehigh University, Bethlehem, 

Pennsylvania/ZLehigh University, Bethlehem, Pennsylvania). International 

Accounting Practices and Transaction Cost Theory: An Extended Framework 

[accounting theory]. The International Journal of Accounting. 1993; 28(3): 

187-205. 

Methodology: theoretical. 

Study of transaction cost theory involving the measurement and analysis of the 

degrees of specificity and compliance of some 30 countries. Cultural variables 

and possible areas of future research are discussed. 

588. Raymond, Robert H.; Iqbal, M. Zafar; Schafer, Eldon L., United States/United 

Kingdom/New Zealand (University of Nebraska/ZCalifomia Polytechnic State 
University/ZPacific Lutheran University). The Gearing (Leverage) Adjustment: 
A Historical and Comparative Analysis [managerial accounting]. The Interna- 
tional Journal of Accounting. 1982 Sep; 18(1): 139-157. 
Methodology: theoretical. 



148 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 1, 1998 

Study of the arguments for and against the use of a gearing leverage adjustment 
in financial reporting. 

589. Razasee, Zabihollah; Lee, John T., United States (Middle Tennessee State Univer- 

sity//Middle Tennessee State University). Market Value Accounting Standards 
in the United States and Their Significance for the Global Banking Industry 
[financial accounting & reporting]. The International Journal of Accounting. 
1995; 30(3): 208-221. 
Methodology: empirical descriptive. 

Discussion of the necessity to move toward market value accounting from his- 
torical cost accounting in order to provide relevant and reliable financial 
reporting by banking institutions. 

590. Rege, Udayan P.; Brennan, W. John; Silvester, W. Harold, United Kingdom/Euro- 

pean Economic CommunityAJnited States/Canada (University of 
Saskatchewan/AJniversity of Saskatchewan/ZUniversity of Saskatchewan). Cur- 
rent Regulatory Practices, Corporate Financial Forecasting, and Takeover Bids 
[governmental]. The International Journal of Accounting. 1983 Mar; 18(2): 
171-175. 

Methodology: deductive descriptive. 

Discussion of the current regulations regarding takeover bids in the U.K., U.S., 
European Economic Community, and Canada. 

591. Reinstein, Alan; Spalding, Albert D., United States (Wayne State University, 

Detroit, Michigan/AVayne State University, Detroit, Michigan). Accounting 
and Auditing Implications of Complying with the United States' Foreign Cor- 
rupt Practices Act Amendments of 1988 [auditing]. The International Journal 
of Accounting. 1991; 26(1): 18-26. 
Methodology: deductive descriptive. 

Comparison of 1977 and 1988 Foreign Corrupt Practices Act. The 1988 amend- 
ments give U.S. corporations both an opportunity to engage in foreign 
commerce and a challenge to develop internal policies. 

592. Rezaee, Zabihollah, United States (Middle Tennessee State University). The 

Impact of New Accounting Rules on the Consolidation of Financial Statements 
of Multinational Companies [financial accounting & reporting]. The Interna- 
tional Journal of Accounting. 1991; 26(3): 206-219. 
Methodology: empirical descriptive. 

Evaluation of the influence SEAS No. 94 has had on the consolidated financial 
statements reported by multinational companies. 

593. Riahi-Belkaoui, Ahmed; Picur, Ronald D., Canada/United States/Great Britain 

(University of Illinois at Chicago/ZUniversity of Illinois at Chicago). Cultural 
Determinism and the Perception of Accounting Concepts [accounting theory]. 
The International Journal of Accounting. 1991; 26(2): 118-130. 
Methodology: empirical statistical. 

By using multidimensional scaling techniques, demonstrates that different cul- 
tural groups have different interpretations of accounting concepts and will have 
communication problems. 

594. Riahi-Belkaoui, Ahmed, United States (University of Illinois at Chicago, Illinois). 

The Information Content of Value Added, Earnings, and Cash Flow: US Evi- 



Bibliography 149 

dence [accounting theory]. The International Journal of Accounting. 1993; 

28(2): 140-146. 

Methodology: theoretical. 

Examination of earnings, cash flows, and value added as related to adequate 

disclosures in American corporate reports. 

595. Richards, William R., United States (Coopers & Lybrand). Auditing U.S. Compa- 

nies With Operations Abroad [auditing]. The International Journal of 

Accounting. 1976 Sep; 12(1): 1-11. 

Methodology: theoretical. 

Study of the effect of the establishment of operating subsidiaries abroad by U.S. 

corporations on the auditing of large multinational companies based in the U.S. 

Holds that the responsibilities of the auditors of U.S. multinational corporations 

have been poorly defined. 

596. Riise, Ame, Norway/United States/United Kingdom (The Norwegian School of 

Economics and Business Administration). Norwegian Standards for Annual 
Reporting Requirements and Chart of Accounts [financial accounting and 
reporting]. The International Journal of Accounting. 1982 Mar; 17(2): 103-120. 
Methodology: deductive descriptive. 

Discussion of the political, social, and international factors influencing the Nor- 
wegian accounting system. 

597. Rinke, Dolores, European Community (Purdue University, Calumet, Indiana). 

Comparative Analysis of the Credentialing Processes of Professional Public 
Accountants in the European Community [public accounting]. The New 
Europe: Recent Political and Economic Implications for Accountants and 
Accounting. Champaign, IL: Center for International Education and Research 
in Accounting; 1994: 97-130. 
Methodology: deductive descriptive. 

Comparative examination of the requisite credentials for public accountants in 
the European Community. 

598. Rivera, Juan M., Spain (University of Notre Dame). The Accounting Profession in 

Spain: Apartheid or Isolationism on the European Continent [financial account- 
ing and reporting]. The Recent Accounting and Economic Developments in 
Western Europe. Champaign, IL: Center for International Education and 
Research in Accounting; 1985 May: 129-142. 
Methodology: deductive descriptive. 

Discussion of the history and economic environment responsible for current 
accounting practices in Spain. 

599. Rivera, Juan M., Panama/United States (University of Notre Dame). The Account- 

ing Profession and Accounting Education in Panama: A Survey [accounting 
education]. Comparative International Accounting Educational Standards. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1990 Apr: 175-192. 
Methodology: empirical descriptive. 

Study of current needs in the Panamanian accounting educational system. Also 
discusses the effect the U.S. system has had on Panama. 



150 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

600. Rivera, Juan M., United StatesA^enezuela (California State University at 

Northridge). The Financial Function of a U.S. Multinational Company 

Abroad— A Venezuelan Experience [managerial accounting]. The International 

Journal of Accounting. 1982 Sep; 18(1): 129-138. 

Methodology: deductive descriptive. 

Discussion of the factors affecting a U.S. firm with affiliates in Venezuela or 

abroad. 

601. Rivera, Juan M., United States/European Economic Community (University of 

Notre Dame). The Internationalization of Accounting Standards: Past Problems 

and Current Prospects [financial accounting and reporting]. The International 

Journal of Accounting. 1989; 24(4): 320-341 

Methodology: deductive descriptive. 

Discussion of the factors that have undermined the acceptance of international 

accounting standards. Calls for recognition of individual needs rather than the 

needs of a few large countries. 

602. Rivera, Juan M., Central & South America (Instituta Technologico y de Estudios 

Superiores de Monterey). Latin American Accounting— A General Perspective 

[financial accounting and reporting]. The International Journal of Accounting. 

1969 Sep; 5(1): 107-108. 

Methodology: deductive descriptive. 

Study of the major problems in accounting in Latin America. 

603. Rivera, Juan M.; Salva, Antonio Socias, Spain/European Union (University of 

Notre Dame, Indiana/ZUniversitate de les Illes Balears, Spain). The Recent Eco- 
nomic Developments in Spain and the Implementation of EU Directives on 
Accounting [accounting history]. The New Europe: Recent Political and Eco- 
nomic Implications for Accountants and Accounting. Champaign, IL: Center 
for International Education and Research in Accounting; 1994: 149-170. 
Methodology: historical. 

Overview of the development of the accounting in Spain and its consequential 
implementation of accounting-related directives of the European Union. 

604. Rivola-Clay, Anna Maria; Doupnik. Timothy S., Italy/European Economic Com- 

munity (University of South Carolina/ZUniversity of South Carolina). The 

Progress of Italian Accounting: Allegro Ma Nontroppo [financial accounting 

and reporting]. The International Journal of Accounting. 1987 Mar; 22(2): 

87-102. 

Methodology: deductive descriptive. 

Discussion of the social, environmental, and legal influences on the Italian 

accounting system. 

605. Robb, A. J., New Zealand (University of Canterbury. New Zealand). Interim 

Reports and Their Qualitative Evaluation [financial accounting and reporting]. 
The International Journal of Accounting. 1980 Mar; 15(2): 77-86. 
Methodology: empirical statistical. 

Study of the interim reports of forty New Zealand companies. Indicates a wide 
variety of reporting levels, with the highest levels taken by the industrial and 
service related firms. 



Bibliography 151 

606. Rohleder, Robert P., United States (Deloitte & Touche, Chicago). Ethics, the Prac- 

tice of International Accounting and Auditing, and New Influences in the 
Marketplace [social effects]. Ethical Considerations in Contemporary Interna- 
tional Accounting Practice. Champaign, IL: Center for International Education 
and Research in Accounting, Department of Accountancy; 1992: 11-18. 
Methodology: deductive descriptive. 

Article addressing societal issues involving the practice of ethics in the public 
accounting profession. 

607. Rosenfield, Paul, none (American Institute of Certified Public Accountants). 

Accounting for Foreign Branches and Subsidiaries [accounting theory]. The 

International Journal of Accounting. 1972 Mar; 7(2): 35-44. 

Methodology: theoretical. 

Discussion of the conceptual issues common to both the translation and the 

restatement of foreign balances for general price-level changes. 

608. Rueschhoff, Norlin G., Europe (University of Notre Dame). European Accounting 

and Auditing Standards: A Comparative Study with International Standards and 
Guidelines [financial accounting and reporting]. The Recent Accounting and 
Economic Developments in Western Europe. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 91-1 14. 
Methodology: deductive descriptive. 

Discussion of the major European standard-setting bodies and their effects on 
accounting principles, disclosures, auditing practices, ethics, and education. 

609. Rueschhoff, Norlin G., United States (University of Notre Dame). International 

Accounting and Auditing in the U.S. CPA Examination, 1917-86 [professional 
development]. The International Journal of Accounting. 1986 Sep; 22(1): 
25-31. 

Methodology: theoretical. 

Study of the U.S. uniform CPA exam calling for greater emphasis on interna- 
tional issues. 

610. Rueschhoff, Norlin G., CanadaAJnited States (University of Notre Dame). U.S. 

Dollar Based Financial Reporting of Canadian Multinational Corporations 

[public accounting]. The International Journal of Accounting. 1973 Mar; 8(2): 

103-109. 

Methodology: empirical descriptive. 

Review of the factors causing the Canadian Multinational Corporation to use 

the U.S. dollar as a basis for financial reporting. 

611. Ruffing, Lorraine, United Nations/Eastern Europe/former USSR (United Nations 

Intergovernmental Working Group of Experts on International Standards of 
Accounting and Reporting). United Nations Activities in International 
Accounting in Eastern Europe and the USSR [financial accounting & report- 
ing]. The New Europe: Recent Political and Economic Implications for 
Accountants and Accounting. Champaign, IL: Center for International Educa- 
tion and Research in Accounting; 1994: 43-60. 
Methodology: deductive descriptive. 



1 52 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Study of work the United Nations has accomplished in Eastern Europe and the 
former USSR to bring those countries' accounting systems in harmony with 
those of the West. 

612. Ruggles. Richard: Ruggles, Nancy, none (Yale University //International Associa- 

tion for Research on Income and Wealth). The Evolution and Present State of 

National Economic Accounting [accounting theory]. The International Journal 

of Accounting. 1968 Sep; 4(1): 1-16. 

Methodology: deductive descriptive. 

Study of national economic accounting systems, focusing on the extent to 

which these systems meet current and anticipated needs for economic 

information. 

613. Rushinek. Avi: Rushinek. Sara F., Belgium/France/Germany/Italy/Netherlands/ 

United States (University of Miami//University of Miami). Additional Fund 

Allocation Constraints for Common Stock Investments: An Empirical Analysis 

of Regional Portfolios in the Common Market and the United States [financial 

accounting and reporting]. The International Journal of Accounting. 1986 Mar; 

21(2): 69-89. 

Methodology: empirical statistical. 

Study of inter country redundancy regarding portfolio management. 

614. Rushinek. Avi; Rushinek. Sara F., United States/United Kingdom (University of 

Miami/ZUniversity of Miami). Multinational Transfer-Pricing Factors: Tax, 
Custom Duties. Antitrust/Dumping Legislation. Inflation. Interest, Competi- 
tion. Profit/Dividend, and Financial Reporting [financial accounting and 
reporting]. The International Journal of Accounting. 1988 Mar; 23(2): 95-1 1 1. 
Methodology: empirical descriptive. 

Study of multinational corporations regarding factors that influence their trans- 
fer-pricing policies. 

615. Ruth, John J., United States. Japan, Great Britain (Goldberg Securities, Inc.). 

Recent Changes in International Financial Markets [economics & develop- 
ment]. Changing International Financial Markets and Their Impact on 
Accounting. Champaign. IL: Center for International Education and Research 
in Accounting. Department of Accountancy; 1992: 17-30. 
Methodology: capital markets. 

Discussion of the changes in international capital markets and various proposals 
to aid in the area of financial disclosure and reporting. 

616. Sabri, Nidal R.; Jabr, M. Hisham, Middle East (Birzeit University. PalesUne// 

An-najah University, Palestine). Business and Accounting Ethics in Islam: The- 
ory and Practice [social effects]. Ethical Considerations in Contemporary 
International Accounting Practice. Champaign, IL: Center for International 
Education and Research in Accounting. Department of Accountancy; 1992: 
49-64. 

Methodology: deductive descriptive. 

Analysis of the relationship between business accounting ethics and Islamic 
codes of conduct and legislation. 

617. Sabri, Nidal R.; Jabr, M. Hisham. Middle East/ Arab Countries (Birzeit University// 

Birzeit University). Accounting Information Systems for Banks Without Inter- 



Bibliography 153 

est (Islamic Banks) [economics and development]. The Recent Accounting and 
Economic Developments in the Middle East. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 233-242. 
Methodology: theoretical. 

Presentation of a framework for Islamic banks, discussing the social and legis- 
lative factors that would influence such a system. 

618. Said, Kamal E.; Funk, lerry A., none (University of Houston//San Jacinto College). 

Planning and Control in Accounting Education: A Model for Subsystem Con- 
trols in a Free Market Environment [accounting education]. The International 
Journal of Accounting. 1976 Mar; 11(2): 103-119. 
Methodology: theoretical. 

Presentation of a model to regulate accounting education at the undergraduate 
and graduate levels. Regards education as a subsystem that needs restructuring 
so as to include controls for regulation. Gives several recommendations. 

619. Salas, Cesar A.. Central & South America (Arthur Andersen & Company). 

Accounting Education and Practice in Spanish Latin America [accounting edu- 
cation]. The International Journal of Accounting. 1967 Sep; 3(1): 67-85. 
Methodology: deductive descriptive. 

Study that relates problems in accounting education to issues about the practice 
of accounting in Latin American countries. 

620. Samuels, J. M.; Oliga J. C. Developing Countries/Egypt/Italy/United Kingdom 

(University of Birmingham, England/ZUniversity of Birmingham. England). 
Accounting Standards in Developing Countries [economics and development]. 
The International Journal of Accounting. 1982 Sep; 18(1): 69-88. 
Methodology: theoretical. 

Discussion of the view that uniform standards are always feasible and good. 
Argues that decisions must be made from one country to another. 

621. Sands, John Stephens; Pragasam, John, Australia/United States/United Kingdom 

(Griffith University, Brisbane, Queensland, Australia/ZUniversity of Southern 

Queensland, Toowoomba, Queenland, Australia). Students" Perceptions of the 

Usefulness of International Accounting course Contents: An Australian Study 

[accounting education]. The International Journal of Accounting. 1993; 28(4): 

325-334. 

Methodology: empirical descriptive. 

Examination of the results of a survey given to Australian students who had just 

completed a course in international accounting to determine the usefulness of 

each topic taught via ranking. 

622. Satubaldin, Sagandyk, Soviet Union (Alma-Ata Institute of National Economy. 

USSR). Methods of Analyzing Profits of Industrial Enterprises in the USSR 

[managerial accounting]. The International Journal of Accounting. 1976 Sep; 

12(1): 91-99. 

Methodology: empirical descriptive. 

Discussion of the Soviet use of profit analysis to determine the extent of plan 

fulfillment, as well as the causes of non-fulfillment. 

623. Saudagaran, Shahrokh M., United States (Santa Clara University). The SEC's 

Response to the Internationalization of Securities Markets [financial accounting 



154 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

& reporting]. Changing International Financial Markets and Their Impact on 

Accounting. Champaign. IL: Center for International Education and Research 

in Accounting. Department of Accountancy; 1992: 125-138. 

Methodology: capital markets. 

Historical analysis of whether the Securities and Exchange Commission (SEC) 

has responded to pressure to ease its disclosure requirements to allow foreign 

securities to be accessible to American securities exchanges. 

624. Savoie, Leonard M.. United States (Clark Equipment Company). Financial and 

Accounting Aspects in International Business [financial accounting and report- 
ing]. The InternationalJournal of Accounting. 1973 Sep; 9(1): 13-22. 
Methodology: deductive descriptive. 
Case study of Clark Equipment Company's overseas investment. 

625. Savoie, Leonard M.. none (American Institute of Certified Public Accountants). 

International Dimensions of Accounting [financial accounting and reporting]. 
The International Journal of Accounting. 1969 Sep; 5(1): 79-84. 
Methodology: deductive descriptive. 

Study of progress in measuring the international dimensions of accounting 
which explores ways to achieve greater cooperation and understanding among 
accountants in all nations. 

626. Scarbrough, Paul; McGee, Robert; Sakurai. Michiharu, United States/Japan (Bent- 

ley College, Waltham. Massachusetts/ZSeton Hall University, New York// 
Senshu University, Tokyo, Japan). Accounting for Software Costs in the United 
States and Japan: Lessons from Differing Standards and Practices [information 
systems]. The International Journal of Accounting. 1993; 28(4): 308-324. 
Methodology: empirical descriptive. 

Study of how different theoretical accounting models of a new software con- 
structive process effect the accounting standards of both the United States and 
Japan. This article differentiates between the cost accounting emphasis of Japan 
and the financial accounting emphasis of the United States. 

627. Schaller, Howard G., Thailand (Indiana University). Thailand: NIDA — An Experi- 

ment in Management in the Public and Private Sectors [economics and 
development]. The International Journal of Accounting. 1968 Sep; 4(1): 
137-140. 

Methodology: deductive descriptive. 

Review of the current state of the National Institute for Development Adminis- 
tration (NIDA) in Thailand. 

628. Schiff, J. B., Canada/United Kingdom/United States/Australia/India/Pakistan/Phil- 

ippines/South Africa (Fairleigh Dickinson University). Management 
Accounting Practices Statement Promulgation: An International Perspective 
[managerial accounting]. The International Journal of Accounting. 1986 Sep; 
22(1): 119-133. 

Methodology: deductive descriptive. 

Discussion of the various professional organizations influencing the promulga- 
tion of international management accounting standards. 

629. Schoenfeld. Hanns-Martin, none (University of Illinois at Urbana-Champaign). 

Comments on 'International Accounting in an Inflationary Economy' [financial 



Bibliography 155 

accounting and reporting]. The International Journal of Accounting. 1968 Sep; 

4(1): 165-168. 

Methodology: theoretical. 

Remarks concerning the development of adequate accounting procedures for 

enterprises operating in countries with an inflationary record. 

630. Schoenfeld, Hanns-Martin, Germany (University of Illinois at Urbana-Cham- 

paign). Development and Present State of Cost Theory in Germany [managerial 
accounting]. The International Journal of Accounting. 1972 Sep; 8(1): 43-65. 
Methodology: deductive descriptive. 
Analysis of the development of cost theory in Germany. 

631. Schoenfeld, Hanns-Martin, United States (University of Illinois at Urbana-Cham- 

paign). International Influences on the Contemporary Accounting Curriculum: 

International Accounting Instruction at the University of Illinois at 

Urbana-Champaign [accounting education]. The International Journal of 

Accounting. 1974 Sep; 10(1): 71-85. 

Methodology: deductive descriptive. 

Discussion of the need for a specialized course in international accounting. 

632. Schoenfeld, Hanns-Martin, Germany (University of Illinois at Urbana-Cham- 

paign). New German Regulations for the Publication of Financial Statements 

[public accounting]. The International Journal of Accounting. 1970 Mar; 5(2): 

69-88. 

Methodology: deductive descriptive. 

Summary of both the background and purposes of the Publicity Law in 

Germany. 

633. Schweikart, James A., none (University of Richmond). Attitude Measurement and 

Instrumentation in International Accounting Research [accounting theory]. The 
International Journal of Accounting. 1987 Mar; 22(2): 131-141. 
Methodology: deductive descriptive. 

Discussion of the use of surveys in international accounting research. Presents 
different survey instruments and discusses their implementation. 

634. Schweikart, James A., United States/Brazil/China (Temple University). Contin- 

gency Theory as a Framework for Research in International Accounting 

[financial accounting and reporting]. The International Journal of Accounting. 

1985 Sep; 21(1): 89-98. 

Methodology: theoretical. 

Presentation of the contingency theory as a methodology for international 

accounting research. 

635. Schweikart, James A.; O'Connor, Walter F., United States/Japan (University of 

Richmond/ZFordham University). Attitude Measurement in International 
Accounting Research: A Test of Thurstone and Likert Scaling Validity [profes- 
sional development]. The International Journal of Accounting. 1989; 24(2): 
103-130. 

Methodology: empirical descriptive. 

Study of different research techniques to analyze attitudes toward international 
accounting. 



156 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

636. Scott, George M.. Netherlands (University of Pennsylvania). A Business Econom- 

ics Foundation for Accounting: The Dutch Experience [accounting theory]. The 
International Journal of Accounting. 1970 Mar; 5(2): 117-131. 
Methodology: deductive descriptive. 

Presentation of the business economics approach to accounting as used by 
Dutch accountants. 

637. Scott, George M., none (University of Texas at Austin). Financial Control in Multi- 

national Enterprises — The New Challenge to Accountants [managerial 
accounting]. The International Journal of Accounting. 1972 Mar; 7(2): 55-68. 
Methodology: deductive descriptive. 

Study with two major objectives: ( 1 ) to show that multinational enterprises con- 
stitute a different economic phenomenon than had previously existed (2) to 
inform accountants about the probable impact of multinational enterprises on 
management, management information systems, financial accounts, and the 
education of accountants. 

638. Scott, George M., none (University of Texas at Austin). Information Systems and 

Coordination in Multinational Enterprises [information systems]. The Interna- 
tional Journal of Accounting. 1974 Sep; 10(1): 87-105. 
Methodology: theoretical. 

Explanation of the concept of coordination in management describing the coor- 
dinative form of management. Presents recent developments in information 
systems, arguing that computer technology will greatly facilitate coordination 
management. 

639. Scott, George M.. third world countries/developing countries (University of Penn- 

sylvania). Private Enterprise Accounting in Developing Nations [economics 

and development]. The International Journal of Accounting. 1968 Sep; 4(1): 

51-65. 

Methodology: theoretical. 

Examination of several aspects of private enterprise accounting in three 

advanced nations that proposes how this form of accounting could be applied in 

"developing" nations. 

640. Sedaghat, Ali M.; Sagafi-Nejad, Tagi; Wright. George. Developing Countries 

(Loyola College, Baltimore, Maryland/ZLoyola College, Baltimore, Maryland// 
Loyola College, Baltimore, Maryland). Economic Development and Securities 
Markets in Developing Countries: Implications for International Accounting 
[economics & development]. The International Journal of Accounting. 1994; 
29(4): 297-315. 
Methodology: capital markets. 

Investigation of variables to develop a model to associate economic develop- 
ment as measured by gross domestic product and securities markets. 

641. Seidler. Lee J., none (New York University). Nationalism and the International 

Transfer of Accounting Skills [accounting education]. The International Jour- 
nal of Accounting. 1969 Sep; 5(1): 35-45. 
Methodology: deductive descriptive. 

Discussion of the interference nationalistic activities in the transfer of account- 
ing skills between countries. 



Bibliography 157 

642. Seidler, Lee J., developing countries/third world countries (New York University). 

Teaching Business Administration Overseas: The Case for the Ugly American 

[accounting education]. The International Journal of Accounting. 1968 Sep; 

4(1): 145-154. 

Methodology: theoretical. 

Study of the reasons for the success of business schools organized around 

American models in developing countries in spite of the failure of these schools 

to "adapt" to local ways. 

643. Sempier, Robert N., none (International Federation of Accountants). The Interna- 

tional Federation of Accountants: Operating Procedures and Current Progress 
[financial accounting and reporting]. The International Journal of Accounting. 
1979 Sep; 15(1): 21-31. 
Methodology: deductive descriptive. 

Description of three basic objectives of the International Federation of Accoun- 
tants: to develop international concerns, to develop regional organizations, and 
to arrange international congresses. 

644. Senteney, David L.; Bazaz, Mohammad S., United States (Eastern Michigan Uni- 

versity, Ypsilanti, Michigan/ZOakland University, Rochester, Michigan). The 
Impact of SFAS 14 Geographic Segment Disclosures on the Information Con- 
tent of US-Based MNEs' Earnings Releases [financial accounting & reporting]. 
The International Journal of Accounting. 1992; 27(3): 267-279. 
Methodology: empirical statistical. 

Comparative statistical examination of unexpected earnings and unexpected 
security price revisions released simultaneously with US-based multinational 
enterprises' annual earnings releases before and after the implementation of 
SFAS 14. 

645. Shalchi, Hossein; Zimmerman, V. K., United States/United Kingdom/Canada/ 

South Africa (University of Illinois at Urbana-Champaign/ZUniversity of Illi- 
nois at Urbana-Champaign). Appendix: Index of Price-Level and Inflation 
Accounting, 1972-76 [financial accounting and reporting]. The Impact of Infla- 
tion on Accounting: A Global View. Champaign, IL: Center for International 
Education and Research in Accounting; 1979 May: 262-300. 
Methodology: empirical descriptive. 

Study of price-level and inflation related articles categorized by topic and 
frequency. 

646. Shama, Avraham; McMahan, Christopher G., Soviet Union/European Economic 

Community/Eastern bloc countries/United States (University of New Mexico// 
University of New Mexico). Perestroika and Soviet Accounting: From a 
Planned to a Market Economy [economics and development]. The International 
Journal of Accounting. 1990; 25(3): 155-169. 
Methodology: deductive descriptive. 

Discussion of the effect that reforms in the Soviet Union will have on its 
accounting system. Discusses the conceptual framework and history of the 
present system. 



158 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

647. Shapiro. Alan C. none (University of Southern California). Evaluation and Control 

of Foreign Operations [managerial accounting]. The International Journal of 
Accounting. 1978 Sep; 14(1): 83-104. 
Methodology: deductive descriptive. 

Discussion of the evaluation and translation methods that affect the control of 
the multinational corporation. Author concludes that the multinational corpora- 
tion should be treated as a social institution. 

648. Sharkas, Wajdy, Kuwait (Kuwait University). The Effectiveness of the Supreme 

Audit Bureau in Kuwait in Monitoring Public Expenditures: An Evaluation 

[auditing]. The International Journal of Accounting. 1985 Sep; 21(1): 123-141. 

Methodology: deductive descriptive. 

Description of the economic, political, and regulatory effects on auditing in 

Kuwait. 

649. Sharp, David J., Global (Boston College). Global Foreign Exchange Markets: 

Implications for Management Accounting [managerial accounting]. Changing 
International Financial Markets and Their Impact on Accounting. Champaign, 
IL: Center for International Education and Research in Accounting, Department 
of Accountancy; 1992: 107-124. 
Methodology: capital markets. 

Analysis of the implications of global currency markets' efficiency and volatil- 
ity for managerial accounting. 

650. Sharp, Robert F., global (Ohio University). The Use of Computer Simulation in 

International Accounting Research [professional development]. The Interna- 
tional Journal of Accounting. 1989; 24(1): 57-69. 
Methodology: deductive descriptive. 

Discussion of computer simulation as a research tool. Past examples are given 
and author makes suggestions for future research implications. 

651. Shields, Janice Christine, United States (Pennsylvania State University). Foreign 

Language and Accounting Expertise: A Marketable Combination [accounting 
education]. The International Journal of Accounting. 1981 Sep; 17(1): 133-146. 
Methodology: empirical descriptive. 

Sur\'ey of various multinational companies and accounting firms as to the mar- 
ketability of foreign languages, which encourages multilingualism. 

652. Shinawi, Ahmed Abdul Kadir; Crum, William F., Saudi Arabia (Ministry of Com- 

merce and Industry of the Government of Saudia Arabia///University of 

Southern California). The Emergence of Professional Public Accounting in 

Saudi Arabia [public accounting]. The International Journal of Accounting. 

1971 Mar; 6(2): 103-110. 

Methodology: deductive descriptive. 

Overview of the development of public accounting in Saudi Arabia. 

653. Shoenthal, Edward, United States/United Kingdom (Brooklyn College). Differ- 

ences in the Characteristics of Certified Public Accountants and Chartered 
Accountants: An Obstacle to Harmonization [public accounting]. The Interna- 
tional Journal of Accounting. 1987 Sep; 23(1): 95-103. 
Methodology: empirical descriptive. 



Bibliography 159 

Comparison of CPA's in the U.S. with CA's in the U.K.. which finds that CA's 
are more likely to be male, older than CPA's, and more highly trained and edu- 
cated prior to licensing. Discusses the effect of these differences on efforts 
toward harmonization. 

654. Shuaib, Shuaib A., Kuwait/ Arab Countries (Kuwait University). Accounting Edu- 

cation in the Middle East: The Case of Kuwait [accounting education]. The 
Recent Accounting and Economic Developments in the Middle East. Cham- 
paign, IL: Center for International Education and Research in Accounting; 1985 
May: 213-232. 

Methodology: deductive descriptive. 
Discussion of the development of accounting education in Kuwait. 

655. Shuaib, Shuaib A., Kuwait (University of Kuwait). Accounting Information and the 

Development Planning Process in Kuwait [economics and development]. The 
InternationalJournal of Accounting. 1980 Mar; 15(2): 129-141. 
Methodology: deductive descriptive. 

Description of the use of the accounting system in Kuwait as a source of infor- 
mation and as a tool for economic development. Urges the development of a 
professional body to analyze, define, assess information needs, and develop 
uniform standards in the system. 

656. Shute, John, none (Agency for the International Development, Washington, D.C.). 

Comments on Dr. Churchill's Paper on Highway Finance [economics and 

development]. The International Journal of Accounting. 1968 Sep; 4(1): 

111-114. 

Methodology: theoretical. 

Commentary on A. A. Churchill's crutuque of the balanced budget in highway 

finance. 

657. Sigel, Phillip; Theerathom, Pochara; Alcerreca-Joaquin, Carlos, United States 

(University of Houston-Downtown, Texas/ZMemphis State University, Mem- 
phis, Tennessee/ZUniversity of Houston-Downtown/Instituto Technologio 
Autonono de Mexico, Mexico City, Mexico). The Determinants of Systematic 
Risk in Multinational Corporations After SPAS 52 [economics & develop- 
ment]. International Journal of Accounting. 1992; 27(4): 324-341. 
Methodology: capital markets. 

Study to identify various sources of risk for subsidiaries of multinational corpo- 
rations in order to better evaluate the performance of multinational 
corporations. This research was done in light of the issuance of SFAS 52. 

658. Simon, Abraham J., United States (Queens College, City University of New York). 

An Economic and Macroaccounting Framework for Household Nonmarket 
Production and Its Uses: The Output Side [economics and development]. The 
International Journal of Accounting. 1977 Mar; 12(2): 143-168. 
Methodology: theoretical. 
Presentation of a framework to account for nonmarket production output. 

659. Simon, Abraham J., none (Queens College, City University of New York). A Mac- 

roaccounting Framework for the Value-Added and Saving Side of Household 



160 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Nonmarket Production [financial accounting and reporting]. The International 
Journal of Accounting. 1977 Sep; 13(1): 93-129. 
Methodology: modeling. 

Presentation of a model of the accounting methodology for the value-added per- 
spective and nonmarket production. Focuses on the input side. 

660. Simon. Daniel T.. South Africa (University of Notre Dame). The Market for Audit 

Services in South Africa [auditing]. The International Journal of Accounting. 

1995; 30(4): 356-365. 

Methodology: empirical statistical. 

Study to determine similarities between South African audit services/practices 

and those of the United States, United Kingdom, and Australia. 

661. Simon, Daniel T.; Teo, Susan; Trompeter. Gregory, Hong Kong/Malaysia/Sin- 

gapore (University of Notre Dame, Indiana/ZNanyang Technological 
University, SingaporeZ/Boston College, Massachusetts). A Comparative Study 
of the Market for Audit Services in Hong Kong, Malaysia, and Singapore 
[auditing]. The International Journal of Accounting. 1992; 27(3): 234-240. 
Methodology: empirical statistical. 

Study of similarities and differences between the audit services offered in Hong 
Kong. Malaysia, and Singapore. 

662. Simon, Daniel T.; Ramanan, Ramachandran; Dugar, Amitabh, United States/India 

(Northwestern University/ZUniversity of North Carolina/ZNorthwestem Univer- 
sity). The Market for Audit Services in India: An Empirical Examination 
[auditing]. The International Journal of Accounting. 1986 Mar; 21(2): 27-35. 
Methodology: empirical statistical. 

Study of auditing in India. Finds that auditor type, client size, audit risk, and 
complexity affect the audit fees in such engagements. 

663. Simyar, Farhad, China (Concordia University, Canada). Joint Ventures in the Peo- 

ple's Republic of China [economics and development]. Recent Accounting and 
Economic Developments in the Far East. Champaign, IL: Center for Interna- 
tional Education and Research in Accounting; 1988 May: 169-195. 
Methodology: deductive descriptive. 

Discussion of the historical, economic, and social background of the environ- 
ment surrounding enterprise in China. Suggests that foreign businesses obtain a 
basic understanding of these factors before implementing international 
endeavors. 

664. Sinason, David H., none (University of North Florida). Executory Contracts in 

Agency Theory [accounting theory]. The International Journal of Accounting. 

1988 Mar; 23(2): 137-143. 

Methodology: deductive descriptive. 

Discussion of the nature and function of the executory contract. Concludes that 

the information contained in such contracts should be disclosed to outside 

principles. 

665. Singh, D. R.; Ahuja, Jag Mohan, India/United States (Punjab Agricultural Univer- 

sity, India/ZIndian Bank). Corporate Social Reporting in India [financial 



Bibliography 161 

accounting and reporting]. The International Journal of Accounting. 1983 Mar; 

18(2): 151-169. 

Methodology: empirical statistical. 

Survey of firms in India regarding their level of social disclosure. Finds that 

companies do not adequately disclose their social activities. 

666. Singhvi, Surendra S., India (Miami University, Ohio). Characteristics and Implica- 

tions of Inadequate Disclosure: A Case Study of India [financial accounting and 
reporting]. The International Journal of Accounting. 1968 Mar; 3(2): 29-43. 
Methodology: empirical descriptive. 

Study of some of the characteristics of corporations associated with the quality 
of disclosure in annual reports. 

667. Sishtla, Vijaya Saradhi. India (Pennsylvania State University). Economic Change 

under Five- Year Plans and Accounting Education in India [accounting educa- 
tion]. Comparative International Accounting Educational Standards. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1990 Apr: 213-236. 
Methodology: deductive descriptive. 

Discussion of the educational and professional requirements of the Indian 
accounting system. Contends that changes to date with the system have been 
disorganized and that restructuring is needed. 

668. Skinner, R. C, none (University of Otago. New Zealand). Accounting Information 

for Decision-Making [managerial accounting]. The International Journal of 

Accounting. 1971 Sep: 7(1): 65-78. 

Methodology: theoretical. 

Study emphasizing unification in decision-making. 

669. Skinner. R. C. none (Monash University. Australia). Combining LIFO and FIFO 

[accounting theory]. The International Journal of Accounting. 1975 Mar; 10(2): 

127-133. 

Methodology: theoretical. 

Study of a method of stores issue pricing and stock valuation used by some 

companies in England, which combines the best features of LIFO and FIFO. 

670. Skinner. R. C, none (Monash University. Australia). Cost Allocation in Manage- 

ment and Financial Accounting [financial accounting and reporting]. The 
International Journal of Accounting. 1986 Mar; 21(2): 91-107. 
Methodology: deductive descriptive. 

Description of cost allocation for financial accounting. Holds that cost alloca- 
tion is appropriate and should be considered. 

671. Skinner. R. C. Australia/United Kingdom/United States (Monash University. Aus- 

tralia). The Role of Conservatism in Determining the Accounting Lives of 

Fixed Assets [accounting theory]. The International Journal of Accounting. 

1988 Mar; 23(2): 1-18. 

Methodology: empirical descriptive. 

Survey of the role of conservatism in both fixed asset life determination and 

valuation. 

672. Skomp, Stephen E.; Ward. C. W. R.. United Kingdom/United States (Louisiana 

Tech University/ZUniversity of Lancaster, England). The Capital Structure Poli- 



162 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

cies of U.K. Companies: A Comparative Study [economics and development]. 
The International Journal of Accounting. 1983 Sep; 19(1): 55-64. 
Methodology: empirical descriptive. 

Survey and comparison of British companies regarding their capital structure 
policies. Finds that managers in the U.K. tend to focus on the balance sheet. 

673. Skully, Michael T., Japan/United States (University of New South Wales, Austra- 

lia). Japanese Corporate Structure: Some Factors in Its Development 
[economics and development]. The International Journal of Accounting. 1981 
Mar; 16(2): 67-98. 
Methodology: deductive descriptive. 

Discussion of the historical, social, and economic reasons for the growth of Jap- 
anese firms. Concludes that the Japanese firms have developed primarily 
because of the Japanese banking structure, but that the role of the Japanese 
banks will diminish in the future. 

674. Smith, Charles H., none (University of Texas at Austin). The Modem Systems 

Approach, General System Theory, and Accounting Theory Development in 

the Age of Synthesis [accounting theory]. The International Journal of 

Accounting. 1971 Mar; 6(2): 59-73. 

Methodology: theoretical. 

Investigation of whether or not the systems approach and general system theory 

can contribute to the development of accounting theory. 

675. Someya, Kyojiro, Japan (Waseda University, Tokyo, Japan). Accounting Standard 

Selection and its Socio-economic Consequences [professional development]. 

International Journal of Accounting. 1993; 28(2): 93-103. 

Methodology: historical. 

Analysis of three events in 1990 in which legal alternative reporting techniques 

by Japanese companies allowed those companies to evade ethical and credible 

standards of accounting. 

676. Someya, Kyojiro, Japan (Waseda University, Japan). The Slip Accounting System: 

Traditional Bookkeeping Procedures in Japan [financial accounting and report- 
ing]. The International Journal of Accounting. 1971 Sep; 7(1): 99-1 14. 
Methodology: deductive descriptive. 

Presentation of the advantages and disadvantages of methods employing slips 
to record transactions. 

677. Soyode, Afolabi, Nigeria (University of Ibadan, Nigeria). Indigenizing the Multina- 

tional Corporation in Nigeria: Accounting and Social Effects [economics and 
development]. The Muldnational Corporation: Accounting and Social Implica- 
tions. Champaign, IL: Center for International Education and Research in 
Accounting; 1977 Jan: 107-126. 
Methodology: deductive descriptive. 

Explanation of the requirements necessary for the growth of the Nigerian 
economy. 

678. Spagnola, Bob; Brannon, Roger, United StatesAJnited Kingdom/Germany (Colo- 

rado State University/ZUniversity of Minnesota-Duluth). International Joint 
Ventures: A Perspective on Organization and Accounting Implications of Glo- 



Bibliography 163 

bal Partnering for U.S. Multinationals [economics & development]. 

International Journal of Accounting. 1994; 29(1): 34-45. 

Methodology: deductive descriptive. 

Examination of the organizational fundamentals of international joint ventures 

(IJVs) and various accounting issues related to them. 

679. Sprouse, Robert T., United States (Financial Accounting Standards Board). Infla- 

tion: Symptom or Disease? [financial accounting and reporting]. The Impact of 
Inflation on Accounting: A Global View. Champaign. IL: Center for Interna- 
tional Education and Research in Accounting; 1979 May: 1-19. 
Methodology: theoretical. 

Discussion of the effect of inflation on financial statement presentation and the 
unit of measurement. Discusses the capital maintenance concept and its rele- 
vance to investors. 

680. Standish, Peter E. M., United Kingdom/France/Germany/Netherlands (London 

Graduate School of Business Studies). Accounting Responses to Inflation in the 
European Economic Community [financial accounting and reporting]. The 
International Joitmal of Accounting. 1975 Sep; 11(1): 167-186. 
Methodology: deductive descriptive. 

Discussion of the responses within the European Economic Community (ECC) 
to inflation from the standpoint of statutory disclosure requirements, particular 
professional bodies, and particular companies. 

681. Standish, Peter E. M., none (London Graduate School of Business Studies). Inter- 

national Accounting Practice and the Reporting of Price-Level Changes 
[financial accounting and reporting]. The Multinational Corporation: Account- 
ing and Social Implications. Champaign, IL: Center for International Education 
and Research in Accounting; 1977 Jan: 213-234. 
Methodology: theoretical. 
Description of theories of price-level translation and accounting for inflation. 

682. Stanley, Marjorie T.; Block, Stanley B., none (Texas Christian University/ZTexas 

Christian University). Accounting and Economic Aspects of SEAS No. 8 

[accounting theory]. The International Journal of Accounting. 1979 Mar; 14(2): 

135-155. 

Methodology: empirical descriptive. 

Survey supporting modification of SEAS no. 8 because of increased volatility 

of earnings and the requirement that investors be better informed when dealing 

with a multinational firm. 

683. Stolowy, Herve; Walser-Prochazka, Sylvie, United States/Canada/New Zealand/ 

France (Ecole Superieure de Commerce de Paris, Erance/ZEmst & Young, 
Paris, France). The American Influence in Accounting: Myth or Realty? The 
Statement of Cash Flows Example [financial accounting & reporting]. The 
International Journal of Accounting. 1992; 27(3): 185-221. 
Methodology: deductive descriptive. 

Results of a comparative survey to determine the extent of American and Cana- 
dian influence on more recent models of statement of cash flows. 

684. Sudarwan, M.; Fogarty, Timothy J., Indonesia (Jakarta, Indonesia/Case Western 

Reserve University). Culture and Accounting in Indonesia: An Empirical 



164 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Examination [social effects of accounting]. The International Journal of 
Accounting, 1996: 31(No.4): 463-481. 
Methodology: theoretical 

An examination of the relationships among the cultural characteristics of Indo- 
nesian society, reporting practices of Indonesian firms, and accounting 
standards released by the Association of Indonesian Accounts. It is argued that 
an empirical relation exists between the change in cultural values and the 
change in accounting values as captured by Gray's four dimensions (profes- 
sionalism, conservatism, secrecy, and uniformity). 

685. Summers, Edward L.; Deskins, James Wesley, none (University of Texas at Austin/ 

/University of Illinois at Urbana-Champaign). A Classification Schema of 

Methods for Reporting Effects of Resource Price Changes (with Technical 

Appendix) [accounting theory]. The International Journal of Accounting. 1970 

Sep: 6(1): 101-120. 

Methodology: theoretical. 

Taxonomy of the responses to the problem of financial reporting in the presence 

of resource price changes. 

686. Suzuki, Norihiko, Japan (University of Illinois at Urbana-Champaign). The Japa- 

nese Auditing System: Its Problems and Prospects [auditing]. Managerial 

Accounting: An Analysis of Current International Application. Champaign, IL: 

Center for International Education and Research in Accounting; 1984 Jan: 

93-106. 

Methodology: deductive descriptive. 

Discussion of the development of the auditing system in Japan and of the 

effects of legal, international, and social influences. 

687. Swoboda, Peter, United States/West Germany (University of Frankfurt). Compari- 

son of Consolidated Financial Statements in the United States and West 

Germany [financial accounting and reporting]. The International Journal of 

Accounting. 1966 Mar; 1(2): 9-24. 

Methodology: deductive descriptive. 

Comparison of consolidation practices in West Germany and (a) principles of 

accounting generally accepted in the U.S. and (b) SEC requirements. 

688. Tai, Benjamin Y. K., Hong Kong (California State University at Fresno). The 

Accounting Profession in Hong Kong: Problems and Challenges [professional 
development]. Recent Accounting and Economic Developments in the Far East. 
Champaign, IL: Center for International Education and Research in Account- 
ing; 1988 May: 219-228. 
Methodology: deductive descriptive. 

Discussion of the history and requirements in the accounting profession in 
Hong Kong. Concludes that current conditions are inadequate for future profes- 
sional growth and calls for a plan to accommodate this professional growth. 

689. Tai, Benjamin Y. K.; Au-Yeung, Pak-Kuen; Kwok, Maurice C. M.; Lau, Lawrence 

W. C, Hong Kong (California State University at Fresno//Chinese University 
of Hong Kong//Hagemeyer-Morison Ltd, Hong Kong//Television Broadcasts 
Limited, Hong Kong). Non-Compliance with Disclosure Requirements in 
Financial Statements: The Case of Hong Kong Companies [financial account- 



Bibliography 165 

ing and reporting]. The International Journal of Accounting. 1990; 25(2): 
99-112. 

Methodology: empirical statistical. 

Study of seventy-six firms in Hong Kong regarding their compliance with dis- 
closure requirements. Finds a 22% non-compliance rate overall. Analyzes the 
relationship of business size, sector, and auditor with non-compliance. 

690. Talaga, James A.; Ndubizu, Gordian A., none (West Chester University/ZDrexel 

University). Accounting and Economic Development: Relationships among the 

Paradigms [economics and development]. The International Journal of 

Accounting. 1986 Mar; 21(2): 55-68. 

Methodology: theoretical. 

Discussion of the role accounting plays in economic development. 

691. Tang, Qingliang, United Kingdom/China (University of New England, Armidale, 

NSW, Australia). Economic Consequences of the International Harmonization 
of Accounting Standards: Theory and its Chinese Application [economics & 
development]. International Journal of Accounting. 1994; 29(2): 146-160. 
Methodology: theoretical. 

Proposal of a theoretical model used to evaluate foreign users of financial state- 
ments as well as local users to determine the degree of harmonization of 
accounting standards on local affected groups and implementation of this model 
to explain pertinent accounting standards in Chinese joint ventures. 

692. Taylor, Martin E.; Evans, Thomas G.; Joy, Arthur C, global/developing countries 

(University of South Carolina/ZBowling Green State University/ZUniversity of 
South Carolina). The Impact of lASC Accounting Standards on Comparability 
and Consistency of International Accounting Reporting Practices [financial 
accounting and reporting]. The International Journal of Accounting. 1986 Sep; 
22(1): 1-9. 

Methodology: empirical descriptive. 

Survey of two big eight accounting firms regarding the comparability and con- 
sistency of present international reporting practices. Finds that the IS AC has 
been successful in improving such reports. 

693. Teamey, Michael G.; Baridwan, Zaki, United States/United Kingdom/Japan/Neth- 

erlandsAVest Germany/Indonesia (University of Kentucky/ZGadjah Mada 
University, Indonesia). The Effects of Translation Accounting Requirements 
and Exchange Rates on Foreign Operations' Financial Performance — The Case 
of Indonesia [financial accounting and reporting]. The International Journal of 
Accounting. 1989; 24(3): 251-265. 
Methodology: empirical statistical. 

Study of seventeen companies operating in Indonesia. Finds that U.S. compa- 
nies showed higher performance after, rather than before, the translation of the 
financial statements. 

694. Teoh, Hai Yap; Er, Meng, Australia (University of Wollongong. Australia/ZUniver- 

sity of Wollongong, Australia). Impact of Floating Exchange Rates on 
Company Risk Management Practices and Reported Income: The Australian 



166 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

Experience [financial accounting and reporting]. The International Journal of 

Accounting. 1989; 24(3): 221-236. 

Methodology: empirical descriptive. 

Survey of 480 Australian companies involved in international trade. Finds that 

Australian currency fluctuations have increased the exposure to exchange rate 

risk. 

695. Teruya, Yukio, Japan/United States (Okinawa University, Japan). The Accounting 

Disclosure System in Japan [financial accounting and reporting]. Recent 
Accounting and Economic Developments in the Far East. Champaign, IL: Cen- 
ter for International Education and Research in Accounting; 1988 May: 
163-167. 

Methodology: deductive descriptive. 

Discussion of the development and regulation of the current accounting disclo- 
sure system in Japan. Discusses the current structure of the system and 
problems existing in it today. 

696. Thomas, R. Douglas, United States/Canada/United Kingdom (Canadian Institute of 

Chartered Accountants). The Accountants International Study Group — The 

First Three Years [accounting education]. The International Journal of 

Accounting. 1970 Sep; 6(1): 59-65. 

Methodology: theoretical. 

Critique of the work of the Accountants International Study Group. 

697. Thorelli, Hans B., developing countries (Indiana University). Management Audit 

and Social Indicators: The MNC through the Glasses of the LDC [managerial 
accounting]. The Multinational Corporation: Accounting and Social Implica- 
tions. Champaign, IL: Center for International Education and Research in 
Accounting; 1977 Jan: 1-19. 
Methodology: deductive descriptive. 

Explanation of the need for management audits at the local level of the less 
developed countries. 

698. Tondkar, Rasoul H.; Adhikari, Ajay; Coffman, Edward N., European Economic 

Community (Virginia Commonwealth University/ZGrand Valley State Univer- 
sity/A^irginia Commonwealth University). An Analysis of the Impact of 
Selected EEC Directives on Harmonizing Listing and Filing Requirements of 
EEC Stock Exchanges [financial accounting and reporting]. The International 
Journal of Accounting. 1990; 25(2): 127-143. 
Methodology: deductive descriptive. 

Discussion of the effects that the admission, listing, and interim reporting direc- 
tives have had on four European Economic Communities' stock exchanges. 
Analyzes the listing and filing requirements for the international, Amsterdam, 
Frankfurt, and Paris exchanges are analyzed and concludes that the directives 
have prompted harmonization. 

699. Tondkar, Rasoul H.; Adhikari, Ajay; Coffman, Edward N., United States/Japan/ 

United Kingdom/Germany/France (Virginia Commonwealth University/A^ir- 
ginia Commonwealth University/ZVirginia Commonwealth University). The 
Internationalization of Equity Markets: Motivations for Foreign Corporate List- 
ing and Filing and Listing Requirements of Five Major Stock Exchanges 



Bibliography 167 

[economics and development]. The International Journal of Accounting. 1989; 

24(2): 143-163. 

Methodology: deductive descriptive. 

Discussion of listing and filing characteristics in the international markets. 

700. Treffers, Henk C, Europe (Union Europeene des Experts Comptables, 

Economiques et Financiers). The Changing Nature of the European Accounting 
Profession [professional development]. The International Journal of Account- 
ing. 1967 Sep; 3(1): 43-54. 
Methodology: deductive descriptive. 
Discussion of the problems facing the European accounting profession. . 

701. Tritschler, Charles A., France (Purdue University). A Sociological Perspective on 

Accounting Innovation [accounting theory]. The International Journal of 

Accounting. 1970 Mar; 5(2): 39-67. 

Methodology: theoretical. 

Study of social variables within the context of accounting innovation. Uses 

these social variables to explain mixed patterns in the adoption of adjusted 

statements and their ultimate rejection in France. 

702. Trotman, Ken T., Australia/Canada/United States/United Kingdom (The University 

of New South Wales, Australia). An Evaluation of Accounting for Construction 
Contracts: An International Comparison [financial accounting and reporting]. 
The International Journal of Accounting. 1982 Mar; 17(2): 151-166. 
Methodology: theoretical. 

Presentation of the methodology used to account for construction projects. Con- 
cludes that current standards do not properly address the issue and that future 
standards should consider existing conditions. 

703. Tsui, Judy S.L., Hong Kong (City University of Hong Kong). Auditors' Ethical 

Reasoning: Some Audit Conflict and Cross Cultural Evidence [auditing]. The 
International Journal of Accounting, 1996; 31(1): 121-133. 
Methodology: empirical statistical 

An examination of the relationship between different levels of ethical reasoning 
and ethical behavior of Hong Kong Auditors in an audit conflict situation. Tests 
the hypothesis that ethical reasoning scores for Hong Kong auditors will be 
lower than US auditors on the basis of Hofestede's theory of cultural 
differences. 

704. Turk, Ivan, Yugoslavia (University of Ljubljana, Yugoslavia). Analysis of Effi- 

ciency by Means of Interrelated Indicators: A Yugoslav Approach [economics 

and development]. The International Journal of Accounting. 1982 Mar; 17(2): 

89-102. 

Methodology: deductive descriptive. 

Discussion of the Yugoslavian method of efficiency analysis using indicators. 

705. Turk, Ivan, Yugoslavia (Ljubljana University, Yugoslavia). Recent Professional 

Statements of Accounting Principles and Ethics in Yugoslavia [financial 
accounting and reporting]. The International Journal of Accounting. 1976 Sep; 
12(1): 111-120. 
Methodology: deductive descriptive. 



1 68 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1 , 1 998 

Discussion of the socioeconomic, regulatory, and theoretical effects of the 
accounting system in Yugoslavia. 

706. Turley. W. S., European Economic Community (University of Manchester, 

England). International Harmonization of Accounting: The Contribution of the 
EEC Fourth Directive on Company Law [financial accounting and reporting]. 
The International Journal of Accounting. 1983 Mar; 18(2): 13-27. 
Methodology: theoretical. 

Study that attributes differences in accounting practice to theoretical differ- 
ences. Concludes that international standard-setting is far more complex than 
originally thought. 

707. Tyra, Anita I., Europe (Bellevue Community College). Financial Disclosure Pat- 

terns in Four European Countries [public accounting]. The International 

Journal of Accounting. 1970 Mar; 5(2): 89-101. 

Methodology: empirical descriptive. 

Synopsis of a study on financial disclosure in annual reports published in West 

Germany. France, the Netherlands, and the U.K. 

708. Ueno, Susumu; Wu, Frederick H., United States/Japan (Kanazawa College of Eco- 

nomics. Toyama-City. Japan/ZSouthem Illinois University at Carbondale, 
Illinois). The Comparative Influence of Culture on Budget Control Practices in 
the United States and Japan [managerial accounting]. International Journal of 
Accounting. 1993:28(1): 17-39. 
Methodology: empirical statistical. 

Study to determine degree of impact of national culture on budget control prac- 
tices in the United States and Japan. 

709. Vaidya, Surekha; Poitras. Geoffrey: Talib. Ameen. Singapore/United States/Ger- 

many (National University of Singapore/ZSimon University, Bumab), BC, 
Canada/ZNational University of Singapore). International Accounting Implica- 
tions of Bond-cum- Warrant Issues [financial accounting & reporting]. The 
International Journal of Accounting. 1995: 30( 1 ): 25-36. 
Methodology: empirical descriptive. 

Determination of how differences in accounting and policies for warrant bond 
issues effect subsequent reporting and disclosure of such information. 

710. Van Offeren. Dick: Bavishi. Vinod B.. European Community (University of 

Amsterdam, The NetherlandsZZCenter of International Financial Analysis & 
Research, Inc.). Financial Reporting Practices of Leading European Companies 
[financial accounting & reporting]. The New Europe: Recent Political and Eco- 
nomic Implications for Accountants and Accounting. Champaign, IL: Center 
for International Education and Research in Accounting; 1994: 29-42. 
Methodology: empirical descriptive. 

Study to identify annual reports which pro\ ide useful information to interna- 
tional readers. 

711. van Seventer. A.. Netherlands (San Jose State University). The Continuity Postu- 

late in the Dutch Theory of Business Income [accounting theory]. The 
International Journal of Accounting. 1969 Mar; 4(2): 1-19. 
Methodology: theoretical. 



Bibliography 169 

Study of the continuity postulate offered by the Amsterdam school as a new 
approach to the problems of income accounting. 

712. van Seventer, A., Netherlands (San Jose State University). Replacement Value 

Theory in Modem Dutch Accounting [accounting theory]. The International 

Journal of Accounting. 1975 Sep; 11(1): 67-94. 

Methodology: theoretical. 

Discussion of a few fundamental principles of the replacement value theory. 

713. van Seventer, A., none (San Jose State University). An Unsettled Problem in the 

Theory of Replacing Durable Assets: The Wemelsfelder — Traas Controversy 

[accounting theory]. The International Journal of Accounting. 1914 Mar; 9(2): 

45-81. 

Methodology: theoretical. 

Discussion of the problem of replacing durable assets without giving attention 

to the literature of economics and finance. 

714. Vandendries, Rene, Peru (University of Illinois at Urbana-Champaign). Social 

Accounting and Its Applications in Peru [social effects of accounting]. The 

International Journal of Accounting. 1970 Sep; 6(1): 91-99. 

Methodology: theoretical. 

Study of the interrelationships among variables of macroaccounts, essential for 

the analysis of the economic development of Peru. 

715. Vangermeersch, Richard, European Economic Community/United States (Univer- 

sity of Rhode Island). The Route of the Seventh Directive of the EEC on 

Consolidated Accounts — Slow, Steady, Studied, and Successful [financial 

accounting and reporting]. The International Journal of Accounting. 1985 Mar; 

20(2): 103-118. 

Methodology: deductive descriptive. 

Discussion of the development and implications of the European Economic 

Community's seventh directive. 

716. Vatter, William J., none (University of California at Berkeley). Progress in the Pur- 

suit of Principles [accounting theory]. The International Journal of Accounting. 

1969 Sep; 5(1): 1-15. 

Methodology: deductive descriptive. 

Critique of developments in accounting principles which have not achieved the 

anticipated goals. 

717. Velayutham, Sivakumar; Perera, Hector, New Zealand (Massey University, New 

Zealand). Recent Development in the Accounting Profession in New Zealand: 
A Case of Deprofessionalization? [professional development]. The Interna- 
tional Journal of Accounting, 1996; 31(4): 445-462. 
Methodology: deductive descriptive 

A description of recent developments in the accounting profession in New 
Zealand and analysis of the direction of these changes. Evidence is provided to 
argue that the recent changes in the accounting profession in New Zealand sug- 
gest a trend towards deprofessionalization. 

718. Vergoosen, Ruud G. A., The Netherlands/ZUnited States (Vrije Universiteit, 

Amsterdam, The Netherlands). The Classification of Leases by Leassees in the 



170 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

United States and the Netherlands: A Comparative Study [financial accounting 
& reporting]. The International Journal of Accounting. 1992; 27(3): 241-254. 
Methodology: deductive descriptive. 

Comparative study between Dutch and American lease classification systems 
and SFAC No. 2. 

719. Vickrey, Don W., none (Arizona State University West, Phoenix). An Internation- 

ally Relevant, Alternative Price-Oriented Concept of Market Efficiency 

[economics & development]. The International Journal of Accounting. 1994; 

29(3): 206-219. 

Methodology: deductive descriptive. 

Introduction and application of an alternative price-oriented concept of market 

information efficiency. 

720. Vickrey, Don W., none (University of Arizona). Two Views of Current-Exit Val- 

ues: Addition and Additivity [accounting theory]. The International Journal of 

Accounting. 1976 Mar; 11(2): 51-57. 

Methodology: theoretical. 

Discussion of how current-exit values can be added in a manner consistent with 

measurement theory. Contends that a current-exit- value accounting system can 

be developed around the concepts of realizable market value of an asset set and 

discharge value of a liability set. 

721. Violet, William J., United States/United Kingdom (Moorhead State University). 

The Development of International Accounting Standards: An Anthropological 

Perspective [social effects of accounting]. The International Journal of 

Accounting. 1983 Mar; 18(2): 1-12. 

Methodology: theoretical. 

Social analysis of the development of international accounting standards. 

722. Violet, William J., United States (Moorhead State University). A Philosophical 

Perspective on the Development of International Accounting Standards 

[accounting theory]. The International Journal of Accounting. 1983 Sep; 19(1): 

1-13. 

Methodology: deductive descriptive. 

Discussion of the pragmatic formulation of accounting principles in a society. 

Calls for the development of a postulate based framework for international 

principles. 

723. Vobroucek, C. A., United Kingdom/United States/Canada/Brazil/Australia (Cater- 

pillar Tractor Company). Reshaping Corporate Information Flows Using 

Cost-Effective Financial Systems [managerial accounting]. Managerial 

Accounting: An Analysis of Current International Application. Champaign, IL: 

Center for International Education and Research in Accounting; 1984 Jan: 

71-81. 

Methodology: deductive descriptive. 

Discussion of the transformation of the accounting system at Caterpillar Tractor 

into one that is standardized and centrally controlled. 

724. Walker, Kenton B.; Johnson, Eric N., Australia/United Kindom/New Zealand/Den- 

mark/Korea/ Canada/Singapore/India/Hong Kong (University of Wyoming/ 
University of Toledo). A Review of Synthesis of Research on Supplier Concen- 



Bibliography 171 

tration. Quality and Fee Structure in non-U. S. Markets for Auditor Services 
[auditing]. The International Journal of Accounting, 1996; 31(No.l): 1-18. 
Methodology: Historical. 

A review of research on audit market concentration, auditor quality and the 
determinants of audit fees in countries outside of the U.S. Identifies some struc- 
tural differences in audit markets between studies that are traceable to 
divergence in economic, cutural nd social norms across developed and develop- 
ing countries. 

725. Wang, Zhemin, Global (North Dakota State University). An Empirical Assessment 

of lASC's Proposed Goodwill Amortization Requirement [financial accounting 
& reporting]. The International Journal of Accounting. 1995; 30(1): 37-47. 
Methodology: empirical statistical. 

Analysis of the implications involving lASC's proposal to amortize goodwill 
over a five-year period. 

726. Waresul Karim, A.K.M.; Moizer, Peter. Bangladesh (University of Leeds). Deter- 

minants of Audit Fees in Bangladesh [auditing]. The International Journal of 
Accounting, 1996; 31(4): 497-509. 
Methodology: auditing. 

A description of the nature of audit services market in Bangladesh and analysis 
of the determinants of audit fees of both financial and non-financial companies 
in Bangladesh. It shows that the size of the auditee has the greatest influence on 
audit fees and that auditees which employed at least one qualified acountant had 
higher audit fees. 

727. Wasley, Robert S., New Zealand (University of Colorado at Boulder). The Role of 

Management Accounting in New Zealand Business [managerial accounting]. 
The International Journal of Accounting. 1975 Mar; 10(2): 57-74. 
Methodology: theoretical. 

Discussion of four basic elements of management accounting: organizational 
structure, a chart of accounts, a cost accounting and budgeting system, and fre- 
quent comparison of the budget to actual performance. 

728. Wasley, Robert S., New Zealand (University of Colorado). The Status of Accoun- 

tancy and of Accounting Practices in New Zealand [professional development]. 
The International Journal of Accounting . 1968 Mar; 3(2): 67-89. 
Methodology: deductive descriptive. 

Study of the status of accountancy and of accounting practices in New Zealand 
as they relate to the economic and social environment of the country and the 
existing philosophy of management. 

729. Weber, Charles, none (University of Illinois at Urbana-Champaign). Income Deter- 

mination Theory: Some Mathematical and Graphical Approaches [accounting 
theory]. The International Journal of Accounting. 1966 Sep; 2(1): 35-47. 
Methodology: theoretical. 

Proposal of steps to integrate probability theory into the framework of account- 
ing thought. Emphasizes the determination of subjective income along 
Bayesian lines and the establishment of a clear distinction between subjective 
and realizable income. 



172 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

730. Weber, John A., none (University of Notre Dame). Keeping Current on New 

Developments in Accounting [miscellaneous]. The International Journal of 

Accounting. 1971 Sep; 7(1): 115-123. 

Methodology: empirical descriptive. 

Study of recent developments in journal systems of related disciplines, which 

suggests that the average lag within the accounting journal system will increase 

in the future unless acceptance rates are reduced. Concedes, however, that the 

current accounting journal systems are more efficient than those in the past. 

731. Weinstein, Arnold K.; Corsini. Louis; Pawliczek, Ronald, United States/Europe 

(Boston College/ZBoston CoUege/ZBoston College). The Big Eight in Europe 

[public accounting]. The International Journal of Accounting. 1978 Mar; 13(2): 

57-71. 

Methodology: empirical descriptive. 

Survey of the big eight firms regarding their organizational structures in the 

U.S. and Europe. Presents different models of organizational structure among 

the big eight and concludes that big eight firms must be more responsive to 

local needs, yet retain enough control to ensure proper international reporting. 

732. Weirich, Thomas R.; Clarence G. Avery; Anderson, Henry R., none (Northern Illi- 

nois University/ZNorthem Illinois University/ZNorthem Illinois University). 
International Accounting: Varying Definitions [financial accounting and report- 
ing]. The International Journal of Accounting. 1971 Sep; 7(1): 79-87. 
Methodology: empirical descriptive. 

Study with three main purposes: (1) to report research on some of the major 
concepts of the term "international accounting," (2) to survey periodicals on 
this topic to determine if the authors have explicitly defined "international 
accounting," if not, to arrive deductively of a definition from the periodicals, 
and (3) based on an analysis of these articles to draw a conclusion as to the 
meaning of "international accounting." 

733. Welton, Ralph E.; Davis, James R., United States/New Zealand (Clemson Univer- 

sity/ZClemson University). Accounting Implications of the Perception of 
Professional Ethics: A Comparative Analysis of American and New Zealand 
Students [social effects of accounting]. The International Journal of Account- 
ing. 1990; 25(4): 268-283. 
Methodology: empirical descriptive. 

Study of U.S. and New Zealand college students that shows a maturation pro- 
cess regarding ethics that occurs during the college years. 

734. Westaway, James G., United States (Barber-Ellis Group). Inflation Accounting: 

What Would We Do without It? [financial accounting and reporting]. The 

Impact of Inflation on Accounting: A Global View. Champaign, IL: Center for 

International Education and Research in Accounting; 1979 May: 43-54. 

Methodology: deductive descriptive. 

Description of the use of replacement cost accounting by the Barber-Ellis 

Group. 

735. White, Mick; Hopkins, Roger; Juchau, Roger H.. Cook IslandsZFijiZKiribatiZNauruZ 

NiueZSolomon IslandsZTongaZTuvaluZVanautuZWestern Samoa (University of 
the South PacificZZUniversity of SingaporeZZUniversity of Canterbury, New 



Bibliography 173 

Zealand). Tertiary Education Strategies for Accounting in Developing Societ- 
ies — The Southwest Pacific as a Case Study [economics and development]. The 
International Journal of Accounting. 1986 Mar; 21(2): 145-160. 
Methodology: deductive descriptive. 

Discussion of the factors that affect the accounting profession in the southwest 
Pacific. 

736. Wilkinson, Theodore L., United States (Price Waterhouse & Company). United 

States Accounting as Viewed by Accountants of Other Countries [accounting 
theory]. The International Journal of Accounting. 1965 Sep; 1(1): 3-14. 
Methodology: deductive descriptive. 

Narration of the inconsistencies and problems plaguing current (1965) account- 
ing practices, both domestic and international. 

737. Will, Hartmut J., United States (University of British Columbia). Computerized 

Accounting: International Issues [information systems]. The International 
Journal of Accounting. 1980 Sep; 16(1): 169-203. 
Methodology: deductive descriptive. 

Discussion of the role of accounting in management information systems. Calls 
for the standardization of professional principles and of the management infor- 
mation systems. 

738. Williams, Thomas H.; Griffin, Charles H., none (University of Texas at Austin// 

University of Texas at Austin). MAS and the Expanded Meaning of Accounting 
Education [accounting education]. The International Journal of Accounting. 
1973 Mar; 8(2): 33-43. 
Methodology: deductive descriptive. 

Study of the evolution of the management advisory function, accounting prac- 
tice, and the question of appropriate education. 

739. Willingham, John J.; Sorenson, James E., none (University of Texas at Arlington// 

University of Denver). The Behavior Science Milieu of Accounting [social 

effects of accounting]. 77?^^ International Journal of Accounting. 1971 Sep; 

7(1): 49-63. 

Methodology: theoretical. 

Study of the scientific content of accounting placing special emphasis on the 

behavioral dimension. 

740. Winjum, James O., United Kingdom (University of Michigan). Income Tax 

Administration in Great Britain [taxation]. The International Journal of 

Accounting. 1972 Sep; 8( 1): 109-116. 

Methodology: deductive descriptive. 

Discussion of the general administration of income taxes in Great Britain, 

emphasizing the roles played by local tax inspectors and independent chartered 

accountants in the assessment of income taxes. 

741. Woelfel, Charles J., none (Southern Illinois University). Understanding the Multi- 

nationals [financial accounting and reporting]. The International Journal of 

Accounting. 1976 Mar; 11(2): 133-142. 

Methodology: empirical descriptive. 

Discussion of the role and operations of multinationals in modem society. 

Defines multinational corporations and discusses technological, economic, and 



174 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 1, 1998 

political factors contributing to the development of a domestic company's for- 
eign operations. Forms conclusions based on evidence drawn from discussions 
and correspondence with executives in major multinational corporations and 
members of academia. 

742. Wolk. Harry I.; Heaston. Patrick H.. United States (Drake University. Des Moines, 

Iowa//Drake University, Des Moines, Iowa). Toward the harmonization of 
Accounting Standards: An Analytical Framework [financial accounting & 
reporting]. The International Journal of Accounting. 1992; 27(2): 95-1 1 1 . 
Methodology: modeling. 

Presentation of an analytical framework for examining accounting event cate- 
gories (called uniformity analysis) frequently used in globalized business 
operations in an attempt to increase harmonization. 

743. Wolk, Harry I.; Briggs, Roger W., none (Drake University/ZDrake University). 

Accounting Research, Professors, and Practitioners: A Perspective [accounting 
education]. The International Journal of Accounting. 1975 Mar; 10(2): 47-56. 
Methodology: theoretical. 

Presentation of a sample framework for analyzing accounting research, placed 
within the context of current criticisms made by directors of accounting educa- 
tion. Suggests how to strengthen accounting research, the perceived neglect of 
which has been responsible, in part, for the eroding relationship between pro- 
fessors and practitioners. 

744. Wong-Boren, Adrian. Mexico/United States (San Diego State University). Impor- 

tant Events in the Development of the Accounting Profession in Mexico 

[accounting history]. The International Journal of Accounting. 1987 Sep; 23(1): 

23-46. 

Methodology: deductive descriptive. 

Historical survey of the accounting profession in Mexico. 

745. Wong-Boren, Adrian; Bamett, Andrew H., Mexico/United States (San Diego State 

University//San Diego State University). Mexican Market Efficiency: A Study 

of the Information Content of Accounting Numbers [financial accounting and 

reporting]. The International Journal of Accounting. 1984 Sep; 20(1): 45-70. 

Methodology: empirical statistical. 

Study of the Mexican stock exchange to determine the value of the financial 

statement information, which finds that this information did help investment 

decisions. 

746. Wonnacott, Ronald, none (University of Western Ontario). U.S. Investment and the 

Recipient Country [economics and development]. The International Journal of 
Accounting. 1972 Mar; 7(2): 45-54. 
Methodology: deductive descriptive. 

Discussion of U.S. investment practices and the reasons why they raise prob- 
lems for Europeans and Canadians. 

747. Woodruff, William, Global (University of Florida). The Accumulation and Trans- 

fer of Capital: A Global View [accounting history]. Changing International 
Financial Markets and Their Impact on Accounting. Champaign, IL: Center for 



Bibliography 175 

International Education and Research in Accounting, Department of Accoun- 
tancy: 1992: 147-154. 
Methodology: historical. 

Examination of the evolution of global capitalization and various issues regard- 
ing capital accumulation and transfer. 

748. Woodruff, William, United States/Korea/Soviet Union (University of Florida). 

World Power and the United States: The Shifting Realities [economics and 
development]. The Impact of Inflation on Accounting: A Global View. Cham- 
paign, IL: Center for International Education and Research in Accounting; 1979 
May: 189-203. 

Methodology: deductive descriptive. 

Discussion of the reasons for the inability of the U.S. to provide economic lead- 
ership to the Western world. 

749. Wright, P. K., none (University of Adelaide in South Australia). The Valuation of 

Tax-Depreciable Assets [taxation]. The International Journal of Accounting. 
1973 Mar; 8(2): 45-57. 
Methodology: theoretical. 

Modification of the theory of asset valuation, as it applies to the problem of val- 
uing tax-depreciable assets. 

750. Wright, William, United States (Stanford University). An Empirical Study of the 

Professional Socialization of Accounting Students [accounting education]. The 
International Journal of Accounting. 1977 Sep; 13(1): 53-76. 
Methodology: empirical descriptive. 

Survey of entry-level auditors, which revealed a desire for less tedious and 
mundane responsibilities. Author concludes that public firms could lower 
employee turnovers and audit cost by implementing such desires. 

751. Wu, Frederick H.; Hackett, Donald W., United States/Europe/Central & South 

America/Canada/Africa/Asia/Oceania/Middle East (Wichita State University// 
Wichita State University). The Internationalization of U.S. Public Accounting 
Firms: An Empirical Study [public accounting]. The International Journal of 
Accounting. 1977 Mar; 12(2): 81-91. 
Methodology: empirical descriptive. 

Study of U.S. CPA firms regarding their expansion outside the U.S. Finds that 
client requirements and the desire to serve clients moving abroad were the main 
factors influencing the expansion. 

752. Wu, Frederick H.; Sharp, Douglas, none (Wichita State University//Wichita State 

University). An Empirical Study of Transfer Pricing Practice [financial 

accounting and reporting]. The International Journal of Accounting. 1979 Mar; 

14(2): 71-99. 

Methodology: empirical descriptive. 

Study of the prominence of transfer pricing theory, which traces its influence to 

market prices and social factors. 

753. Wyatt, Arthur R., United States (Arthur Andersen & Co.). Accounting Standards: 

National or International? [financial accounting & reporting]. Changing Inter- 
national Financial Markets and Their Impact on Accounting. Champaign, IL: 



176 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 1, 1998 

Center for International Education and Research in Accounting, Department of 

Accountancy; 1992: 31-42. 

Methodology: deductive descriptive. 

This article addresses the need for the promulgation of international accounting 

standards in light of the globalization of the business sector. 

754. Xu-Ying, Yu, China (Xiamen University, People's Republic of China). The Fund 

Market in China: Its Formation, Development, and Impact on Accounting [eco- 
nomics & development]. Changing International Financial Markets and Their 
Impact on Accounting. Champaign, IL: Center for International Education and 
Research in Accounting. Department of Accountancy; 1992: 67-92. 
Methodology: capital markets. 

Examination of the growth of the commodity market in China and its effects on 
China's accounting system. A hypothetical model is introduced and its impact 
upon various areas of accounting is analyzed. 

755. Xu-ying, Yu, China/United States (Xiamen University, People's Republic of 

China). The General Character of Chinese and U.S. Management Accounting 
and an Analysis of the New Chinese Management Accounting Style [manage- 
rial accounting]. Recent Accounting and Economic Developments in the Far 
East. Champaign, IL: Center for International Education and Research in 
Accounting; 1988 May: 51-64. 
Methodology: deductive descriptive. 

Discussion of the developments which have led to the current managerial 
accounting practices in China and the U.S. Includes as overview of current Chi- 
nese managerial accounting theory. 

756. Yagil, Joseph; Amoako-Adu, Ben; Kantor, Jeffrey, Canada/United States (Haifa 

University/ZUniversity of New Brunswick/ZUniversity of Windsor). Capital 

Cost Allowance (Depreciation) and Capital Budgeting in Canada [managerial 

accounting]. The International Journal of Accounting. 1986 Mar; 21(2): 47-54. 

Methodology: theoretical. 

Discussion of the effects that disposition value will have on capital budgeting in 

Canada. 

757. Yamaji, Hidetoshi, Japan (Kobe University, Japan). Collective Bargaining and 

Accounting Disclosure: An Inquiry into the Changes in Accounting Policy 
[financial accounting and reporting]. 77?^' International Journal of Accounting. 
1986 Sep; 22(1): 11-23. 
Methodology: empirical statistical. 

Study of Japanese firms regarding the effect that collective bargaining has on 
the manipulation of accounting information. Finds that Japanese management is 
inclined to manipulate the accounting information in order to reduce a firm's 
labor costs. 

758. Yamamura, Jeanne H.; Frakes, Albert H.; Sanders, Debra L.; Ahn. Sung K., Japan/ 

United States (University of NevadAVashington State University). The Interna- 
tional Journal of Accounting. 1996; 31(3): 347-363. 
Methodology: auditing. 

An empirical comparison of Japanese and US auditor decision making in areas 
expected to be affected by cultural differences. Results proved national differ- 



Bibliography 177 

ences, however, due to environmental factors rather than the theorized effect of 
cultural differences. 

759. Yu, S. C, United States (University of Florida). Is the New U.S. Budget More a 

Understandable Document? [governmental]. The International Journal of 
Accounting. 1968 Mar; 3(2): 45-66. 
Methodology: deductive descriptive. 

Examination of the new budget in an effort to determine whether or not it is eas- 
ier to understand and more useful than the old budget. 

760. Yu, S. C, none (University of Florida). A Reexamination of the Going Concern 

Postulate [accounting theory]. The International Journal of Accounting. 1971 

Mar; 6(2): 37-58. 

Methodology: deductive descriptive. 

Reexamination of the going concern concept, by identifying its constitutive and 

operational meanings and by explaining its implications. 

761. Yu, S. C, none (University of Florida). The Several Modes of Normative Account- 

ing Thought: A Critical Examination [accounting theory]. The International 

Journal of Accounting. 1974 Mar; 9(2): 83-104. 

Methodology: theoretical. 

Examination of several modes of accounting thought, with reference to episte- 

mological foundations and empirical validity. Discusses assertions in 

theorization, especially emphasizing truth values, the positive and normative 

phases of accounting operation. 

762. Zappala, Frederick J., Italy (Boston College). The Current State of the Accounting 

Profession in Italy [public accounting]. The International Journal of Account- 
ing. 1973 Mar; 8(2): 111-121. 
Methodology: empirical descriptive. 

Survey of professional accountants, university professors, and students to 
obtain a consensus of opinion on existing conditions of public accounting in 
Italy. 

763. Zeff, Stephen A., Thailand (Tulane University). Comments on the NIDA Program 

[accounting education]. The International Journal of Accounting. 1968 Sep; 

4(1): 141-143. 

Methodology: theoretical. 

Brief commentary on the NIDA Program. 

764. Zick, John W., Saudi Arabia (Price Waterhouse & Company). International Trade: 

Opportunities in the Arabian Gulf [miscellaneous]. The Recent Accounting and 
Economic Developments in the Middle East. Champaign, IL: Center for Inter- 
national Education and Research in Accounting; 1985 May: 33-41. 
Methodology: deductive descriptive. 

Discussion of the opportunities and requirements for establishing enterprise in 
the Middle East. 

765. Ziebart, David A., United States/inflationary countries (University of Illinois at 

Urbana-Champaign). Exchange Rates and Purchasing Power Parity: Evidence 
Regarding the Failure of SFAS No. 52 to Consider Exchange Risk in 



178 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol 33, No. 1, 1998 

Hyper-Inflationary Countries [financial accounting and reporting]. The Interna- 
tional Journal of Accounting. 1985 Sep; 21(1): 39-51. 
Methodology: empirical statistical. 

Empirical study of SFAS No. 52 regarding exchange risk exposure in 
hyper-inflationary countries. Concludes that SFAS No. 52 fails to address this 
risk. 

766. Zimmerman, V. K., none (University of Illinois at Urbana-Champaign). The Long 

Shadow of a Scholar [miscellaneous]. The International Journal of Accounting. 

1967 Mar; 2(2): 1-20. 

Methodology: deductive descriptive. 

Appreciation of A. C. Littleton's lifelong devotion to accounting. 

767. Zund, Andre, Switzerland (University of St. Gallen, Switzerland). Accounting and 

Auditing in Switzerland [miscellaneous]. The New Europe: Recent Political 
and Economic Implications for Accountants and Accounting. Champaign, IL: 
Center for International Education and Research in Accounting; 1994: 17-28. 
Methodology: deductive descriptive. 

Overview of the accounting environment in Switzerland and its evolution 
toward European harmonization. 

768. Zund, Andre, Switzerland (Saint Gall Graduate School, Switzerland). Swiss 

Accounting and Auditing in an International Context [professional develop- 
ment]. The Recent Accounting and Economic Developments in Western 
Europe. Champaign, IL: Center for International Education and Research in 
Accounting; 1985 May: 1-13. 
Methodology: deductive descriptive. 

Discussion of how the Swiss accounting profession will be affected by confor- 
mity to the practices of other countries. 




JAI PRESS INC. 



Advances in 
International Accounting 



Edited by J. Timothy Sale, Department of Accounting 
and Business Law, University of Cincinnati, Stephen B. Salter, 
Department of Accounting and Information Systems, 
University of Cincinnati, and David J. Sharp, Accounting and 
Control Area, University of Western Ontario 



Volume 10, 1997, 227 pp 
ISBN 0-7623-165-1 



$78.50/£49.95 



CONTENTS: Editorial Board. Currency Exchange Rate Exposure of U.S.- 
Based Multinational Corporations: The Usefulness of SFAS No. 14 Geograph- 
ic Segment Disclosures, M. Sadegh Bazaz, David L. Senteney, and Robert F. 
Sharp. International Diversification and Security Price Behavior, Philip H. Sie- 
gel. Khondkar E. Karim. and John T. Rigsby. Accounting for Business Combi- 
nations and Foreign Currency Translation: An Empirical Comparison of Listed 
Companies from Developed Economies, Ajay Adhikari and Emmanuel N. 
Emenyonu. Auditor Concentration and Real Audit Fees Changes among 
Large Firms in Hong Kong: A Pre and Post Merger Analysis, Benjamin Y.K. 
Tai and Carol M.F. Kwong. The Market for Audit Services in Pakistan, Daniel 
T. Simon and Mark H. Taylor International Accounting Diversity: Is a Theory 
in Sight?, Peter Carlson. Internationalising Financial Reporting in a Newly 
Emerging Market Economy: The Polish Example, Carol A. Adams and Ka- 
tarzyna M. McMillan. Applicability of Management Control Theories in China: 
A Case Study, Anthony Moung Yin Chan and Max Mang Lee. A Comparative 
Ratio Analysis between Chinese and U.S. Firms, Jayne Fuglister. Tax Com- 
plexity and Compliance Costs of U.S. Multinational Corporations, Dennis R. 
Lassila and L. Murphy Smith. International Accounting Dissertation Abstracts, 
Frederick Niswander. 



Also Available: 
Volumes 1-9 (1987-1996) 



$78.50/£49.95 each 



55 Old Post Road No. 2 ~ P.O. Box 1 678, Greenwich, Connecticut 06836- 1678 
Tel: (203) 66 1 - 76()2 Fa.x: (203) 66 1 4)792 



Advances in Accounting 



Edited by Philip M. J. Reckers, 

School of Accountancy, Arizona State University 

Volume 1 5, 1 997, 242 pp. $78.50/£49.95 

ISBN 0-7623-0294-1 

CONTENTS: The Association between Audit Reports and Bankruptcies: Fur- 
ther Evidence, Dasaratha V. Rama. K. Raghunandan, and Marshall Geiger. 
Retention of Women in Public Accounting: Directions for Future Research, 
Karen L. Hooks, Paula B. Thomas, and William D. Stout. Effects of Engage- 
ment-Wide Inherent Risk Factors on Auditor's Evaluations of Multiple Explana- 
tions from Client and Audit Team Sources, Susan Ayers and Steven Kaplan. An 
Investigation of the Relevance of Disclosure of Asset Composition in Assessing 
Distress Risk of Savings Institutions, SaeedJ. Roohani and Zabihollah Rezace. 
Evidence of the Relations between Firm Characteristics and Reserve Revisions 
in the Petroleum Industry, Frances L. Ayres. Richard G. File, and Sunkook 
Kwon. Accounting Accruals and the Incremental Content of Earnings and Cash 
Flows from Operations, C.S. Agness Cheng, Chao-Shin Liu, and Thomas 
Schaefer. An Investigation of the Impact of Market Discipline on Individuals' 
Price Revisions, Charles E. Davis, Elizabeth B. Davis, and Daniel P. Murphy. 
The Impact of Earnings Management on Bank Risk Premia, Thomas G. Robin- 
son and Julia Grant. The Comparison of Dysfunctional Behaviors by Tax Ac- 
countants and Auditors Under Time Budget Pressures, Tom Dalton and Tim 
Kelley. A Comparison of AHP and ANOVA Decision Modeling Techniques in In- 
ternal Control Procedures Evaluations, Sally A. Webber and John l-iasseii. A 
Longitudinal Analysis of Environmental Disclosure Practices, Sarah D. Stan- 
wick and Richard Tabor A Bayesian Analysis of Cost-Effectiveness of Auditing 
for Small Businesses, Ash Deshmukh, Philip H. Siegel. and Khondkar E. Karim. 
Participative Budgeting Under Uncertainty: Multi-Period Experimental Evi- 
dence, Larissa Kyj and Penelope Sue Greenberg. 

Also Available: 
Volumes 1-14 (1984-1996) 
-I- Supplement 1 (1989) $78.50/£49.95 each 



55 Old Post Road No. 2 - P.O. Box 1678. Greenwich. Connecticut 06836-1678 
Tei: (203) 661- 7602 Fax: (203) 661-0792 



UCTIONS FOR AUTHORS 



id SCOPE. The aims of The International Journal of Accounting are to advance the aca- 
\6. professional understanding of accounting theory and practice from the international per- 
jand viewpoint. The Journal recognizes that international accounting is influenced by a 

forces, e.g.. governmental, political and economic. 
Uirnal attempts to assist in the understanding of the present and potential ability of account- 
Id in the recording and interpretation of international economic transactions. These transac- 
L be within a profit or nonprofit environment. The Journal deliberately encourages a broad 
[he origins and development of accounting with an emphasis on its functions in an increas- 

irdependent global economy, and welcomes manuscripts that help explain current interna- 
l:ounting practices, with related theoretical justifications, and identify criticisms of current 
[Other than occasional commissioned papers or special issues, all the manuscripts published 
hnial are selected by the editors after the normal refereeing process. 

luscripts should be submitted in triplicate to the Editor. Professor Andrew D. Bailey. Jr., The 
\national Journal of Accounting, University of Illinois, 320 Commerce West, 1206 S. Sixth 

;t. Champaign, IL 61820, U.S.A. 

jmanuscripts must be typewritten or word processed, double spaced on one side only and 
ibered consecutively, including an abstract of approximately 100 words, and 6 key words for 
[xing. Papers must either be neither previously published nor submitted elsewhere simulta- 
lisly. Authors are responsible for obtaining permission from the copyright owner (usually the 
(isher) to use any quotations, illustrations, or tables from another source. 

author's full name, affiliation, and when applicable, e-mail address should appear on the 
ipage. 

'ables, figures and illustrations should accompany the manuscript on separate sheets. Captions 
lid clearly identify all separate matter, and all figures must be submitted in camera ready copy, 
|ectronic program specifies files, such as EPS or Post Script. All should be called out in text 

indication given as to location. For example, 

TABLE 1 ABOUT HERE. 

I notes should be numbered consecutively throughout the manuscript with superscript Arabic 
lerals. They should be collected in a separate file at the end of the text, 
rences should be cited in the text as follows: 

pweikart and O'Conner (1989) agree with this method. Other studies have found simi- 
results (Schweikart and O'Conner, 1989; Smith, 1991). 

separate Reference page(s), each citing should appear, double-spaced, in alphabetical order as 



•nal Articles 

iiglois, Catherine C. and Bodo B. Schlegelmilch. 1990. "Do Corporate Codes of Conduct 
Reflect National Character?" Journal of International Business Studies. (Fourth 
Quarter): 519-539 



'mpden-Tumer Charles and Alfons Trompenaars. 1993. The Seven Cultures of Capital- 
ism. New York: Doubleday. 

1 acceptance the author is to submit one copy of the approved manuscript on a spellchecked 
compatible, program specific disk to the editor. The accuracy of the disk and proofs is the 
^ )nsibility of the author. Macintosh submissions are limited to high density disks. 



H 



(M JAI PRESS INC. 






Advances in Accounting i 

I 

Edited by Philip M. J. Reckers, I 

School of Accountancy, Arizona State University i 

Volume 15, 1997, 242 pp. $78.50/£49.95 \ 
ISBN 0-7623-0294-1 

I 



CONTENTS: The Association between Audit Reports and Bankruptcies: Fur- 
ther Evidence, Dasaratha V. Rama, K. Raghunandan. and Marshall Geiger. 
Retention of Women in Public Accounting: Directions for Future Research, | 

Karen L. Hooks, Paula B. Thomas, and William D. Stout. Effects of Engage- 
ment-Wide Inherent Risk Factors on Auditor's Evaluations of Multiple Explana- ' 
tions from Client and Audit Team Sources, Susan Ayers and Steven Kaplan. An i 
Investigation of the Relevance of Disclosure of Asset Composition in Assessing 
Distress Risk of Savings Institutions, SaeedJ. Roohani and Zabihollah Rezace. I 
Evidence of the Relations between Firm Characteristics and Reserve Revisions i 
in the Petroleum Industry, Frances L. Ayres, Richard G. File, and Sunkook 
Kwon. Accounting Accruals and the Incremental Content of Earnings and Cash 1 
Flows from Operations, C.S. Agness Cheng, Chao-Shin Liu, and Thomas 
Schaefer. An Investigation of the Impact of Market Discipline on Individuals' 
Price Revisions, Charles E. Davis, Elizabeth B. Davis, and Daniel P. Murphy. 
The Impact of Earnings Management on Bank Risk Premia, Thomas G. Robin- 
son and Julia Grant The Comparison of Dysfunctional Behaviors by Tax Ac- 
countants and Auditors Under Time Budget Pressures, Tom Dalton and Tim | 
Kelley. A Comparison of AHP and ANOVA Decision Modeling Techniques in In- 
ternal Control Procedures Evaluations, Sally A. Webber and John Hassell. A I 
Longitudinal Analysis of Environmental Disclosure Practices, Sarah D. Stan- i 
wick and Richard Tabor. A Bayesian Analysis of Cost- Effectiveness of Auditing 
for Small Businesses, Ash Deshmukh, Philip H. Siegel, and Khondkar E. Karim. I 
Participative Budgeting Under Uncertainty: Multi-Period Experimental Evi- 
dence, Larissa Kyj and Penelope Sue Greenberg. 



Also Available: 
Volumes 1-14 (1984-1996) 
+ Supplement 1 (1989) $78.50/£49.95 each | 



55 Old Post Road No. 2 - P.O. Box 1678. Greenwich. Connecticut 06836-1678 
Tei : ( 203 ) 66 1 - 7602 Fax : r203) 66 i -0792 



INSTRUCTIONS FOR AUTHORS 

AIMS and SCOPE. The aims of The International Journal of Accounting are to advance the aca- 
demic and professional understanding of accounting theory and practice from the international per- 
spective and viewpoint. The Journal recognizes that international accounting is influenced by a 
variety of forces, e.g., governmental, political and economic. 

The Journal attempts to assist in the understanding of the present and potential ability of account- 
ing to aid in the recording and interpretation of international economic transactions. These transac- 
tions may be within a profit or nonprofit environment. The Journal deliberately encourages a broad 
view of the origins and development of accounting with an emphasis on its functions in an increas- 
ingly interdependent global economy, and welcomes manuscripts that help explain current interna- 
tional accounting practices, with related theoretical justifications, and identify criticisms of current 
practice. Other than occasional commissioned papers or special issues, all the manuscripts published 
in the Journal are selected by the editors after the normal refereeing process. 

1 . Manuscripts should be submitted in triplicate to the Editor, Professor Andrew D. Bailey, Jr., The 
International Journal of Accounting, University of Illinois. 320 Commerce West, 1206 S. Sixth 
Street, Champaign, IL 61820, U.S.A. 

2. All manuscripts must be typewritten or word processed, double spaced on one side only and 
numbered consecutively, including an abstract of approximately 100 words, and 6 key words for 
indexing. Papers must either be neither previously published nor submitted elsewhere simulta- 
neously. Authors are responsible for obtaining permission from the copyright owner (usually the 
publisher) to use any quotations, illustrations, or tables from another source. 

3. The author's full name, affiliation, and when applicable, e-mail address should appear on the 
title page. 

4. All tables, figures and illustrations should accompany the manuscript on separate sheets. Captions 
should clearly identify all separate matter, and all figures must be submitted in camera ready copy, 
or electronic program specifies files, such as EPS or Post Script. All should be called out in text 
and indication given as to location. For example, 

TABLE 1 ABOUT HERE. 

5. Footnotes should be numbered consecutively throughout the manuscript with superscript Arabic 
numerals. They should be collected in a separate file at the end of the text. 

6. References should be cited in the text as follows: 

Schweikart and O'Conner (1989) agree with this method. Other studies have found simi- 
lar results (Schweikart and O'Conner, 1989; Smith, 1991). 

On a separate Reference page(s), each citing should appear, double-spaced, in alphabetical order as 
follows: 

Journal Articles 

Langlois, Catherine C. and Bodo B. Schlegelmilch. 1990. "Do Corporate Codes of Conduct 
Reflect National Character?" Journal of International Business Studies, (Fourth 
Quarter): 519-539 

Books 

Hampden-Turner Charles and Alfons Trompenaars. 1993. The Seven Cultures of Capital- 
ism. New York: Doubleday. 

7. Upon acceptance the author is to submit one copy of the approved manuscript on a spellchecked 
IBM compatible, program specific disk to the editor. The accuracy of the disk and proofs is the 
responsibility of the author. Macintosh submissions are limited to high density disks. 



-, en ^ 

I °- 

o o 

3^ (0 



0) 
0) 



<. O 

2 o 
■° 2. 

<D O 

S2. c 

00 



O) 
00 



C/2 

o 
o 

o 



J3 
O 

Q) 

a 

z 
o 

JO 

b 

GO 
O 

X 

_^ 
O) 

^ 

00 






I j; 



o 



a3 -fi O Z j-^ 

>-A; s.^ -i. >*"> N.^ 

S-- GO Z < (Ji 

rnocn 
comM 

r r -< 



-^u 'X- '-_■> 

00:0 -<r 
o-< ( r 

i oozrvj 
co;d^->OvD 

O^M MO) 





fi) 




-0 


If 




m 


> 

2 
2 




H 


> 


■0 ■ 


2 


33 


I 





OS 









■tk 


3) 


1 


w 






CO 


i 





PERIODICAL 




Ihe 
International 
Journal of 
Accounting 



Andrew I). Bailey, Jn 

University of Illinois at 
Urhana-C hampaifin 

CO-EDITORS 
Arthur R. Wyatt 

University oj Illinois at 
VrbanU'Champai^n 

Yukio Fujita 

Aichi-daknin University, Tokyo 

R.S. Olusegun Wallace 

Kinfi l-ahd University, Saudi Arabia 
Volume 33 • Number 2 • 1998 



Published b\ 



Greenwich. Connecticut London. Encland 



>nter for International Education and Research in Accounting, 
Jniversity of Illinois at Urbana-Champaign 



Name of publicat.on: THE INTERNATIONAL JOURNAL OF ACCOUNTING (ISSN 0020-7063) 

Issue: Volume 33/Number 2/1998 

Frequency: Published Quarterly „ ^ „ ,^no 

Office of publication: 55 Old Post Road No. 2, P.O. Box 1678 
Greenwich. Connecticut 06836-1678. 



Subscription rates (postage included): 

Institutions: United States S225.00 

Foreign Surface Mail S250.00 
Foreign Air Mail S275.00 



Individuals: United States S95.00 

Foreign Surface Mail SI 20.00 
Foreign Air Mail $145.00 

(Please remit by personal check or credit card) 



Please contact publisher for missing issues. 

All subscriptions must be prepaid and are for the 1999 calendar year only. 

POSTMASTER send address changes to: 



Subscription Dept. 



Editorial Office: 



55 Old Post Road No. 2, P.O. Box 1678. Greenwich, CT 06836-1678. 
(Europe and United Kingdom) 38 Tavistock Street, Covent Garden 
London WC2E 7PB, England 

Center for International Education & Research in Accounting 

320 Commerce West Building 

Box 109, 1206 South Sixth Street 

Champaign, IL 61820 

217-333-4545; 217-244-6565(fax) 

E-Mail: b-smith@cba.uiuc.edu 



Editor: A.D. Bailey, Jr. 

Back Issues: Information about availability and prices of back issues starting with Volume 3 1 , Number 1 
may be obtained from the publisher's order department (address above). Prior issues, please 
contact the editorial office. 

Claims- Claims for undelivered copies must be made no later than three months after publication^ 

The publisher will supply missing copies when losses have been sustained in transit and 
when the reserve stock will permit. 



Copyright: 



» Board of Trustees of the University of Illinois. 



The 
International 
Journal of 

Accounting 



APR 2 2 1998 

UNIVERSITY OF ILLINOIS 
URBANA-CHAMPAIGN 



EDITOR 
Andrew D. Bailey, Jr. 

University of Illinois at 
Urbana-Champaign 

CO-EDITORS 
Arthur R. Wyatt 

University of Illinois at 
Urbana-Champaign 

Yukio Fujita 

Aichi-Gakuin University, Tokyo 

R.S. Olusegun Wallace 

King Fahd University, Saudi Arabia 
Volume 33 • Number 2 • 1998 



Published by 



^JAI Press Inc. 



Greenwich, Connecticut London, England 



Center for International Education and Research in Accounting, 
University of Illinois at Urbana-Champaign 



EDITOR 

Andrew D. Bailey, Jr. 

University of Illinois, Urbana-Champaign 

CO-EDITORS 

Arthur R. Wyatt, University of Illinois, Urbana-Champaign 

Yukio Fujita, Aichi Gakuin University, Tokyo 

R. S. Olusegun Wallace, King Fahd University, Saudi Arabia 

BOOK REVIEW EDITORS 

Axel Haller, Universitat Augsburg, Augsburg 
Stephen A. Zeff, Rice University, Houston 

EDITORIAL POLICY BOARD 

Hans Havermann, KPMG Deutsche Treuhand-Gesellschaft, Diisseldorf 

H. Peter Holzer, Wirtschaftsuniversitdt, Vienna 

Toshio lino, Surugadai University, Japan 

Yu Xu-Ying, Xiamen University, People's Republic of China 

Stephen A. Zeff, Rice University, Houston 

EDITORIAL REVIEW BOARD 

Dhia AlHashim, California State University, Northridge 

Bhabatosh Banerjee, lAAER, India 

Barbro Back, Turun Kauppakorkeakoulu, Finland 

Pierre Bescos, ESCP, France 

A. Bose, India 

C. S. Agnes Cheng, University of Houston, Houston 

Joseph Cheung, Polytechnic University, Hong Kong 

Gilles Chevalier, Samson Belair/Deloitte-Touche, Quebec 

Ling-Tai Lyunete Chou, National Chengchi University, Taiwan 

David Cooper, University^ of Alberta, Canada 

Sejila Dizdarevic, Tucson, Arizona, U.S.A. 

Timothy S. Doupnik, University of South Carolina 

Peter Easton, Ohio State University^ Columbus 

John W. Eichenseher, University of Wisconsin-Madison 

Kenneth Euske, Navel Postgraduate School, Monterey 

Shawki Farag, The American University, Cairo 

Ehsan H. Feroz, University of Minnesota, Duluth 



Cathy Finger, University of Illinois, Urbana-Champaign 

Carol Frost, Dartmouth College, Hanover 

Yukio Fujita, Aichi Gakuin University, Japan 

Sidney Gray, University of New South Wales, Australia 

Trevor Harris, Columbia University, New York 

Sergio de ludicibus, Universidade De Sao Paulo 

Chen-en Ko, National Taiwan University, Taiwan 

Chris Lefebvre, Kotholieke Universiteit Leuven, Belgium 

Joelle Le Vourc'h, ESCP, Paris 

Mei-Hwa Lin, National Chengchi University 

Thomas Linsmeier, University of Illinois, Urbana-Champaign 

Andrew Lymer, The University of Birmingham, UK 

M. R. Mathews, Massey University, New Zealand 

Gary Meek, Oklahoma State University, Stillwater 

Karen MoUoy, University of Illinois, Urbana-Champaign 

Ken Moores, Bond University, Australia 

Belverd Needles, DePaul University, Chicago 

Masayuki Nakagawa, Universiade De Sao Paulo 

Prawit Ninsuvannakul, Thailand 

B.O. Ogundele, University ofllorin, Nigeria 

Soong Park, Presbyterian Church (USA) 

Enrique Bonson Ponte, University ofHuelva 

Grace Pownall, Emory University, Atlanta 

Reiner Quick, Universitat GH Essen, Essen 

Lee Radebaugh, Brigham Young University, Provo 

Sridhar Ramamoorti, University of Illinois, Urbana-Champaign 

Robert S. Roussey, University of Southern California, Los Angeles 

T. Flemming Ruud, University of St. Gallen, Switzerland 

Stephen B. Salter, University of Cincinnati 

Alan Sangster, Queen 's School of Management, Northern Ireland 

Shigeto Sasaki, Senshu University, Japan 

Michael Schadewald, University of Wisconsin-Milwaukee 

Hanns-Martin Schoenfeld, University of Illinois, Urbana-Champaign 

Daniel T. Simon, University of Notre Dame 

Herve Stolowy, HEC Group School ofMgt., France 

Gary L. Sundem, University of Washington, Seattle 

Jimmy Y. T. Tsay, National Taiwan University 

Judy S L Tsui, City University of Hong Kong 

M.A. van Hoepen, Erasmus University Rotterdam, Netherlands 

R. S. Olusegun Wallace, King Fahd University, Saudi Arabia 

Stephen Z. Zeff, Rice University, Houston 

David A. Ziebart, University of Illinois, Urbana-Champaign 



1997 Ad Hoc Reviewers 



Matt Anderson, Michigan State University, East Lansing 
Barbro Back, Turun Kauppakorkeakoulu, Finland 
Maureen Berry, University- of Illinois, Urbana-Champaign 
Pierre Bescos, ESCP, France 

A. Bose, India 

Robert Bricker, Case Western Reserve University, Cleveland 

Dennis Chambers, University of Illinois, Urbana-Champaign 

John Chandler, University of Illinois, Urbana-Champaign 

Gilles ChevaHer, Samson Belair/Deloitte & Toiiche, Quebec 

Frederick D. S. Choi, New York University, New York 

Eugene E. Comiskey, Georgia Institute Tech, Atlanta 

Daniel Collins, University of Iowa, Iowa City 

Jeremy Cripps, Heidelberg College, Tiffin 

Naim Dahmash, University of Jordan, Amman 

Bala Dharan, Rice University, Houston 

Jon Davis, University of Illinois, Urbana-Champaign 

Richard J. Dietrich, University of Illinois, Urbana-Champaign 

Timothy S. Doupnik, University of South Carolina, Columbia 

Leslie Eldenburg, University of Arizona, Tucson 

Howard Engle, Arthur & Anderson, Chicago 

Merle Erickson, University of Chicago, Chicago 

Thomas G. Evans, University of Central Florida, Orlando 

Michael Favere, National Institute of Development Administration, Thailand 

Joseph Fisher, Indiana University, Bloomington 

Cheryl Fulkerson, University of Texas at San Antonio 

James Ato B. Garthey, Controller and Accountant, Republic of Ghana 

Julia Grant, Case Western Reserx'e University, Cleveland 

Audrey Gramling, University of Illinois, Urbana-Champaign 

Mohamed Hussein, University of Connecticut, Storrs 

Frederick Jacobs, University of Minnesota, Minneapolis 

Sanjay Kallapur, University of Arizona, Tucson 

Robert Kirsch, Southern Connecticut State University, New Haven 

John Kramer, University of Florida. Gainesville 

Chris Lefebvre, Katholieke Universiteit Leuven. Belgium 

Marian Lower, Security Control & Audit, United Kingdom 

Silvia Madeo, University of Missouri - St. Louis 

Kenneth Merchant, University of Southern California, Los Angeles 

B. O. Ogundele, University ofllorin, Nigeria 
Soong Park, Economics Institute, Boulder 

Kathy Petroni, Michigan State University, East Lansing 

Judy Raybum, University of Minnesota, Minneapolis 

Hanno Roberts. Norwegian School of Management. Norway 

Robert Roussey, University of Southern California, Los Angeles 

Marjorie Shelley, University of Illinois, Urbana-Champaign 

Claude Simon, ESCP, France 

Daniel Smith, University of Georgia, Athens 

Theodore Sougiannis, University of Illinois, Urbana-Champaign 

Thomas Stemburg, University of Illinois, Urbana-Champaign 

Mark Tombley, University of Arizona, Tucson 

Shiing-Wu Wang, University of Southern California, Los Angeles 

Arnold Wright, Boston College, Chestnut 



THE INTERNATIONAL 
JOURNAL OF ACCOUNTING 



VOLUME 33 NUMBER 2 1998 



Editorial Comment 

ANDREW D. BAILEY, Jr vii 



ARTICLES 

The Quest for International Accounting Harmonization: A Review of 
the Standard Setting Agendas of the lASC, US, UK, Canada, and 
Australia, 1973-1997 

DONNA L STREET AND KIMBERLEY A. SHAUGHNESSY 179 

Corporate Financial Disclosure in Emerging Markets: Does 
Economic Development Matter? 

STEPHEN B. SALTER 211 

Ownership Effects on Audit-Detected Error Characteristics: An 
Empirical Study in an Emerging Economy 

K. HUNG CHAN AND PHYLLIS L L. MO 235 

Differential Reporting in Singapore and Australia: A Small Business 
Managers' Perspective 

S. MITCHELL WILLIAMS AND GREG TOWER 263 

Colonialism and Accounting Education in Developing Countries: 
The Experiences of Singapore and Sri Lanka 

HEMA WIJEWARDENA AND SENARATH YAPA 269 



BOOK REVIEW 

Japanese Accounting — A Historical Approach by Kyojiro Someya 

Reviewed by MOSHE HAGIGI 283 

Accounting Research in Lund, edited by Kristina Artsberg, 

Anne Loft and Stefan Yard 

Reviewed by JOHN FLOWER 285 



EDITORIAL COMMENT 



As the editor of The International Journal of Accounting I have the opportunity to write the 
occasional editorial. I plan to use this opportunity sparingly. In my first editorial I placed 
my faith in the international research community to identify outstanding research topics 
and methods for the future. I believe that the research faculty should drive the academic 
research endeavor. I will try to remain open to researcher innovation and direction. 

My role as editor effectively began in January 1997. 1 am writing this editorial after one 
year of editing experience with The IntemationalJournal of Accounting. I want to give you 
some idea about the rewards that come with the editorship of the Journal. However, I also 
want to discuss some of the problems my review board and I encounter in reviewing papers 
submitted for publication. 

The rewards associated with the Journal editorship are immense. I am becoming much 
more attuned to the importance of international issues, the richness of the work and the 
unique difficulties associated with doing quality work in this arena. My regard for those 
who have chosen to make this their career commitment was always high, but rises daily. 
As a result of my Journal editorship I have attended a number of interesting meetings, met 
and spoken with many academic researchers committed to advancing international 
accounting research and international educational cooperation. The conversations have 
contributed to my education and understanding of international research issues. 

I firmly believe that the economic globalization of business and accounting and the ris- 
ing power of technology to knit our capital, labor, and production markets into a single 
market, means that international accounting research, broadly defined, will become a 
major factor in accounting research before the end of the next decade. The good news is 
that more academics will be interested in international research topics. The bad news is that 
the competition is going to be fierce. I think we will all benefit by this process. 

All told, this last year as editor of The International Journal of Accounting has been one 
of the most rewarding of my academic career. I appreciate the support freely offered by 
many reviewers and authors and look forward to the coming year. 

However, all is not well for some authors who wish to publish their international 
accounting research. In my last editorial I indicated that I relied on the authors to be inno- 
vative in identifying topics and applying sound methodologies. Further, I indicated that the 
reviewers and I would maintain an open mind with respect to innovation. Nevertheless, the 
Journal receives many manuscripts each year that cannot be accepted for publication. 
What is it that makes a manuscript acceptable for publication? 

First and foremost is motivation. Authors who spend the time to motivate the interna- 
tional significance of their work early in their paper substantially improve their chances of 
a positive review. The editor and reviewers do not consider the fact that a paper was not 
written in the U.S., the editorial and publishing home of the Journal, as prima facie evi- 
dence that the paper qualifies as significant international accounting research. Author must 
take the time and make the effort to link their work to a significant international accounting 
problem and the relevant published literature. This is valuable to the author as it enhances 
the chance of acceptance or invitation to revision. It is important to the Journal reader 
because it contributes to their understanding. 



VIII 



Second, authors should develop or refer to a conceptual framework within which they 
expect interesting differences or interpretations within or between countries or jurisdic- 
tions due to the accounting issues addressed in the research. The authors who demonstrate 
that their work fits within the conceptual framework provide a reference point for the inter- 
pretation of their research results. Linkage to other countries or jurisdictions may be done 
by reference to other extant works or by actually applying the author's own method across 
national or other jurisdictional boundaries. 

Some papers may be intrinsically interesting even though they address only a single 
country or jurisdiction. This may occur when a country makes changes in its accountancy 
standards or practices and a pre-post analysis becomes possible. Other possibilities do exist 
and many of them appear in the past issues of the Journal. So, we do publish papers 
restricted to a single country if there is an intrinsic international interest of some kind. Nev- 
ertheless, the author who makes the connections to the international accounting literature 
explicit improves the quality of the paper and its chance to influence future accounting 
developments. 

Authors cannot rely on editors, reviewers and ultimately readers to make the necessary 
connections. We try to give advise on this matter when we can, however, if the author does 
not make the connection, it is asking a lot to obtain direction from the editor and/or review- 
ers. The author is the expert with respect to the research under consideration. 

Third, the selection and application of appropriate research methods is important. I will 
not spend much time on the obvious fact that authors who apply the appropriate methods 
rigorously will likely receive encouragement if the paper is well motivated. The selection 
and careful application of any chosen research methodology is crucial to success. A well- 
motivated paper where the research is not competently implemented should not be pub- 
lished. Because of the obvious nature of this point and because there is an extensive 
research literature on the matter of individual methods, I will not address these matters fur- 
ther in this editorial. 

Instead, I will comment on a few other matters of an editorial nature that can contribute 
significantly to the success of an otherwise well-motivated and implemented project. The 
structure of a paper and the proper use of English both contribute to the likely acceptance 
of a paper. 

First, a well-constructed paper that uses the English language properly substantially 
improves its success potential. It does this because structure substantially improves the 
communications potential of the paper and its ability to communicate a coherent story. In 
fact, authors might find it useful to think about the construction of their paper as a process 
of telling a story about their research. The story should be told so that an intelligent person, 
not particularly knowledgeable about the author's work, can understand the basic points of 
the paper. One of the advantages of presenting papers at seminars and workshops prior to 
submission is to develop the story nature of the paper. The difficulty in properly structuring 
papers does not seem to be related to whether the author's first language is English. 

Second, the proper use of the English language is important. Successful authors often 
take the time to obtain professional editing support prior to submission. I use editorial sup- 
port on my own papers and often recommend that an author use an expert English language 
editor before resubmitting a paper. The reviewers and I recognize our responsibility to 
encourage those for whom English is a second or third language to write for our Journal 
audience. We are particularly prepared to work with authors who provide well-motivated 



and structured papers, but have some difficulty with EngUsh usage. Nevertheless, we are 
an English language journal and our reviewers are not likely to speak the first language of 
the author even if the reviewer's first language is not English. 

We want to help authors because it is in our interest to do so. We want the best research 
possible published in The International Journal of Accounting. We will do our best 
because it is a shame when a perfectly good piece of work is rejected because the reviewers 
and editors could not decipher the research meaning of the paper due to any of the above 
problems. 

The competition for outstanding international accounting research is growing. There are 
more accounting journals willing to publish quality international research today than ever 
before and the number is growing. We at The International Journal of Accounting are 
pleased by this recognition of the importance of international accounting research issues. 
We seek to be your journal of first choice when submitting papers. We will work with you 
to bring your research to a publishable level. Give us the opportunity to consider your next 
international accounting research effort. 



Andrew D. Bailey, Jr. 
Editor, TIJA 



The International 
Journal of 
Accounting 



The Quest for International Accounting Harmonization: 
A Review of the Standard Setting Agendas of the lASC, 
US, UK, Canada, and Australia, 1973-1997 

Donna L. Street and Kimberley A. Shaughnessy 

James Madison University 



Key Words: Harmonization; Accounting Standard Setting Process; Anglo-American Accounting 
Model; G4+1; lASC; International Accounting Standards 



Abstract: For 1973 through 1997, the research examines the evolution of accounting standards to 
ascertain the extent of similarities and differences in financial reporting practices among the lASC 
and national standard setters in the US, UK, Canada, and Australia. Collective and individual 
efforts aimed at minimizing differences to achieve harmonization/compatibility are discussed. The 
impact of the lASC's modified philosophy for the 1990s, specifically its cooperative endeavors 
with the G4 standard setters on agenda coordination and hannonization/compatibility of account- 
ing standards, is also investigated. 

During the 1970s and 1980s, the lASC, US, UK, Canada, and Australia achieved accounting 
standard compatibility in very few areas. Successes included the funds flow statement and leases. 
This failure to make significant progress toward hannonization/compatibility can be linked to lim- 
ited agenda coordination and cooperation between the lASC and national standard setters. The 
research also reveals that significant periods of time, of as much as two decades or more, passed 
before the lASC and Anglo-American standard setters attained some form of consensus on agenda 
items initiated during the lASC's first nvo decades. 

The lASC and Anglo-American standard setters entered the 1990s better equipped than in prior 
decades to engage in cooperative endeavors. By focusing on common themes in their conceptual 
frameworks and adopting a philosophy of harmonization via cooperation, the lASC and G4 have 
made considerable progress. Areas where the five standard setters have achieved consensus, or 
are close to achieving concurrence, include several projects initiated during the 1970s and 1980s. 
These projects include investments in associates, interim reporting, business combinations, joint 
ventures, deferred taxes, and pensions. In addition, projects launched by the G4 + 1 members dur- 
ing the 1990s have often produced compatible standards (or proposals) on a relatively timely 
basis. Examples include financial instruments, EPS, segment reporting, and comprehensive 
income. The research also reveals a few areas where consensus has not been achieved, such as 
accounting for the correction of errors. R&D. and interest capitalization. 



Direct all correspondence to: Donna L. Street, School of Accounting, James Madison University, Harrisonburg, 
WA 22807, U.S.A.; E-mail: streetdl@jmu.edu. 

The International Journal of Accounting, Vol. 33, No. 2, pp. 179-209 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



180 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

Several objectives underlying the goal of accounting standard harmonization have been 
achieved in the 24 years since the International Accounting Standards Committee (lASC) 
was founded. Yet, true harmonization has been hindered by many factors. Accounting sys- 
tems are developed and fostered within a nation's unique environment, which includes dif- 
ferent socioeconomic factors, educational and legal systems and cultural mores. Plus, 
accounting systems do not evolve uniformly or simultaneously (Radebaugh & Gray, 
1997). Accordingly, significant differences exist between International Accounting Stan- 
dards (lASs) and the national standards of the lASC membership. 

Researchers often refer to the Anglo-American accounting model that is practiced in the 
United Kingdom (UK), United States (US), and other countries where the UK has had a 
major colonial influence. The impact of the Anglo-American model on the lASC's work is 
evident. As reflected in the conceptual frameworks of the lASC, the US, UK, Canada and 
Australia, these standard setters share "the objective of providing quality financial stan- 
dards for the primary purpose of providing information useful to capital market 
participants" (Paul, 1997, p. III). However, despite a common conceptual goal, notable 
contrasts exist between lASs and the standards of those countries using the Anglo-Ameri- 
can model. 

Initially the lASC worked independently of national standard setters. However, in 1990 
the lASC elected to work towards greater compatibility between national accounting 
requirements and the removal of differences between national requirements and lASs. A 
1980 lASC resolution, which provided the basis for participation with groups of national 
standard setters, was reaffirmed in 1993. The resolution stated: 

Because members have agreed that lASC is the appropriate forum for the development 
and publication of international accounting standards, . . . lASC requests member bod- 
ies to use their best endeavors to ensure that the lASC board is kept fully informed of 
all initiatives within their country towards the development of accounting standards and 
that, when any discussions on accounting standards are proposed between two or more 
countries ... lASC is invited to participate ... (lASC, 1993, p. 1) 

Based on the lASC's revised philosophy for the 1990s, a cooperative effort of the lASC 
and those organized national standard setters whose standards were universally recognized 
was initiated to facilitate harmonization (Carsberg, 1996). Among the most likely candi- 
dates to work with the lASC were standard setters from the US, UK, Australia, and Can- 
ada, especially in view of each entity's commitment towards harmonizing standards and 
their strikingly similar conceptual frameworks. 

The current research examines the evolution of accounting standards, since the forma- 
tion of the lASC in 1973, to ascertain the extent of similarities and differences in 
financial reporting practices among the lASC and standard setters in the US, UK, Can- 
ada, and Australia. Efforts to minimize differences to achieve harmonization are 
discussed. The impact of the lASC's modified philosophy for the 1990s, specifically 
with respect to cooperative endeavors with the Anglo-American standard setters on 
agenda coordination and harmonization/compatibility of accounting standards, are also 
investigated.^ 

In 1993, the Australian Accounting Standards Board (AASB), Canadian Accounting 
Standards Board (AcSB), Financial Accounting Standards Board (FASB), and UK 



International Accounting Harmonization 181 

Accounting Standards Board (ASB) began work on a project with the lASC. Together, this 
Group of 4+1 (G4+1) produced Future Events: A Conceptual Study of Their Significance 
for Recognition and Measurement (Johnson, 1994). As a result of this successful endeavor, 
the lASC desired to continue to coordinate agendas with the 04 (Carsberg, 1996). Initially, 
the G4+1 focussed on agreeing to broad principles. By formulating a consensus view, the 
G4+1 arrives at a basis upon which each standard setter can write its own individual stan- 
dard. Working together on common problems assists the G4+1 in achieving its goal of 
harmonizing the members' individual standards. Recently, the G4+1 members committed 
to jointly develop the group's first accounting standard (Cairns, 1997a). The current 
research ascertains the success of the G4+1 in improving compatibility of national 
accounting standards and lASs. 

METHODOLOGY 

For 1973-1997, the lASC and Anglo-American agendas are reviewed to ascertain the suc- 
cess these standard setters have made toward achieving harmonization. Data were col- 
lected for projects in progress in 1973 and those beginning in or after 1973. In 1973, the 
lASC and FASB were formed, and the current standard- setting bodies in Australia, Can- 
ada, and the UK were formed post- 1973. Therefore, the data include all major projects 
addressed by the G4+1 members plus some addressed by predecessor bodies." 

For each project, data were collected regarding the year each standard setter placed the 
item on its agenda and issued relevant documents such as discussion papers (DPs), expo- 
sure drafts (EDs) and final standards. All projects examined are the subject of an IAS, or 
on the lASC's agenda, and have also been considered by a majority of the Anglo-Ameri- 
cans, including conceptual framework projects. Industry standards and standards dealing 
exclusively with disclosures are excluded. 

Data sources include: International Accounting Standards 1997 {Table on History of 
lASs and EDs},-^ lASC Insight {the lASC newsletter}, lASC annual reports, the lASC 
World Wide Web Home Page; Financial Accounting Series Status Report {the FASB 
newsletter}, Financial Accounting Standards (FASs) {Background Information Appendix 
for each standard}, FASB's (1997a) World Wide Web Home Page; Ernst & Young's UK 
GAAP (Davies et al., 1994),"^ ASB press releases. Inside Track {the ASB newsletter} ;Am5- 
tralian Accounting Handbook {project chronology preceding each standard}; and a list of 
Canadian EDs with publication dates {provided by Canadian Institute of Chartered 
Accountants (CICA)}, the 1996 Canadian Accounting Handbook, and the CICA World 
Wide Web Home Page, for the lASC, US, UK, Australia, and Canada respectively. 

Analysis 

Table 1 summarizes the standard setters' agendas and indicates the time required to 
achieve consensus for each financial reporting topic. Highlighting is used to indicate the 
release of a standard that adopted the majority view. For on-going projects, release of an 
ED reflecting the consensus view is indicated by black print on white. To identify the phi- 
losophy endorsed by each standard setter, the relevant literature was reviewed. Table 1 



182 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



o 



w 



(D 

CO 
■g 

CO 
T3 

C 

B 

CO 



ns 

z 

T3 

C 

to 
o 

CO 

< 












!> 








Sf 








,1 


r 


,0 OC «3[ 










+ 






'^ vC 




u 










< </5 






o o* 




a. 


< < 




2 


S So 




- ^ 


~ 














1 






o 


<: 


D O 




fe. 








!t 


I 






— s 


- 






u 




< a> 




c 












s^ o 




- 




< < 




s- 




lL. U- 












_ s; 
















T3 








O 












^ 




c 




X 




















« 




^ 




^ 












c: 


c 






3C 








^ ^ 




3 




~ — ^ — 




< 




< < < < 










+ 

s 


C/3 




c=S^^g2 


< 












§ 


o 




p- (^- r- r- f- r-. 
























< 


< 


s 












< < Q 

5: u, til 


9 < 






p~ r- (^ 








< 


a: 


■a 




t 


o ^ 


b 




Is 


O < 

* < 


t: 




r^ {-w 


3* CO 


tj 












Q S 


o 
+ F 


@g 


O Q 






^^ 


< UJ 


'-? >£ 




P 


^ o 


-21 ■ £ 






f^i^ 


















O 1 




« 


gK 


, O 






- < .D 












;C 


c ^ » 


-. ;?■ 2 






T 1::. 


J \ 














O ^ k^ - 


" ^ 






^ M ^ ° 


o ^ 


1 


D 


J,^: 


Is . 


K^ 


< 


UJ ^K UJ C £ 




n 


r- 


£^g ? 


» oe u 


w^r 


02 








r^. m 






^^B 


CQ f~ t-.' O 








'-. a: y-; ri ai 






^^B 


7 < ffi cc oo 






H 


« • cu a- J. 
^ ^ < < {- 






H 






■e 










1 


-< 










-" 


;3 


« 


dj 


^^ 


CJ 


1 


< 



1 


^ 








A 






* 




r^, r^ 










•» 








D 






a-- 


s 














^ 


p^ 






0^ 










o 














y 


^ < 






S ^ - 


. c 




•7" 


Co + 


C 








c 


< Q i. 


5 Q 










1 ^ 






■I 


fe ^, 


_ 
















< 










+ . 


■ 


Bs H 


S c 5 ; 


= 5fe 










Z 


^^ t- r 


a- o- a- \c 












; 




^^ g 


^^^ 


; 




^J 5 


^^ 


1 




1 ? 


%% % 


1 


p- r- 


'.'P--- 


ss s 














































: 


o 


£ 


=^ - 1^ 






tu 












1 


P-. 


i~c 


^ ^ p^ 


■j 


--. 






H 


^ g o 






^H 


'7 < m 






^H 


S rS, 0< 






^H 


£ ? < 






P 




o 


7- « 






'0 


< :^ D 


B 


3 




u ::j < 



International Accounting Harmonization 



183 



E E 



O 3 ^ !L> C 










E 


hi 




^ 














oi xi u. a 












































































































rr 


Vi 
















< 














i^ 














< 














< 














o. 














ctf 














< 














(>^ 














< 














< 














oc U- 














<; 














00 




























CO 












IV 


a. 












u. 


9 












c- 


oo 


















^^ 
























•f 




f>; 








i-, 






^«e 






















n'. 






^ 








u. 


< 




% 










OC 




^St 








a: 


IS 


























<- 


< 




^.' 




















Vi 






■^ 








•o 


o 




rj 










r^ 






1 










a: 


















a: 




















j 




S 




C 




5 


'0- 




so 




ir; 


•» 


r-l 


'X. 


m 














!':., 






























~ 










K 


^^ 




































% 




r, 7 






(/■; 


•» K 


<^ 






"r >? 




W- 




ai Si, 


U4 


( 




<> a- 






;:;■ 


S ^ 


r? 


^1 




<^ 












H 




■^ 






< 






















H 




w 






c 






■ 


'- 


1.- 






o 






mi 




























































Wh 




y. 






■y^ 


« 


\^ 


Hv 






'/■ 


u; 


;^ 


— 


< 


£ 




-1 


-^ 


— • 


< 


< 



r S- E 

g !2 ^ 
g o u 

SEE 





1^ 




fc 


c 


-1 


t; 


< 




c 


O 


< 



I 



'^ 



UJ 


c; 




>> 


T3 


u« 


















c 














>s 




























«! 








00 


^ 










































u. 














/, 


































































































«• 














< 














^ 




























</> 












o 


< 

< 












{-!, 














0-. 














«> 


« 












</) 














<- 




























2 


^ 


























-»! . 














'^. 


< 












aw 












^ 


(A 












^' 


< 












g 


rf 




■ 


-, 


"■ 










1 


C 

UJ 




a: 


OC 


< 


■o 








^t 


UJ 




— 


^^B 








vO 


r*% 


o 


! 


o- 






■iCi 


cc 






















































































j 


9 








r; 


o 


jj 








r- 


r-^ 






























y 






^1 
























o 


























2 


c 




35 


f^i 


C 


T 




l:, 






UU 


liJ 




; 






aS* 


4 


rA 




|j 






»^' 




t- 


OC 




—. 


OS 
























^m ^. 


< 


6. 






^ 




^H '.'. 


.«? 


■«f 






UJ 




















r» 


x^ 






r- 






































7 


O 


r/1 


M 




X 


'/I 


< 


< 




3 




— : 


-J 




< 


< 



O c 















? 
























IS' 






,,, 


sO 








rt 


r'l 


fs 




1 
















































« 








J ' 


J ' 


= 








^ 


>> 


y 








^^ 






















1 




^ 




3.pB 


z 


ta 


'^^ 


O fcl 


I 




< 


y 


^Q 


z 




^^. 


•4 


'V^ EM 


■1 








'0<> W^ 


■ 


m 










^H r^ 


P 










■ 1 


^< 










n 






p 






























U 


y. 




!r 


■< 


u 


u 


'^ 




< 


D 




184 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



II 



II 



S CD oi 



ii 



u <y\ 



o ^ 



Zi -o p. 



S.B 



0^2 






















t 




























an 








+ 


+ 




























r4 


I 








^ 






I 






P 


c 










gg 


UJ 




H 






b. 















v^ 




P 








^S\ 






















































« 








































r~ 



























1/0 






























3 




; C 


cc o| I 


^H 




















i^ .- :ilH 
















Ml 'V liT^ 


UJ 


SB 






S^P 


« 


s_kI 


^Hr^ 














^^r- 














H^ 














^■^ 


















7 






,^ 






(/> 


< 




•-^ 


< 








^ 







— 1 


< 












oa 








♦- 




c« 








E 
3 


c 
f 


oS 


c 
c 




^ 


c 






r/1 


c 


< 






o -5 c 



o o -a _ 



>N 




u 
•G 

g 

.s 


E 


4) 
C 


z 

< 


>> 


c 


T3 




< 



£ 



< 


u 


1 


c 

















e 






















































•+ 




















— 








C-A 


























U- 










< 




1 













tu 


p 












r- 












0-. 




|o^ 












1 


;? 










W-) 


^^ 


w 












wH^f 


ct: 










00 


P 


S 






















„ 






























m 




D 










■* 


r^ 














0^ 


o- 






^ 
















































«r 






















-^ ^i*' 


oi 






00 




^ 


v*k ^n 




r'-i 


'v-i 


r-^ 




LL. 


-<■' ?w 


00 


00 


CC 





E 










1 




.0 


a. 




UJ 




















JC 




CO 


CC a 











































m 














f\. 














-f 


H 












^1 


fr. 












r- 
































y 


•^. 


n 


'^ 








<( 






< 


-J. 






(-■ 


< 


< 


^ 


-J 

















c 








































+ 


:i 




TT 


'_:: 


r^ 




































<t 














0^ 























1 




Ul 








^^ "^ 













Bs ^o 




0- 








n« ov 






^ 














'/-, 














< 


























rQ 


^ 








d 




'r 










u 


















r- 






^— 




o^ 






i 




1 






















Cl 


< 




5 




5 




r- 


«- 




^•^t 




— 


m 


t~ 


so 




«^ 




c* 


^ 






,V 




$;?! 




^^ 






t 


















1 


1 


- 








I^< 


! 




.c 


«v 


:r 




oc 




















































a: 






r 






•y) 






> 


UJ 


< 


c 

UJ 


< 

< 


2 




1 


-T 











FN 


.0 


•> 


r^ 


f^ 





C7v 




00 


















































■^ 








= 






n. 






Q 








< 


i£ 




2 


Q 


'•■1 




c^ 


z 


LU 


■^ 


v; 








1 






oc 







fN 






f^ 




C> 


00 














- 














CD 


^^■r^, 








Q 




ai 










U4 




< 


■ ^ 








^ 














r^ 






















7 













<!■ 




i^ 


_J 


^ 


•r. 







— ' 


— 




< 


-> 





















e 
































U) 










^, 


)^ 








r^ 







'— 
















CJ 














1 




<^^^M 








H 




^iS 








^3 








— 




■n 


















^ 


^ 




^ 








^ 


^ 










^^ 


^ti' 




















C 


FTiN 


w^ 




D 




UJ 


^g 


^^ 




u 







1^ 


S 




0- 




c 


1- 



(/I 


ai 









< 





< 

< 





a 


2 






r> 


•^ 


OQ 


r^ 


'n 




r- 


oc 








OC 




< 

















„ 


TT 




— 






< 


Q 







< 


a 




u. 


UJ 


lU 




■M 






r~ 


^n 


r^ 


f^ 


rsi 




r^ 


r^ 








00 


■ 


_ 














^ 


























! 


< 


d 


Q 


't 


fcj 









u. 


■J 


U4 


Oi 




W; 






|C 


f^ 


0- 



00 


s 


00 


















































V5 
< 




5 


g 

't 


- 


a 












m 


UJ 


u 






















r-- 






00 




t- 


















^Hr^' 


S 2 
a; a. 














^ 


< < 






















•e 






^3 I 








M 





7 


la ' '-^' ' 


::/: 


.— ' 


3 -St 


< 






^ 


D <\<\~\ 






International Accounting Harmonization 



185 

















p 


























^ 


3 




TT 


sD 


r~ 




^ 




K|[3 














K *'' 














qM'^' 














^ ^j 














T SyJ 














£ iSi 














!^ 














<: 




























•J'. 














^ 










































:ij 














^ 


































•y o 




































a; 






^ :? ^ 








a: 














s 






o IP c^' 














i 




1 " 




o: G 




















)^: 




£. 










































IB 


















o G 






==: ^ £ r. 


<£f_. 


il 




2£2« 


















- < < < 


c c a t: 


'J G 










oJv>uic/;C>yL;ii;a.< 


*J ;U 












9 *^ 




QC ac oo »c 




























isi 










o 








UJ 




o c 


















r^ t^ C-- 




















< a 


















































a; V5 






Ui Ui 




Q C 




r? ?? 






oo ce 




Ov O. 








1 


< O Q 




*t 




c 




1 


sss 




o 




Ui 




UJ u; UJ 




9 




























■ 














1 


2 




n 


2 C g 

H < > 




fc 2: O 
O O aj 


■ 
















■o 












1 








oo cc oo 




























































s 






0^ 






< 




rri'^ 


^ 


-T ^ 












































































Si 








































2 




1 


' ', 


- 




a. 




a 










C 


1 




g? 


3C 


y 




1^ 


■ 


— r'. 'n 


























^Hf. 
















< < < 










^H f^ 


~ r'-j C- 










' 




-c ^c r~ 










I-. 


H 




O 


7* 








PtM 


^i 


< 


< 






-^ 


m 


-^ 


^ 


< 




— ' 



E 2 



o t 

c -a 



11 





















If. 
















> 








^ 








































a 














Ul 










































< S 
























































S < 
























































S^ 'O [/* ■<» 




rr 














<■ 
























-spg < 




u. 














a; 
























'oomi 09 




c^ 






































i 2 a: 


n 


C 










O !« -y, 


UJ 












r^. fA fA 


r^ 






















































s 


■^, 












Q 


It 


^ 










s 


<5' 


«; 


£ 








< ? 




■ 




















^H 






< < 




'- PV 






u^ u. 










VI c/; 




ui V*l 






o o 


S 


sH 


































S-S 




o 
















^ 








sg 




< 
























r-- r- 












1 










o 






■ 




Q 


n 


r^ 


Q 










LU 


lLi 


UJ 


UJ 






















^H 




r- 


CC 


oo 


oo 






1 








^ 








2 


o 


v> 


?>H 








"^ 




;;; 


^n 




ii 








































( 






i: 




¥ 


O 








































O 




^ 




< 


r^ 






< 


'A 




7- 


<■ 








4 


rA 


^ 


rsf 










r- 














































CC CD CC 


sr. 














&; C^ £ 
















< < < 


































<; 






















-p 






















o 




'f- 


o 




-y; 


< 


< 


;^ 


rj 


3 




-; 


'w* 


^ 


< 


< 






p. « 

8 ^ 



g E 2 
lie 



D - 



P -5 



E o' o 



I 






r- 


X 


















92-ED 
92-FAS112A 

5,43 












1' 












Ul 








a 

UJ 








84-AGD 

84-ED 

84-SFAS81 






C 
Q 
< 

i 


a 
o 
< 


i 














VI 


;^ 


< 


< 


< 



186 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



•? t: E 



g I 



£ P 







U, 


o 


— 


u, — 


0- — 


u. 


^ 


in 
























s 




















3 








tM 




C^ 


A 


i 






C/\ 


















s 




tj 




































D 














u. 




O 


rs 






Cl 






c> 




o 


u. 






U. 








o 


^ 








■1 ! 




















■»• 




O 




§9 




aj 


u. 




'V 




la 


















ST. 


C\ 








^a 
























£1. 










< 






UJ 


'A' 








'J-: 


u ' 






Q 












Pu 






D 


<• 




a. 




< 


r';; 






1-' 










00 






o^ 






s 




t 


s 








^ 




l«" 


















^ 




rJ 


Or! 






X 






^ 




V) 


w> 
























lA 












^ 






< 






il 














„ 




































OB 




































< 




S 






S 
















































< ^ 






>^ 












f^ 












C 






< 




S 


< 
















iU 








^ 












cA 


^ 




























< 








1 




m 


S 




a 




" 


5^s 




ce: 


u 




O 




< 


^ K!fl 




ri; 


rA 








1-^ 


r^ hS 


















1 








































1 




c 
o 

< 










< 


< 


9 






















s 




y- 






1^. 




»'■ 


1 - 


crt 






































' 






c 




5 














< 






^ 




::■ 


c 




















i^ 




























^, 






r^ 




p' 


r~ 


f- 












































X 














a; 






o- 














-f 




I 


< 






D 








< 






























(- 








^D 












•e 












s 






«5 


< 


< 


Sj! 


< 




S ■= CO 



u 


E J 


c 


fe 


u. 


■5 




a 












Q < 












ty-. 












'< 
1 












< < 












UJ ti- 
er c^ 










1 


£ 


:5: 

9 










o 




5 






< 




< 

4 


















^ 


(/> 


y 


< 


< 



International Accounting Harmonization 



187 



■s S 

1- i 



•5 <« 



c Z Si, 

§ < £ 

^ '-_/ ex 

-S -^ 7 

r/; =1 o 



-5 £ S 



Si 



5^ 

[ 



5 .1 



E :^ 



c t ^ 



?■ D. 



00 



■^ < .> 

D 






E « 



■p =;, — 






■5 „ o 



g'r 



I g 










u 


.i= 


«x. 




« 












"^ 


Vm 




















1 3 < i ^ 




































« S i^ ^ -K 




j2 














-H 1 D *- ^ 
■E S ^ .5 S 




^ 










_^^ 




M T> .;j 3 O 

c: e < C o 

£ 1 ■;; 1 ^ 




-J 






«y-i 


tr-. 


*/^ 














»" 






























'W* 






















Haimo 
after m 
be join 
indicat 
* Low 
































































OC 
<■ 


c 








^ 










































































C" 


3- 












t 


*:? 


r-' 


(>• 




















'W 








































.^X.. 








^H 




;«n 


■ 










^"^ 


c 






1 




i 


R 










&d 


^ 










•Kfc- 


Ka 










;vA 








1 




^S' 


H 


















1 




Si, 


M 




■ 










</; ;« 








«-) 






■ 
















■ 








t/J 






























<* 






I 










< 






? 




n 




lZ 






■ 










u. 






; 




tV 
























































j 




Cv 
















""■ 






■ 






























i 








C 

9 


< 


2 




: 




III 
















-^ 


w 




i 




c^ K;^ «5 




O 






















§ 






i. 










J 




r^ 








^ 


5 






■u 


c 
o 


o 
< 


S 




: 




< 


UJ 

^ 


3 




a: 
< 


n 




:i: 


i 


o 


;; 


so 


— 


j 




!^' 


^ 




X 








^ 


r^ 
























5 


a. 


S 


^M 






f- 










p 








< 


fds^ 


^ 


H 


f^' 




yj 










fci 










J. ^ 


<-> 


^^1 


i! 




fN 




















t- r- 




g 






t^- 












•f- 
























































T 


pi 


O 






V 


W^ 








o 


r 




u! 




< 


< 


< 


Vj 


;^ 


< 


a 




V) 


u 




< 


< 



— o 
E « 

K Si 








M 


D 


< 


< 




E 


^ 







^ II 


s 

j: 


ti 




<2 


* 5 




















r 
































BI 
















2 




















P - 














fei "" 














E 'i; 














































Hp 














E <7^ 














Qi 














Oi 




























c> 














C 














C 














< 














S 














-I 














<■ 














o 




























■Ji 














O < 














UJ u. 














cr- c^ 














t^ r~- 














•<J^ 


























ai 


< 

■^ 












< 










































< 
































< 
























< S; 


™ 














a5 












\^ -^ ^r^ 




o 










a: Q UJ 


UJ ii. 


n: 








f- 














• 


-, o~ 0-. 


r^ r^ 


On 








1 




a. 
O 


^H 






: 




O 


£ H 




< 
































i 
























a: 




o 




























r-: 








- 




o 


c 




c 


< 




1 




< 




t/S 


C: 


< 




































- 






t^ 










s 












H 






























! 




5! 


</■; C 


. 


a. 
< 


J 


; 






a" 


ty. 


?H 


: 









o 


S 


r^. |S| 














\ 






C 










- 




r^ 


C 


n 


a 




3 o 


a 




Ul 


< 


OI 


ul 


U 


a: — 


1 




o 


P 


l-~- 


io 


O 


oc oo 
















H 






u: 




o ?. 






















1 






o 


























1 


Cl. 




so 






















•E 


M 




o 




7 






!^ 


frl 




< 


VI 


< 


i<; 




3 


c3 




^... .y 


D 


< 


< 



188 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



U BD > 



(/> 


JS 


p 




< 


* 


■a 


o 


U 


JO 

n 


U> 




* 


i" 






,o 


o 



= ,V T3 



< E 



i I 



e. o o ^ 



U 

CO 

< 

:s -I £ 



e o <3 






^ ^ 



■B s 



F 


p 


fe 


i 


-C 


ii 


5 


c 








J2 


U 


o 


o 


t; 


< 


u 




f/1 


o. 




< 


^ 


o 


O 



■ 


=*! 


u 


F 


i 


'5 






! 


§ i 8 ^ o 

u -s .E c: Q. 


1 

X 
















































































n 


c 














1 


















m' 




























}i 


*-- 














s 










a. 
















y^ 






Jl 










a: 






H 




,^ 






.-/> 






s 










< 






4i 










g 






















































K 








m 
























a 




W 












^ 




(A 




'N 


r^'i 


■^ 




5 


■ 


o~ 




O 


s-. 


u« 
















e 


1 














'-, 








C 










= 


?. 




a: 


-JO 
< 


< 




X 


1 






X 


f^ 


*^ 






! 








































* 

X 


: 


n 




< 




t 
< 


o o^ 


9 

4 


J 






!/2 


UJ 


< 


c^ — 


* 


O'. 














r-- 










v^ or; 
















s 




8 


a 


























^ 


^H f^ 


V/-' 


< 












■ ^ 




























p 




o 


f- 










S 




















































V 






-J 






a 


PI 


< 




^ 


< 


< 


< 





















r 
















^ 
















Rf) 
















J3 




m 


NO 


S 
























m 














»: 














u. 














r^ 














a- 














D 














S 














u. 




























a-. 














as 




_£r 
























a. 




IT 








P 


< 




< 








«- 












A 


-^ 




rn 


— 












ov 


*i- 














< 


































n 


r> 














■CJ 




LU 






















o 


OO 




O- 


ON 




1 






o 




a: 


ac 










< 




< 




» 




f*; 




< 




































3 




c 


n 


f:; 


?t 


c^ 


o 














































j 






sD 






a: 




1 












c« 


^^ oo 


- 




^ 




f: 


(Tl 


















<• 


a; _ 
























-r 










U 














































^0 












^H r- 












































r-- 












pM 










































f^M 


/: 






N-/ 


(/■- 


« 


Pss 


< 


u: 


■yl 


■'j 


^ 


5 


Ea 




\^ 


— • 


^ 


— 


< 


< 



















































































OO 
















-: 




















^ 
















C 
















u^ 
















fV 
















U- 
















, 
















C 








^ 
























u. 








li! 








o 








r- 








n. 








O 








:5 








U-! 
























o 








o. 














t. 
















O 


o. 














<rt 


O 








U 


_ 




a 


or! 








Cs 


u. 




















._ 




























ck; 




ci 




























< 
< 




< 










o 


v^ 




r^ 
















On 










o:; 
































< 






O 










a 




u 










(A 


LU 














t> 


C^" 




(> 










C 


Cv 


oi 


<N 










< 




^ 












:r, 




< 














— 






























ON 














'X:. 














o 


■■J> 


r-, 












O 


< 




rj 










H* 


< 

i 


oo 


11; 












f*\ 














a. 


r*, 








o 






a 


UJ 


a: 






»!: 






g 


3 


S» 






^ 




















CO 














f^ 


















f 














« 








































•P 
















^ 


O 




y 




yi 


ui 


3 


a 


^_,; 








-i 


— 


<■ 


< 


— 




^ 






< ° 



^.^ 






































































a 






























■^ 


■^ 












S 


< 












'yi 


V. 












< 


< 












•T* 














ao 


s 












a 


o 












U 


UJ 












S 


5 














T 




























< 














r^ O 












o 


< U 


























o 


o o 






























^ 














o. 






































N* 




a: 
























<A 














< 




< 










O 




r^l 










r^ 




<> 










C 




O^ 










u^ 




Ui 










oc 















t^ 




























D 




< 


r-^ 








r^. 






wo 








Cl 




■^ 










cs 




n 


o 


B. 




< 




UJ 


ai 












fS 


■c 


r-. 


sC 




f~ 




oo 








t-- 














1" 


































O 


7* 








'A 




< 


<■ 


"") 


V 




^ 




-^ 


< 


_l 



International Accounting Harmonization 



189 



V, 



CO 5. 
< ° 






b < 



ID 

<• 


'5 




a: 














ji 






i 


a 


c/n 






•o 


■■■) 










< 




,ti 


-C 


U 


3 


U 







i^ 


en 




,^ 


■^ 


fS 


5 D 


£ 5^ bu 
















1 




























w 




















" 


o 








a: 




— 










r^ 




























0- 














< 














C/3 














op 














6^ 














oo 


















__ 














a. 














U 
























i 




55" 

< 






Q < 




U) 








Ul u. 




r^ 




r^ 


Ci 




<N (N 




ti£. 




.21 


u. 




oo oo 




~ 






^ 








< 




s 






Q 
O 
< 










m 








f^ 


LL. 


_2l 






oo 




r~ 














5 

tu 


•/-. 


< 


G 


o 


00 

C < 




% 


UJ 




u u. 




•i 


CO 


ob 


CN 


c^ 


4 4 




r-- 


r^ 


r^ 


OO 


oo 


t^ r-- 




■» 










^8 




D 


Q 


c* 


£ 


o 




W 


U 


w 


9 


«: 


D < 




■A 


r^ 


r^ 


o 


VO 


rA rA 




(^ 


r-- 


r- 


oo 




r^ r^ 


r^ 














E 












c 


a- 












< 












■e 








Z 


O 
< 


00 


^ 






en 


< 


z^ 


=3 


(A 




D 




< 


< 





\& s 



13 g 



B =3 
a: n 



£1 



!/: g 






^ £ ^ 



•^ X < 



<zi f- H 



.. od CQ 
00 00 H 



^^% 



U < 



so 



c -z, 



00 • s 

, ^ C/3 W g- 

lo < o: uj 



o 



> 



E E 



^ ,'-, < 
u, O ^ 



S 2 ^ 



c o C/5 

. ft. < 

< 



o .5 

- 5l 

° ■ > 






0u Dm Cu CL Cu Od Dm 



•a CQ 



C/5 «r- •^ ^ >-? 





Op 

< 

c 
2 
"Si 




o 

CD 






o 


00 


15 


4 


a. 
« 
a, 


E 




-s 


c 


^ 




fS 


a. 


E 


5 
i 

1 

C ) 


c 
2 


o 


1 


to 

< 


00 

<: 


00 

< 


00 

o 

< 


oo 

< 


< 


o 
U 


o 
U 

I 


3 
o 

Q 


3 

u 

5 


< 


00 

<• 


D 
C7 


ffl 
a. 


s 


a; 






1 


a. 


0. 


S 


< 


< 


< 


< 


< 


< 


<: 




■ 


U 


D 


o 



O "J 



190 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

indicates where the standard setters: 1) achieved compatibility (in order of consensus), 2) 
are working towards compatibility pending completion of current agenda items (beginning 
when the first standard addressing the current philosophy was issued), and 3) have not 
achieved consensus. 

RESULTS AND INTERPRETATION 

Based on Table 1, the chronology of standard- setting activity for each project is reviewed, 
and the current status of compatibility/harmonization is discussed. Discussion follows the 
order of Table 1 with one exception; given the overlapping nature of the topics, funds flows 
and cash flow statements are combined. 

Harmonization/Compatibility Achieved 

Funds Statement (Panel A) /Cash Flow Statement (Panel 0) 

Prior to adopting a cash flow statement, the Anglo-Americans experimented with a funds 
flow statement. The US Accounting Principles Board (APB) addressed the funds statement 
in 1963. Canadian R#l 1, SSAP 10, IAS 7, and AAS 12 were issued in 1974, 1975, 1977, 
and 1983 respectively, and each required a funds statement. 

The focus changed in 1987 when FAS 95 initiated a worldwide trend by requiring a cash 
flow statement (see O'Bryan, 1989). The UK (FRS 1} and Australia {AASB 1026/ AAS 
28} followed the US model in 1991. And, the revised IAS 7 { 1992} is virtually identical to 
FAS 95. Moving more in line with IAS 7R, Australia issued ED 77. Canada plans to adopt 
IAS 7R with only minor changes (CICA, 1997b). Completion of the Australian and Cana- 
dian projects should yield compatibility among the G4+1. 

Leases (Panel B) 

Today, the G4+1 members have similar leasing standards. In 1976, the US's FAS 13 first 
adopted a substance-over- form approach for leases. Similar standards followed with Can- 
ada's 1978 R#28, 1984's SSAP 21, and 1984's AAS 17 (Skinner, 1987; Davies, et al., 
1994; Godfrey & Warren, 1995). While conceptually similar to the US rules, the guidance 
in 1982's IAS 17 is broader and application often requires judgmental determinations 
(FASB, 1996). To address concerns expressed by the International Organization of Securi- 
ties Commissions (IOSCO), the lASC (1997a) is reviewing IAS 17. A 1997 ED focuses on 
enhanced disclosure requirements and the elimination of the free choice of methods for les- 
sors to recognize finance lease income. The modifications will bring IAS 17 more in line 
with SFAS 13. Australia's 1997 ED 82 proposes revisions consistent with lASC ED 56. 

In 1996, the G5+rs (with New Zealand) Accounting for Leases, A New Approach 
(McGregor, 1996) proposed that all non-cancelable leases should be capitalized. Australia 
and the UK plan to jointly revise their standards based on the G5-I-1 DP, and the lASC also 
plans to eventually adopt this approach. 



International Accounting Harmonization 191 

Provisions and Contingencies (Panel C) 

The G4+1 members have similar rules for provisions and contingencies. FAS 5 { 1975} 
addresses disclosure and recognition of contingent liabilities/assets. In 1978, the lASC and 
Canada issued similar standards, and SSAP 18 followed in 1980. Minor disclosure differ- 
ences exist, and the US has the most extensive requirements (Skinner 1987; Davies, et al., 
1994; CICA, 1997a). Australia's guidelines are also similar to FAS 5 and are addressed in 
the Appendix to SAC 4 { 1992, paras. 18-19} (Ryan & Heazlewood, 1997). 

Currently, the G4+1 are reconsidering provisions. The G4+1 DP Provisions: Their Rec- 
ognition, Measurement, and Disclosure, in Financial Statements was aimed at developing 
a common conceptual understanding to enhance the prospect of harmonization (Lennard & 
Thompson, 1995). Such an understanding was vital in that the lASC, Canada, the UK, and 
the US were considering related issues. 

Building on the G4+1 DP, the lASC and UK undertook a joint project that led to 1997's 
lASC ED 59 and FRED 14. These EDs argue that provisions are liabilities and should be 
recognized only if there is a present obligation to transfer economic benefits as a result of 
past events. In addition, provisions should be recognized at the best estimate of the amount 
required to settle the obligation that existed at the balance sheet date (lASC, 1997b; ASB, 
1997a). Completion of the lASC/UK project may lead to similar guidelines for all G4+1 
members, thereby enhancing comparability and minimizing abuses in areas such as 
accounting for future operating losses and restructuring costs. 

Extraordinary Items (Panel D) 

The G4+1 members have similar guidelines for reporting extraordinary items. In 1969, 
Canada's s3480 {replaced by R#64 in 1989} required that extraordinary items be reported 
as a separate component of income. In 1996, si 520 {R#87} noted that the income state- 
ment should clearly distinguish income before discontinued operations and extraordinary 
items. The US's 1973 APB 30 defines extraordinary items and also requires they be dis- 
closed as a separate component of income. 

SSAP 6 { 1974, revised in 1986} distinguished between ordinary and extraordinary items 
of profit and loss (P&L). Under SSAP 6, extraordinary items were more prevalent in the 
UK than in the US. FRS 3 {1992} now defines extraordinary items in a manner that is 
broadly similar to the US; however, the new UK standard has effectively outlawed extraor- 
dinary items. 

IAS 8 {1978} addressed reporting unusual items. IAS 8 was revised in 1993 via the 
Comparability Project (CP). Under the revised standard, P&L is split between ordinary 
operating activities and extraordinary items. 

AASB 1018 was approved in 1989. Modifications to AASB 1018R in 1992 were under- 
taken to achieve greater consistency between Australia and definitions in the UK, US, and 
Canada and to achieve a reduction of alternative treatments for similar items (Ryan & Hea- 
zlewood, 1997). 

All G4+1 members require separate disclosure of extraordinary items. While all mem- 
bers define extraordinary items in a consistent manner (AASB, 1994), only the Canadian 
definition specifies that classification of extraordinary items does not depend on manage- 
rial or owner's decisions. 



192 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

Compatibility Pending Completion of Current Agenda Items 

Investments in Associates (Panel E) 

Most G4+1 members" standards endorse the equity method of accounting for invest- 
ments in associates. The US"s APB 18 and the UK's SSAP 1, both issued in 1971, require 
the equity method. In the US, the equity method is used when an investor is able to exercise 
significant influence (a 20% or more voting interest) over an associate. Under Canadian 
s3050 {1973, revised in 1978}, the equity method is also employed when an investor is 
able to exercise significant influence. Holding at least a 20% voting interest is a necessary, 
but not sufficient criterion, for significant interest (see CICA, et al., 1994 for US compari- 
son). While IAS 28 (superseded IAS 3 in 1989} prescribes the equity method, the 
disclosure requirements for investments in associates fall short of US requirements. 

In contrast to the UK, US, Canada, and lASC, equity data in Australia appear only in 
footnotes or as a third column adjacent to consolidated accounts. AAS 14 { 1983} was pre- 
ceded by three EDs (Gordon & Morris, 1996) proposing equity accounting. However, a 
legal impediment obstructed the issuance of a standard. ED 71 { 1995} proposes that equity 
accounting be applied in consolidated accounts. A standard is expected in 1997, dependent 
upon proposed legislation (Ryan & Heazlewood, 1997). Assuming passage of the Austra- 
lian proposal, G4+1 standards regarding investments in associates will be compatible in 
that all will permit the use of the equity method. Harmonization may be further facilitated 
by a G4+1 project led by Canada and the UK addressing equity accounting and joint 
ventures. 

Interim Reporting (Panel F) 

Soon all G4+1 members will provide guidelines regarding the preparation of interim 
reports. Quarterly interim reports are currently prepared in Canada and the US. In 1971, 
Canada's si 750 {R#6} required presentation of interim data and noted that such reports are 
normally prepared quarterly. In the US, guidance for preparing interim reports, which are 
required by the SEC, is presented in 1973's APB 28. While the Canadian (discrete method) 
and US (integral method) standards differ conceptually, neither rigorously adheres to a sin- 
gle concept; therefore, the standards are not seriously at odds (Skinner, 1987). 

Quarterly reporting is not as widely practiced outside of North America. For example, 
Australia's AASB 1029 { 1994} requires half-year accounts (Ryan & Heazlewood, 1997). 
In the UK, the normal frequency of reporting is also biannually (Davies, et al. 1994). An 
ASB "best practice" standard {1997} provides guidance on the preparation of interim 
reports and states a preference for the discrete method. The lASC's 1997 ED 57 presents 
guidelines similar to the UK recommendations. ED 57 notes that national regulators should 
decide whether interim reports are required, and, if so, the frequency of publication. Thus, 
all members of the G4+1 will soon provide guidance on the preparation of interim reports. 

Joint Ventures (Panel G) 

Currently, the G4+1 members disagree regarding joint ventures. While the US's 1971 
APB 18 generally requires that the equity method be used for joint ventures, proportional 



International Accounting Harmonization 193 

consolidation is more popular outside the US. A 1994 revision of s3055 (added in 1977 
and first revised in 1991 } eliminated the choice of equity method and required proportional 
consolidation for joint ventures in Canada (see CICA, et al., 1994 for a US and Canada 
comparison). And, under 1990's IAS 31, proportional consolidation is the benchmark with 
equity method serving as the alternative. Australia's AASB 1006 { 1986, AAS 19R} is con- 
sistent with the lASC benchmark. ED 79 { 1 997 } proposes to bring Australia even more in 
line with IAS 31. In the UK, SSAP 1, as amended in 1983, indicates that proportional con- 
solidation or the equity method may be used for joint ventures. A recent UK ED reaffirms 
support for proportional consolidation. Yet, most responses to 1996' s FRED 1 1 preferred 
equity accounting (ASB, 1997b). 

Despite current differences, a G4+1 project led by Canada and the UK should lead to 
harmonization. At a 1997 meeting, the G4+1 representatives unanimously endorsed the 
equity method for joint ventures (Cairns, 1997b) suggesting that the members may modify 
their standards to achieve compatibility. 

Discontinued Operations (Panel H) 

The G4+1 are working toward developing similar disclosure guidelines for discontinued 
operations. The US (APE 30, 1973} and Canada {s3475, R#64, 1989 and si 520, R#87, 
1996} have adopted similar definitions and both require separate disclosure of discontin- 
ued operations in income. In the UK, 1992's FRS 3 modified the requirements of SSAP 6, 
thereby moving the UK more in line with North American requirements. FRS 3 requires 
that P&L be split between continuing operations and discontinued operations. 

IAS 8 {revised in 1993} provides a loose definition of discontinued operations. 
Although the US influence is evident, the accounting requirements are less rigorous. How- 
ever, proposals set forth in 1997's ED 58 will bring the lASC more in line with the US, 
UK, and Canada. In Australia, the AASB (1994) currently plans to review performance 
measurement, including discontinued operations. Completion of the lASC and Australian 
projects should yield similar requirements for all G4-I-1 members. 

Business Combinations (Panel I) 

G4+1 business combination standards differ depending upon when, or if, pooling 
accounting may be used. In the US, APB 16 { 1970}, allows both purchase and pooling 
accounting, although not as alternatives for the same transaction. Although only about 10 
percent of US business combinations qualify as poolings (Radebaugh & Gray, 1997), the 
US rules are less strict than those of the lASC and other G4 members. 

In 1974, Canadian si 580 {R#10} required that the purchase method be used unless an 
acquirer could not be identified, an event which would necessitate poohng. Hiller and 
Smith (1996) argue that accounting for business combinations represents a significant dif- 
ference between Canadian and US GAAP. 

Accounting under the UK's SSAP 23 { 1985} depended heavily on the form of the trans- 
action. In 1994, FRS 6 adopted the principle of control used by Canada and the lASC 
(Tweedie, 1996). While FRS 6 brought the UK more in line with the US, like IAS 22, the 
UK standard is more stringent (ASB, 1994). 



194 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

IAS 22 was issued in 1983 and revised in 1993 as part of the CP. IAS 22R more clearly 
defines which combinations are deemed purchases and which must be reported as a pool- 
ing (Epstein & Mirza, 1997). The lASC's pooling criteria are simpler yet much more 
restrictive than in the US. Australia's AAS 21 { 1985} requires the purchase method for 
all combinations. 

As an outlier, the FASB (1997a) is reconsidering business combinations to achieve 
greater global comparability. Faced with opposition to Canada's "strict" rules on pooling, 
a CICA Task Force will carry out a project in step with the FASB and will provide input to 
the US. Completion of the FASB project may result in more compatibility among the G4+1 
members. Yet, recent events indicate FASB (1997b) may retract its threat to limit poolings. 

Consolidated Statements (Panel J) 

Like business combinations, the US rules for consolidated statements differ from those 
of other G4+1 members. In fact, consolidation accounting represents a major area of diver- 
gence between the US and Canada (CICA, et al., 1994). The US's 1959 ARB 51 and 1987 
FAS 94 prescribe that control through direct or indirect ownership of a majority voting 
interest is the usual condition for consolidation. Under Canada's sl600 (revised in 1975, 
R#14}, control is the principle criterion for consolidation. 

IAS 27 { 1989} superseded IAS 3 ( 1976}, and in 1995, the standard was revised. Like 
Canada's sl600, IAS 27 focuses on an assessment of control as opposed to the US's focus 
on an ownership criterion (FASB, 1996). SSAP 14 { 1978} followed IAS 3 (ASB, 1992). 
Changes in company law prompted the issuance of FRS 2 in 1992. The UK's consolidation 
procedures are similar to IAS 27's (Davies et al., 1994). Australia's AASB 1024 (AAS 
24}, as revised in 1992, also requires a parent to consolidate all entities under its control. 
An Australian ED is expected during 1997 to achieve compliance with lASs. 

The entities included in consolidated statements may be different under US GAAP than 
under Canadian, UK, Australian, or lASC GAAP. Yet, a 1995 FASB ED's definition of 
control, requirement to include controlled entities in consolidated statements, and descrip- 
tion of the purpose of consolidated statements are all consistent with other Anglo- 
American standards. Adoption of the proposal should improve compatibility among the 
G4+1 with control being the determining factor regarding when to consolidate. 

Foreign Currency (Panel K) 

The initial attempts to address foreign currency translation proved frustrating and led to 
one of the first cooperative endeavors between the lASC and the Anglo-Americans. In the 
US, FAS 1 { 1973} was superseded as early as 1975 by FAS 8. The US again decided to 
reconsider foreign currency translation in 1979. Meanwhile in the UK, EDs issued in 1975 
and 1977 permitted use of either the closing rate or temporal method for currency transla- 
tion. The temporal method was considered in the UK only because it was the sole method 
allowed in the US (Davies et al., 1994). In Canada, the CICA also adopted the temporal 
method in 1978 {R#26} but suspended the standard in 1979. 

Aiming for harmonization, the FASB, UK ASC, CICA, and lASC next elected to work 
together and develop similar proposals (see FASB, 1981, para. 76). In the US, FAS 52 fol- 
lowed in 1981; however, the UK's SSAP 20 was delayed until 1983 due to conflicts with 



International Accounting Harmonization 1 95 

the 1981 Companies Act. Although SSAP 20 and FAS 52 are similar in that each require 
the closing rate/net investment method when the functional currency is different from that 
of the holding company, other differences exist. IAS 21, also issued in 1983, allowed sev- 
eral choices. IAS 21R, as revised by the CP in 1993, yielded only modest changes (Epstein 
& Mirza, 1997). IAS 21R is similar to FAS 52 and SSAP 20; yet, again, discrepancies 
exist. 

Canada issued a standard in 1983. Despite cooperation with the US, UK, and lASC, for- 
eign currency translation represents an area of considerable diversity between Canadian 
and US and international standards (Hillier & Smith, 1996; CICA et, al, 1994; CICA, 
1997a; and AASB, 1994). Fortunately, a 1996 ED proposed eliminating differences with 
lASs. But, the AcSB has deferred work on this project and will consider these issues as part 
of its project on recognition and measurement of financial instruments. 

Australia's AASB 1012 {1987 and revised in 1988, AAS 20R} is similar to the above 
standards but discrepancies exist (AASB, 1994). A forthcoming ED will ensure compli- 
ance with IAS 21. 

The G4-I-1 members each prescribe that the statements of self-sustaining operations be 
translated using the current rate method, and statements of integrated operations be trans- 
lated using the temporal method. Yet, procedural differences abound. Although the G4-I-1 
standards will continue to be based on the same theory, application differences may con- 
tinue after completion of the Canadian and Australian projects. 

Conceptual Framework (L) 

All members of the G4+1 have developed, or are in the process of developing, concep- 
tual frameworks. In the US, FASB completed work on its framework in 1985. Similar 
frameworks followed for the lASC {1989}, AcSB {1989 and 1991}, and AASB {1992}. 
Currently, the UK is working on a Statement of Principles (Tweedie, 1996). Analyses of 
the G4-I-1 frameworks reveal that each standard setter benefited from its predecessors' 
work. For example, the lASC drew on FASB's endeavors and benefited from parallel work 
in Australia and Canada (Cairns, 1995). The objectives and qualitative characteristics in 
the other frameworks are similar to SFACs 1 and 2 (ASB 1991 ; Johnson, 1994; McGregor, 
1996). 

Building on FASB's pioneering work, the UK has further advanced the concept of com- 
prehensive income (lASC, 1996), and the UK's Statement of Principles contains 
groundbreaking work on measurement. The ASB (1995a) takes a prescriptive approach 
proposing that measurement decisions should be based on the value to the business rule 
(Tweedie, 1996). During 1997, the US also issued a proposed SFAC that addresses mea- 
surement issues related to discounting. In its DPs, the G4+1 often acknowledges the 
importance that common conceptual frameworks play in facilitating the working group's 
joint endeavors. 

Pensions and Other Post Employment Benefits (OPEBs) (Panel M) 

Historically, pension accounting standards provided for flexibility in the choice of actu- 
arial methods and assumptions (Skinner, 1987). However, in 1985, the FASB introduced 
an approach that has since been adopted by other G4-I-1 members. US standards on pension 



196 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

disclosures and related topics were issued in 1980 and 1983. In 1985, FAS 87 endorsed a 
balance sheet focus for pensions and required the accrued benefit valuation method. A 
1997 ED proposes significant modification of pension disclosure requirements. 

Canadian s3460 {1968, modified in 1973} endorsed several methods for calculating 
pension expense and required minimal disclosures. Then, in 1986. s3460 {R#50}, like FAS 
86, required an accrued benefit valuation method (Santora, 1986). Again, major disclo- 
sures were not mandatory. Several differences existed between s3460 and FAS 87 
(Skinner. 1987). The Canadians chose a discount rate based on the long-run average rate of 
return on fund investments, while FAS 87 required the obligation be revalued based on a 
rate reflecting current conditions. Canadian s4100 { 1990} continues to require use of an 
accrued benefit valuation method. Disclosure requirements remain less stringent than for 
the US and lASC. A 1997 ED proposes the elimination of US/Canadian discrepancies. 

The 1983 version of IAS 19 required that either an accrued or a projected benefit valua- 
tion method be used consistently (CA Magazine, 1983). IAS 19R (revised in 1993 via the 
CP} adopts an accrued benefit valuation method as the benchmark, but permits a projected 
benefit valuation method as an alternative. 

SSAP 24 { 1988} also follows the same broad approach as FAS 87, but the US standard 
is more tightly defined. The major difference is the US specification of the accrued benefit 
valuation method (Davies, et al. 1994). 

Currently, the lASC and UK are reconsidering pensions. Like FAS 87, the lASC's 1996 
ED 54 proposes a single actuarial method. Two options are presented in a 1995 UK DP 
(ASB 1995b). The main differences between the ASB's preferred approach and the lASC 
ED are that the lASC proposes the use of: (1) market values (ASB, actuarial methods) to 
measure pension assets; (2) a high quality fixed interest bond rate (ASB. the rate of return 
on a pension fund's assets); and (3) a "corridor" to reduce volatility (ASB, gradual recog- 
nition) (ASB, 1997b). Some G4+1 members (Micallef et al.. 1997) challenge the UK 
position on discount rates and argue that to improve financial reporting and harmonization 
the lASC should retain the specific rate approach. The ASB is following lASC develop- 
ments, and a FRED is due out in 1997. 

Traditionally, minimal accounting guidance existed for OPEBs. With the exception of 
the US, the G4+1 members have only recently began to seriously consider accounting for 
OBEPs. In the spirit of FAS 87, 1990's FAS 106 required that a liability be recorded for 
OPEBs. 

Other G4+1 members are moving toward the FAS 106 approach. While SSAP 24 states 
its principles may be applicable to OPEBs, ASC Technical Release 756 stated it was not 
necessary to apply SSAP 24 to such benefits. In 1992. the Urgent Issues Task Force (UITF) 
ruled that OPEBs are liabilities and should be recognized following the principles of SSAP 
24. UITF Abstract 6 refers to FAS 106 for guidance on measurement bases. IAS 19 sug- 
gests it may be appropriate to account for and disclose OPEB costs in a similar manner if 
the substance is the same as that of retirement benefit plans. In Canada, various methods of 
accounting for OPEBs are practiced; however, a 1997 ED aims to eliminate US/Canada 
differences. In Australia, OBEPs are covered by 1994's AASB 1028. which addresses all 
employee entitlements and requires that employee entitlements for periods over 12 months 
be measured using present values (Ryan & Heazlewood, 1997). An ED is expected in 1997 
to achieve compliance with the proposed IAS. 



International Accounting Harmonization 197 

Pension standards issued during the 1960s allowed much flexibility. In 1985, the US 
adopted a limited liability approach requiring use of an accrued benefit valuation method. 
Canada eventually adopted a similar approach, and the lASC and Australia will likely soon 
follow the same route. The UK is considering an alternative that although similar to inter- 
national standards would differ significantly in key areas. 

The US also assumed the lead in adopting accrual accounting for OBEPs and was 
quickly followed by the UK. A 1997 ED suggests Canada will also adopt this approach. 
The lASC's planned revision of IAS 19 is to deal with "all forms of post-employment ben- 
efits" (lASC, 1997c). A similar Australian standard should follow issuance of the proposed 
IAS, thereby yielding compatibility among the G4-I-1. 

Deferred Taxes (Panel N) 

In recent decades, debates on deferred tax allocation have focused on the merits of the 
deferred versus the liability method and comprehensive versus partial allocation. In 1967, 
the US { APB 11} and Canada { AARC Bulletin 26} adopted the deferred method of com- 
prehensive tax allocation (Skinner, 1987). Canada's 1973 s3470 adopted partial allocation 
for tax loss carry-forwards. 

The Australian view has changed several times, with 1970's D4 supporting matching 
(Leppinus, 1977); 1976's DS4 reasserting the "realization concept"; and AAS 3 noting that 
matching was preferable to the cash flow alternative (Chew Ng, 1984). Currently, AAS 3, 
as reissued in 1989, requires the liability method with comprehensive allocation (Davies, 
et al. 1994). 

Though most UK companies used the liability method, 1973's ED 11 endorsed the 
deferred method (Davies, et al., 1994). Hope and Briggs (1982) argue the move was in the 
interest of harmonization. However, SSAP 1 1 { 1975 } allowed for the deferred or liability 
method. In 1978, inflation prompted the issuance of SSAP 15. As amended SSAP 15 
allows for partial allocation (with disclosure of the comprehensive provision) computed 
under the liability method. 

Inflation also produced increasing deferred tax balances in the US. In line with AAS 3 
and SSAP 15, 1987's FAS 96 adopted the liability method. Unlike SSAP 15, FAS 96 
retained comprehensive allocation (recognition of deferred assets was restricted). In 1992, 
FAS 109 superseded FAS 96. Similar to 96 in most other areas, FAS 109 adopted partial 
allocation for deferred tax assets. 

IAS 12 { 1979} allowed use of the deferred or liability method and permitted comprehen- 
sive or partial allocation. In 1996, IAS 12 was revised along the lines of FAS 109. While 
the lASC was reconsidering deferred taxes, the UK, Canada, and Australia embarked on 
similar projects (lASC, 1995). In 1997, Canadian s3465 was approved, which is consistent 
with IAS 12R and FAS 109 (CICA, 1997b). An Australian ED, based on IAS 12R, is 
expected in 1997. Thus, with the exception of the UK, the 04+ 1 have adopted similar posi- 
tions on deferred taxes. 

A 1995 UK DP advocated comprehensive allocation, noting it is more consistent with 
international practice ( ASB, 1995c). The proposal was similar to the lASC and FASB posi- 
tion, except the ASB advocated discounting. When the DP met resistance, the ASB 
postponed action. Such opposition is interesting in that a review by the accounting bodies 
identified SSAP 15 as one of the two SSAPs most in need of early attention (ASB, 



198 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

1995b). ^° Though the UK voted against the proposed IAS (Accountancy, 1996a), the ASB 
(1997c) now argues that full provisioning is the only internationally accepted method. A 
forthcoming DP should suggest whether the G4+1 will soon be in harmony regarding the 
issue or if the UK will be an outlier. 

Impairment (Panel P) 

During the 1980s and 90s each G4+1 member addressed impairment. In 1990, Canada's 
s3060 {R#67} was revised to require that when the carrying value of a capital asset 
exceeds the recoverable amount the excess must be charged to income. In the US, 1995's 
FAS 121 requires that long-lived assets and certain intangibles be reviewed for impair- 
ment when events or circumstances indicate the carrying value may not be recoverable. If 
value in use (not discounted) is less than the carrying amount, the asset is written down to 
fair value and a loss is recognized. An impairment loss cannot be reversed. In Australia, 
amendments to AASB 1010 {1991} mandate that non-current assets are written down to 
recoverable amount if that amount is higher than carrying amount. Impairments may be 
taken through any revaluation reserve and only the excess is charged to P&L. In the spirit 
of FAS 121, lASC (1997d) ED55 and the UK's FRED 15 (ASB, 1997a) were issued dur- 
ing 1997. Unlike FAS 121, the lASC and UK propose that 'value in use' be calculated by 
discounting future cash flows. And, both proposals allow for the restoration of past 
impairment losses based on a change in economic conditions. While the G4+1 will likely 
soon have similar standards, important differences continue. Fortunately, the G4+1 DP 
International Review of Accounting Standards Specifying a Recoverable Amount Test for 
Long-Lived Assets (Paul, 1997) provides a basis on which further harmonization can be 
pursued. 

Financial Instruments (Panel Q) 

Having achieved similar standards, or proposals, regarding financial instrument disclo- 
sures, the G4+ 1 are now focusing on recognition and measurement. Each member is 
building on the G4+1 consensus view that derivative financial instruments should be rec- 
ognized and measured at fair value (Adams & Montesi, 1995). A 1997 FASB ED adopts 
this approach and proposes that changes in fair value be reported in net income or compre- 
hensive income. However, US Congressional intervention may delay a FAS. The FASB 
(1997a) has closely followed a similar lASC/Canada project and provided consultation and 
comment about FASB's project. Based on its work with Canada, the lASC (1997e) issued 
a DP proposing that all financial assets/liabilities be measured at fair value with all changes 
in value charged to income/expense. In response to the lASC DP, the Australian Society of 
CPAs (ASCPA, 1997a) requested that the lASC proposal be issued as an Australian DP. A 
1996 UK DP also recommends that financial instruments be measured at current values 
(ASB, 1996a and 1997d and e). In late 1997, the G4+1 agreed to work together to complete 
the members' individual standards (Cairns, 1997a). The G4+rs first standard should result 
in all five bodies requiring that derivatives and other financial instruments be recognized at 
fair value. 



International Accounting Harmonization 1 99 

Comprehensive Income (Panel R) 

Recently, each G4+1 member has moved toward endorsing comprehensive (all-inclu- 
sive) income. Borrowing from FASB's conceptual framework, the UK's FRS 3 (1992) 
requires that comprehensive income be reported via the statement of total recognized 
gains/losses (Tweedie, 1996). Similarly, Australia's 1018 (AAS 1}, as revised in 1992, 
requires that all items of income/expense be included in income except for the effects of 
certain changes in accounting policies (AASB, 1994). IAS 8R { 1993} also requires that all 
items of income/expense be included in income unless an IAS requires or permits 
otherwise. 

Moving in line with the UK's FRS 3, 1997' s FAS 130 and IAS IR estabUsh a new pri- 
mary financial statement showing those gains and losses not currently presented in the 
income statement (Double Entries, 1997b). An Australian ED, expected in 1998, should be 
consistent with IAS IR. And, Canada has noted that a new performance measurement 
statement designed to bring together all changes in equity other than owner transactions 
may hold promise (CICA, 1997b). 

While the G4-I-1 members are committed to disclosure of comprehensive income, debate 
continues concerning where certain items should appear and whether items which initially 
by-pass income should later be recycled through the income statement (Cairns, 1997b). 
The North Americans (FAS 130} prefer recycling while the UK {FRS 3} insists items 
should be recognized only once. A forthcoming G4+1 DP will likely provide insight 
regarding further harmonization efforts. 

Eamings Per Share (EPS) (Panel S) 

The 04+ 1 are moving toward consensus regarding the calculation of EPS. The US, Can- 
ada, and UK initially issued EPS guidelines in 1969 (APB 15}, 1970 {s3500, R#4}, and 
1972 {SSAP 3}, respectively. Each required calculation of primary /basic and fully diluted 
EPS, but the calculations varied (see CICA, et al., 1994). Concurrent projects by the lASC 
and US have led to minimizing these differences. 

IAS 33 and FAS 128 (1997} (see FASB, 1997c) require the calculation of basic and 
diluted EPS. AASB 1027 { 1992}, which applies only to listed companies, was based on 
the then proposed IAS. To further enhance harmonization, Australia plans to issue an ED 
based on IAS 33. 

A 1996 UK DP requested feedback on lASC ED 52. The ASB (1997f) argues that certain 
changes made when the ED was translated into an IAS reflect the views of UK respon- 
dents. In 1997, FRED 16 was issued; the ED generally follows the text of IAS 33. Thus, 
the lASC, Australia, UK, and US will soon have similar EPS standards. Modifications con- 
sistent with Canada's commitment to achieving harmonization with lASC and US 
standards would yield harmony among the G4+1. 

Marketable Securities (Panel T) 

Currently, the G4+1 members concur that marketable securities should not be carried in 
excess of their recoverable amount. Canada's 1972 R#8 re- worded s3010 stating tempo- 
rary investments in marketable securities should be carried at lower of cost or market 



200 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

(LCM). Section 3050 {R#8} requires that long-term investments be written down when 
there has been a loss in value. Like Canada, in 1975 the US adopted LCM for marketable 
equity securities. Under 1986's IAS 25, current investments may be carried at market or 
LCM. Long-term investments may be carried at cost or revalued amounts, or for market- 
able equity securities, at LCM. According to Australia's 1988 Accounting Guidance 
Releases (AGR) 9 and 10, non-current marketable securities should not be carried in excess 
of recoverable amount. 

Reflecting a trend toward carrying financial instruments at fair value, 1993's FAS 115 
requires that trading securities be carried at market with gains/losses flowing through 
income and available for sale securities be carried at market with holding gains/losses by- 
passing income. However, held to maturity debt securities are reported at amortized cost. 
Based on The Role of Valuation in Financial Reporting, the UK ASB also favors marking 
quoted securities to market (Davies, et al., 1994). While variability currently exists among 
the G4+1 guidelines, the decision to jointly work on a standard indicates that all members 
will soon require that marketable securities be carried at fair value (Cairns, 1997a; Adams 
& Montesi, 1995; also see Financial Instruments, Panel Q). 

Segment Reporting (Panel U) 

AH G4+1 members currently require the disclosure of segment information. FAS 14 
{1976} contained the first segment reporting guidelines issued by an Anglo-American 
standard setter. Similar, though less extensive, requirements followed for Canada {sl700, 
1979, revised in 1993}, the lASC {IAS 14, 1981}, Australia {AAS 16, 1984; revised fol- 
lowing 1986's AASB 1005},'" and the UK {SSAP 25, 1990}. All of these standards 
require disclosure of segment revenues, earnings and assets (AASB, 1994). 

Following ajoint US/Canada project and a simultaneous lASC project, 1 997' s FAS 131, 
Canada si 701 {R#93}, and IAS 14R contained new segment reporting guidelines. 
Although differences remain (lASC, 1997f), the standards basically require that operating 
segments be determined based on management structure. With the IAS, companies will 
most often report two bases, with extensive disclosures required for the primary base and 
limited disclosures for a secondary base. Normally, the bases will be industry and geo- 
graphic. Australia is developing an ED based on IAS 14R. 

A 1996 ASB DP requested feedback on the FASB and lASC EDs {Accountancy, 1996b). 
Respondents indicated SSAP 25 is satisfactory, overwhelmingly rejected the managerial 
response, and argued the lASC disclosures are excessive (ASB, 1996b). The ASB has 
made no move to modify its current guidelines. Thus, while all G4+1 members require 
some form of segment reporting, the UK may choose not to endorse the new approach 
developed concurrently by the US, Canada, and lASC. 

Accounting Changes (V) 

Today, each G4+1 member endorses one of two treatments for reporting changes in 
accounting method. As of 1969, Canadian s3600 stated that retroactive treatment may be 
appropriate. Via I980's R#34, sl506 {modified in 1996, R#87} requires that most changes 
in principle be applied retroactively. Similar to Canada, 1974's SSAP 6 requires retroactive 
treatment; however, 1992's FRS 3 requires that all prior-period adjustments be reported in 



International Accounting Harmonization 201 

the Statement of Total Recognized Gains and Losses. Under the IAS 8R { 1993} bench- 
mark, changes in method are also reported as retroactive adjustments. The allowed 
alternative is inclusion of the effect in income. IAS 1, as revised in 1997, requires that the 
cumulative effect of changes in method dealt with under the IAS 8 benchmark be reported 
in a statement of changes in equity. 

Consistent with the lASC alternative, the US's 1971 APB 20 requires that the effect of 
most changes in method be reported as a separate category of income. FAS 130 { 1997}, 
reaffirms this treatment. In Australia, AASB 1018 { 1989}, also requires that most changes 
in method be reported in income. 

With the exception of Canada, all G4+1 members require that changes in accounting 
method be reported in either net income or a statement of "other changes in equity." Adop- 
tion of a "statement of other changes in equity" by Canada (see Comprehensive Income, 
Panel R) would yield compatibility. 

Goodwill (GW) (Panel W) 

The US {APB 17, 1970}, Canada {s 1580, 1973}, Australia {AAS 18, 1984/AASB 1013, 
1988} and lASC {IAS 22R, 1993} all currently follow a "capitalize and amortize" philos- 
ophy for GW (see Carnegie & Gibson, 1991). GW is written off to income if an annual 
review indicates impairment (see FASB, 1996). Required amortization periods vary as fol- 
lows: US and Canada 40 years or less; the lASC 5 years or less (unless a longer period, not 
to exceed 20 years, is justified); and Australia 20 years or less. Unlike the US and lASC, 
Canada and Australia {AASB 1013 as revised in 1996} require straight-line amortization 
(Ryan & Heazlewood, 1997; Grant, 1996). 

In the UK, SSAP 24 { 1984} also allows for the amortization of GW; however, immedi- 
ate write-off to equity is the preferred method. While the 1983 version of IAS 22, allowed 
for immediate write-off, IAS 22R, as revised in 1993 by the CP, prohibits this treatment 
(Epstein & Mirza. 1997). Thus, the UK is out of line with international practice. In addi- 
tion, as early as 1990, the ASC's ED 47, proposed a ban on reserve accounting and argued 
the resulting assets should be depreciated (Rhodes, 1990). 

Currently, the lASC and UK are reconsidering GW. Although 1997's ED 60 reasserts 
support for the capitalization and amortization of GW (lASC, 1997c), the lASC is request- 
ing feedback regarding whether GW should always be amortized. Australia plans to issue 
an ED, which will be compatible with the forthcoming IAS. 

The UK's FRED 12 { 1996} states that GW need not be amortized if its value is signifi- 
cant, is expected to be maintained indefinitely, can be reliably measured in the future, and 
an impairment review indicates no diminution in value. If the life is expected to be limited, 
GW should be amortized over a period of 20 years or less. FRED 15 (ASB, 1997a) con- 
firms this position. 

For most of the G4-I-1, current practice involves the capitalization and amortization of 
GW. However, the UK, and, to some extent, the lASC, are considering whether GW may 
be viewed as a permanent asset that is regularly reviewed for impairment. Australia will 
likely follow the approach adopted by the lASC (Grant, 1996). While the US initially 
expressed skepticism regarding the UK proposal, that position is now being reconsidered 
(FASB, 1997b). If the lASC and FASB were to consider GW as a permanent asset, Canada 
and Australia would likely endorse the same view. However, whether the FASB could 



202 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

attain SEC approval of such an approach is questionable. Thus, the G4+1 may soon agree 
that GW should be capitalized, but may continue to differ regarding whether it must be 
amortized. 

No Significant Progress Toward Compatibility 

Error Correction (Panel X) 

Currently, each G4+1 member endorses one of two treatments for correcting errors. As 
of 1971, Canada's s3600 noted errors should be corrected by prior-period adjustments. 
This policy was restated in 1980's si 506 {R#34; modified in 1996 by R#87}. Similar 
requirements followed in the US {FAS 16. 1977} and UK (SSAP 6, 1974}. In the US, FAS 
130, notes that the retroactive adjustment should not be reported in comprehensive income. 
Alternatively, the UK's FRS 3 {1992} notes that prior-period adjustments should be rec- 
ognized in the Statement of Total Recognized Gains and Losses. Consistent with the US 
and UK, under the IAS 8R { 1993} benchmark, errors are corrected via prior-period adjust- 
ments. However, an allowed alternative states the correction may be included in income. 
Revisions to IAS 1 { 1997} require that the correction of errors dealt with under the IAS 8 
benchmark must also be reported in a statement of total changes in equity. 

Consistent with the lASC allowed alternative, Australia's AASB 1018 {AASIR; 
approved in 1989 and revised in 1992} requires the inclusion of all revenues/expenses in 
P&L including adjustments relating to prior years (Ryan & Heazlewood, 1997). As long as 
the lASC allows for this alternative treatment, Australia will likely continue to be out of 
line with other members of the G4. 

Interest Capitalization/Borrowing Costs (Panel Y) 

The G4+1 members disagree regarding the appropriate treatment of borrowing cost. 
While the US {FAS 34, 1979} mandates capitalization for interest costs associated with the 
acquisition of qualifying non-current assets, Canadian s3850 {R#54, 1987} only requires 
disclosure of the amount of any capitalized interest. The original version of IAS 23 { 1984} 
permitted capitalization or expensing of borrowing costs. However, IAS 23R {revised in 
1993 via CP} now requires expensing as the benchmark, with capitalization serving as an 
allowed alternative. Australia's 1997 ED 75 is based on IAS 23, but, because the AASB 
tends not to allow choices, the proposal endorses only the lASC allowed alternative 
(ASCPA, 1997b). Adoption of the Australian proposal would yield compatibility with 
lASC and US GAAP. While there is no UK standard. Company Law allows interest to be 
included in the production cost of an asset. Despite the disparity among the G4+1, no har- 
monization plans have been announced. 

Research and Development (R&D) (Panel Z) 

The G4+1 members are also at odds regarding R&D. FAS 2 { 1974} requires the expens- 
ing of R&D.' ^ Prompted by FAS 2 (Nobes, 1991), a 1975 UK ED recommended that most 
R&D be expensed. However, following criticism, the proposal was modified. SSAP 13 



International Accounting Harmonization 203 

{ 1977) requires research be expensed and allows, but does not require, the capitalization 
of certain developmental costs. 

Canadian s3450 {R#25} and IAS 9 were issued in 1978/^ Originally, IAS 9 required the 
expensing of research cost but allowed capitalization or expensing of development costs. 
IAS 9R (revised in 1993 via CP} is similar to s3450 and SSAP 13, which both allow cap- 
italization of certain developmental costs. The lASC mandates that development cost be 
recognized as an asset when certain criteria are satisfied. 

In Australia, AAS 13 { 1983} permits R&D to be recognized as an asset and amortized 
(AASB, 1994). The AASB acknowledges AAS 13 must be reconsidered in the interest of 
harmonization. 

Currently, the G4+1 disagree regarding R&D. However, in 1997, the AcSB announced 
it would address Canadian/US differences. And, although change is unlikely, in ED 61, the 
lASC is re-examining R&D. Thus, the opportunity exists for minimizing, but not eliminat- 
ing, differences. In late 1997, the UK ASB stated that a new R&D standard is not a priority. 

SUMMARY AND CONCLUSIONS 

Globalization of business and capital markets has resulted in an ever-increasing demand 
for harmonization of accounting standards. Yet, the current research reveals that entering 
the 1990s, numerous differences existed between lASs and the accounting standards of the 
major Anglo-American countries. Few examples of compatibility were identified. While 
the lASC and Anglo-American's achieved consensus during the early 1980s regarding the 
funds flow statement, this achievement was short-lived as the US initiated a move toward 
the cash flow statement in 1987. A decade later consensus is contingent on issuance of a 
Canadian standard based on the lASC and US standards. The standard is expected during 
late 1997. 

In the 1980s, compatibility was also achieved in accounting for leases. And, a current 
project will bring the lASC even more in line with the Anglo-Americans. Yet, the status 
quo may be disrupted in that a G4+1 publication calls for capitalization of all non-cancel- 
able leases. Australia, the UK and lASC are further developing the proposal and are 
committed to adopting the new approach. At a 1997 G4-I-1 meeting, the US reaction to the 
"New Approach" was more positive than at past meetings (Cairns, 1997b) suggesting the 
North Americans may also reconsider accounting for leases. 

Failure to achieve significant gains toward harmonization in the 1970s and 1980s can be 
linked to the manner in which the lASC and Anglo-American standard setters operated. 
The lASC, whose membership consists of national professional accountancy bodies, 
worked primarily in isolation of national standard-setters. With few exceptions, national 
standard setters also worked independently of each other. 

Prior to the 1990s, agenda coordination was limited, with the exception of a cooperative 
effort on foreign cunency translation in the early 1980s. Unfortunately, this endeavor was 
a limited success as the resulting Canadian standard contrasts significantly from other 
international standards. Yet, this discrepancy may be resolved, as Canada has announced 
plans to move more in line with the US rules. And, Davies, et al. (1994) suggests that UK 
guidelines should be amended to achieve greater comparability internationally. 



204 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

Lack of agenda coordination and cooperation between the lASC and Anglo-Americans 
resulted in significant time lags before consensus was achieved on agenda items initiated 
during the lASC's first two decades. For example, it took more than 20 years to achieve 
similar guidelines on the funds statement and extraordinary items. And, it took more than 
a decade to arrive at compatible rules for provisions. 

As the 21st century approaches, harmonization has become an even more desirable goal. 
Yet, no nation has a set of accounting rules which have such clear merits that they deserve 
adoption by the world (Carsberg. 1996). The US has the longest standard setting history 
and the largest standard setting body that is characterized by high standards of profession- 
alism. Even the US rules, however, exhibit compromises between different interests of a 
kind that could reasonably have been decided differently. No nation has an unquestionable 
right, on the basis of existing achievement, to be regarded as predominant in accounting. 

Presently, lASs also fail to provide the solution. lASs are considered too broad as they 
were designed to meet the needs of many countries with different economic, legal, and reg- 
ulatory frameworks. Carsberg (1996) argues that much work is needed before a well- 
founded basis for uniformity can be reached, and this work can take place, effectively, only 
at the international level. In 1993, the lASC reaffirmed a 1980 resolution whereby member 
countries are encouraged to invite the lASC to participate in discussions between two or 
more countries dealing with accounting standards. This act set the stage for the lASC to 
participate with groups like the G4. 

The lASC and Anglo-Americans entered the 1990s better equipped than in prior decades 
to engage in cooperative endeavors. By focusing on common themes in their conceptual 
frameworks and adopting a philosophy of harmonization via cooperation, the G4+1 has 
contributed significantly to the development of accounting thought and regulation and has 
cut the time required to develop a standard. During the 1990s, the G4+1 has made substan- 
tial progress toward harmonization. Successes include topics initially addressed in the 
1970s or 1980s. Pending removal of a legal impediment in Australia, all five will endorse 
the equity method of accounting for investments in associates. Over two decades have 
passed since the US and UK first endorsed the equity method. Also, after more than two 
decades, the G4+1 will likely soon attain consensus regarding: interim reporting; separate 
disclosure of discontinued operations in income; limited use of pooling of interest; and 
consolidation of accounts based on control. In 1997, the G4+1 voted unanimously in favor 
of using the equity method for joint ventures. 

The G4+1 are also moving toward compatibility on two of the most pressing problems 
of the 1980s. The lASC, US, Australian, and Canadian deferred tax standards are based on 
an approach first adopted in 1987's FAS 97. With the ASB acknowledging that compre- 
hensive allocation has become the only internationally accepted method and the UK's 
commitment to harmonization, an effort to harmonize with the lASC is likely. 

Current lASC and Australian projects on pensions will likely yield standards similar to 
those adopted by the US in 1985 and soon thereafter in Canada. Yet, the UK ASB's pre- 
ferred approach differs somewhat from the lASC proposal. Compromise by the UK is 
questionable, in that the US standard was to represent only "'an evolutionary change" 
(FASB, 1985, para. 107). Conclusion of the current pension projects will likely be fol- 
lowed by consensus regarding OPEBs. The G4+1 members' OPEB standards should be 
similar to the approach adopted by the US in 1990. 



International Accounting Harmonization 205 

G4+1 projects initiated in the 1990s have often produced compatible standards, or pro- 
posals, on a relatively timely basis. Agenda coordination and cooperation have resulted in 
the G4+1 achieving consensus on several topics in less than one decade, as opposed to the 
larger lags characteristic of the 1970s and 1980s. Upon completion of lASC and UK 
projects, all the G4+1 will have impairment standards based on a philosophy similar to that 
adopted by Canada in 1990. In addition, the G4+rs comprehensive income project 
appears to be leading to adoption of an all-inclusive income statement by all members 
within only a few years of the UK establishing international precedent in 1992. 

While cooperative efforts of the 1990s yielded similar disclosure guidelines, or propos- 
als, for financial instruments, measurement has proven more challenging. Yet, the G4+1 
members have worked on individual standards that reflect the group's consensus view that 
derivatives should be recognized and carried at fair value (Adams & Montesi, 1995). In 
late 1997, the lASC Board voted against a staff recommendation that the lASC adopt all 
US standards on financial instruments (Double Entries, 1997c and d). Alternatively, the 
Board decided that the lASC should join with national standard setters, including the G4 
members, to develop a harmonized IAS. Prior to the Board meeting, the G4+1 members 
had agreed to work collectively to complete national and international standards requiring 
the use of fair values for all financial instruments (Cairns, 1997a). The outcome of the 
project will be the G4+rs first standard. 

The G4+1 may soon have similar EPS standards. Projects that ran concurrently resulted 
in timely adoption of similar lASC and US standards. Australia's guidelines are based on 
the (then proposed) IAS. And. the UK has issued a FRED based on the IAS. According to 
the ASB, minimal changes to UK requirements are necessary since the ASB was able to 
feed the views of the UK community into the debate leading to the IAS. These views were 
based on responses to an UK DP that requested comments regarding the lASC/US propos- 
als. This DP reflects the ASB's desire to ensure UK views are reflected in all 
harmonization efforts. Given Canada's commitment to harmonize with lASC and US 
rules, the AcSB can be excepted to issue a standard that, like FRED 16, reflects only minor 
modifications to the IAS. 

Also representative of unprecedented cooperation is a US/Canada joint project on seg- 
ment reporting that ran concurrently with an lASC project. During 1997, the US, Canada, 
and lASC issued similar standards. Again, an UK DP encouraged constituent feedback and 
the responses were introduced into the lASC deliberations. Hence, the UK may again draft 
a FRED based on the new IAS. And, Australia's harmonization strategy commits the 
AASB to develop a standard compatible with IAS 14R. 

GW has been debated for decades with limited success, but this may change. The UK has 
introduced an alternative to the "capitalize and amortize" approach, and an lASC ED 
requests feedback regarding whether GW should always be amortized. In a surprising 
move, the FASB announced it might make purchase accounting less onerous by eliminat- 
ing GW amortization. Given Australia and Canada's lASC harmonization strategies, 
compatibility among the G4-I-1 on GW is possible. 

Diversity among the G4-t-l identified by the research includes: accounting for changes in 
accounting method, R&D, and interest capitalization. Given the successes of the G4-I-1 and 
each member's commitment to harmonization, achieving compatibility in these areas 
appears feasible. In fact, Canada is currently addressing Canada/US differences regarding 
R&D. 



206 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

Only a few years ago harmonization of accounting standards was viewed by most as an 
admirable but unattainable goal. However, this research indicates significant gains have 
been achieved through the lASCs cooperative efforts with the G4. The G4+rs successes 
can be tied to agenda coordination and cooperation. By agreeing to broad principles prior 
to the drafting of individual standards, the G4+1 set the stage for the development of sim- 
ilar standards. Harmonization is further enhanced by activities such as the lASC/Canada 
financial instruments, US/Canada and lASC segment reporting, US/IASC EPS, and lASC/ 
UK provisions projects. 

lASs must not be viewed as an Anglo-American product if these standards are to be 
accepted worldwide. While continuing to work with the 04, the lASC must also further 
develop its working relationships with other groups of national standard setters. Such 
endeavors will prove more challenging. While the conceptual frameworks of the lASC and 
Anglo-Americans are highly similar, the objectives of other national standard setters often 
conflict with those of the lASC. Nevertheless, the lASC must view its early successes with 
the G4 as only an initial step and continue the difficult task of working with other standard 
setters to achieve international accounting harmonization. 

NOTES 

1. The G4+1 members have formally committed to work toward the harmonization of accounting 
standards. See FASB's (1997a) Strategic Plan for International Activities; CICA (1997a) 
Handbook sl501; Australia's 1996 Harmonization Policy (Ryan & Heazlewood, 1997; Davies, 
etal.. 1994; Cairns, 1995). 

2. In 1966. the Australian Accounting Research Foundation (AARF) was formed to provide a 
research base for the profession. In 1984, the Accounting Standards Review Board (ASRB) 
was formed with legislative power to approve standards. The AARF and ASRB merged in 
1981, and in 1991, the AASB replaced the ASRB. Australian Accounting Standards (AAS) are 
developed by the AARF and considered by numerous formal bodies (Whittred & Zimmer, 
1992). After exposure drafts are issued for comment, a standard is issued and forwarded to the 
AASB for approval. Currently, Australia is considering replacing the AASB with a new stan- 
dard setting body {Double Entries, 1997a). 

The AcSB of the Canadian Institute of Chartered Accountants (CICA) issues Releases (Rs) 
which add, replace, and/or modify Sections (s) of the Canadian Accounting Handbook. In 
1997, the CICA Task Force on Standard Setting recommended Canada's continued contribu- 
tions to the global accounting standard setting objectives. 

In the UK, the Accounting Standards Committee (ASC) issued Statements of Standard 
Accounting Practice (SSAPs) between 1970 and 1990. The ASC was replaced in 1990 with the 
ASB that issues Financial Reporting Standards (FRSs). 

3. Braces are utilized to indicate the date a standard, ED, or other document was issued or to pro- 
vide additional information about a document or data source. References are not provided for 
these documents. 

4. Limited agenda information is provided in early versions of lASC Insight and its predecessor, 
[ASC News. 

5. Informed parties, including a representative of the Institute of Chartered Accountants in 
England and Wales (ICAEW) and a former ASC member, indicated no one source provides all 
the necessary data for the UK. 

6. Most of FRED Us proposed changes to SSAP 1 pertain to joint ventures, not investments in 
associates. 



International Accounting Harmonization 207 

7. lASC ED 61 was issued in 1997. Yet, the Board does not intend to revise IAS 22 in areas that 
are not linked to the projects on provisions and contingencies, intangible assets, and impair- 
ment of assets. 

8. The value to the business rule compares net realizable value and value in use to determine the 
recoverable amount that is then compared to replacement cost to determine the value to the 
business. 

9. Initially SSAP 15, did not mandate the liability method which was proposed in ED 19. If fact 
the standard did not mention either the liability method or the deferred method. 

10. SSAP 24, Accounting for Pensions, was the second standard noted by the accounting bodies. 

11. FAS 115 (Panel T) represents an accelerated portion of the US's recognition phase. Similar 
projects include: FAS 's 110 {1992}, 114 {1993}, 118 {1994}, and 125 {1996}. 

12. For a comparison of Australian, US, UK, Canadian, and lASC rules see Ryan and Heazlewood 
(1997). 

13. FAS 68 {1982} specifies how an enterprise is to account for its obligation under an arrange- 
ment for the funding of its R&D by others and does not affect FAS 2. 

14. Paragraphs 16-18 of DIO {issued in 1972 and reissued as AAS 9 in 1979} addressed develop- 
ment costs. Paragraphs 16-18, dealing with R&D, were deleted in 1983 due to issuance of 
AAS 13. 

REFERENCES 

AASB. 1994. Towards International Comparability of Financial Reporting. Policy DP No. 1: 
AARF. 

Accountancy Editorial. 1996a. "lASC and ASB Disagree Over Income Tax.'" Accountancy, (Novem- 
ber): 14. 

Accountancy Editorial. 1996b. "The ASB And International Accounting Standards," Accountancy, 
(September): 88. 

Adams, J. B. and C. J. Montesi. 1995. Major Issues Related to Hedge Accounting: AASB, AcSB, 
ASB, FASB and lASC. 

ASB. 1991. "Statement of Principles for Financial Reporting: The Objective of Financial Statements 
& The Qualitative Characteristics of Financial Information." Chapter 1. (Exposure Draft) 
(July). 

. 1992. "Accounting for Subsidiary Undertakings." FRS 2. 

. 1994. "ASB Tightens the Rules on Accounting for Mergers and Acquisitions." PN50 (Sep- 
tember 22). 

. 1995a. "Statement of Principles for Financial Reporting." (Exposure Draft), (November). 

. 1995b. "Pension Costs in the Employers Financial Statements." Publication of ASB Discus- 
sion Paper. PN 62, (June 22). 

. 1995c. "Comments Invited: Accounting for Tax." Inside Track, (April): 1. 

. 1996a. "Derivatives and Other Financial Instruments." Inside Track, (July): 2-3. 

. 1996b. "Segment Reporting" (Comments Received). Inside Track, (October): 3. 

. 1997a. " Provisions and Contingencies/Impairment of Fixed Assets and Goodwill Exposure 

Drafts Published." PN 92, (June 12). 

. 1997b. "Other Current Projects." Inside Track, (January): 3. 

. 1997c. "Other Current Projects." Inside Track, (April): 3. 

. 1997d. "Derivatives and Other Financial Instruments." Inside Track, (January): 3. 

. 1997e. "Disclosure of Financial Instruments." Inside Track, (April): 1. 

. 1997f. "Earnings Per Share — Exposure Draft Published." PN93. (June 26). 



208 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



ASCPA. 1997a. "CPAs Welcome International Financial Instruments Proposals." Media Release, 
(April): 3. 

. 1997b. "More on Harmonization in Australia." CPA Communique, (April). 

CA Magazine. 1983. "IAS 19 on Retirement Benefits Released." (January): 13. 

Cairns, D. 1995. A Guide to Applying International Accounting Standards, Central Milton Keynes: 
ICAEW. 

. 1997a. "First Standard for G4+1." World Accounting Report, (October): 4. 

. 1997b. "G4+1 — First Open Meeting." World Accounting Report, (April): 13-15. 

Carnegie, G. D. and R. W. Gibson. 1991. "The Evolution of Accounting Standards for Goodwill in 
the English-Language Countries Following APB No. 17 (1970)." Advances in International 
Accounting: 3-17. 

Carsberg, Bryan. 1996. "The Role and Future Plans of the International Accounting Standards Com- 
mittee." in Essays in Accounting Thought: A Tribute to WT Baxter (ed. Irvine Lapsley), 
Edinburgh: ICAS, 68-84. 

Chew Ng, A. 1984. "Income Tax Allocation." The Chartered Accountant in Australia, (December): 
53-55. 

CICA, Instituto Mexicano de Contadores Publicos, FASB. 1994. Financial Reporting in North 
America: Highlights of a Joint Study. 

CICA. 1996a. CICA Handbook: International Accounting Standards Section 1501. Toronto. 

CICA. 1997b. Worldwide Web Homepage. 

Davies, M. and R. Patterson and A. Wilson. 1994. UK GAAP: Generally Accepted Accounting Prac- 
tice of the United Kingdom, fourth edition. Great Britain: MacMillian. 

Double Entries. 1997a. "Proposals to Reform Australian Accounting Standard Setting." 3(28) (Sep- 
tember): 9. 

. 1997b. "lASC Releases IAS 1 (Revised) Presentation of Financial Statements." 3(28) (Sep- 
tember): 9. 

. 1997c. "lASC Announces Proposals on Financial Instruments." 3(28) (September): 9. 

. 1997d. "lASC Board Decides Way Forward on Financial Instruments." 3(39) (November): 



2. 
Epstein, B. J. and A. A. Mirza. 1997. IAS 97: Interpretation and Application of International 

Accounting Standards: New York: Wiley. 
FASB. 1981. "Foreign Currency Translation, FAS 52", (December). 

. 1985. "Employers' Accounting for Pensions, FAS 87", (December). 

. 1996. The lASC-US Comparison Project: A Report on the Similarities and Differences 

betv,'een lASC Standards and US GAAP. 

. 1997a. "FASB's Plan for International Activities," World Wide Web. 

. 1997b. "Issues Associated with the FASB Project on Business Combinations." (June 10). 

. 1997c. "Earning per Share," FAS No. 128. (February). 



Godfrey, J. M. and S. M. Warren. 1995. "Lessee Reactions to Regulation of Accounting for Leases." 
A/7aa/5, 3 1(2): 201-228. 

Gordon, I. and R. D. Morris. 1996. "The Equity Accounting Saga in Australia: Cyclical Standard Set- 
ting." /l/?acM.s, 32(2): 153-177. 

Grant, S. 1996. "Goodwill the Debate That Never Ends.'" Australian Accountant: 18, 20-21. 

Hillier, D. and S. Smith. 1996. "Global Standard Bearers." CA Magazine, (October): 50-53. 

Hope, A. and J. Briggs. 1982. "Accounting Policy Making — Some Lessons from the Deferred Tax 
DehdXe.^' Accounting and Business Research,'' (Spring): 83-96. 

lASC. 1993. "Cooperation by Standard Setting Bodies." lASC Insight, (March): 1. 

. 1995. "National Standard Setting Bodies Review Approaches." lASC Insight, (March): 17. 

. 1996. "Comprehensive Income." lASC Insight, (March): 12. 

. 1997a. "The Board Limits Revision of IAS 17 to Three Issues." I ASC Insight, (March): 8-9. 



International Accounting Harmonization 209 



. 1997b. "Provisions and Contingencies." I ASC Insight. (March): 13. 
. 1997c. "Current Status: Employee Benefits." I ASC Insight. (March): 11-12. 
.. 1997d. "Impairment of Assets" lASC Update, (April): 1. 
. 1997e. "Accounting for Financial Assets and Liabilities: Proposals Issued This Month " 



lASCInsight, (March): 10. 
_. 1997f. "Segment Reporting: Some Differences Remain with North American." lASC 



Insight (March): 20-21. 
Johnson, L. T. 1994. Future Events: A Conceptual Study of Their Significance for Recognition and 

Measurement: AASB, AcSB, ASB, FASB, and lASC. 
Lennard, A. and S. Thompson. 1995. Provisions: Their Recognition, Measurement, and Disclosure 

in Financial Statements. (November): AASB. ASB. CASB. FASB, and lASC. 
Leppinus. G. M. 1977. "Accounting for Company Income Tax: The 1977 Position." The Chartered 

Accountant in Australia. (November): 33-38. 
McGregor, W. 1996. Accounting for Leases: A New Approach: AASB. AcSB, ASB, FASB, lASC, 

and NZ FRSB. 
Micallef, F., G. Peirson, and W. S. Upton. 1997. "Employee Benefits and Discount Rates: In Support 

of E54." lASC Insight. (March): 6-7. 
Nobes, C. W. 1991. "Cycles in UK Standard Setting, Accounting and Business Research. (Summer): 

265-274. 
O'Bryan, D. O. 1989. "An Historical Development of Statement of Financial Accounting Standards 

Number 95: A New Era of Solvency Reporting." in Tondkar, R. H. and Coffman, E. N. (Eds.), 

The Academy of Accounting Historians Working Paper Series Vol. 4 (Academy of Accounting 

Historians) 312-326. 
Paul, J. 1997. International Review of Accounting Standards Specifying a Recoverable Amount Test 

for Long-Lived Assets: AASB, AcSB, ASB, FASB, lASC. and NZ FRSB. 
Radebaugh, L. H., and Gray, S. J., 1997. International Accounting and Multinational Enterprises, 

fourth edition. New York: Wiley. 
Rhodes, R. 1990. "Goodwill — Are We Really Making Progress?" Acc<?M«to/icv, (October): 23. 
Ryan, J. B. and C. T. Heazlewood. (Eds.) 1997. Australian Company Financial Reporting. Account- 
ing Research Study #14: AARF. 
Santora, J. A. 1986. "Canadian Vs. US Pension Reporting Requirements." CA Magazine, (June): 36- 

40. 
Skinner, R. M. 1987. Accounting Standards in Evolution: Holt, Rinehart and Winston of Canada. 

Limited. 
Tweedie, D. P. 1996. "The Conceptual Framework and the Accounting Standards Board." in Essays 

in Accounting Thought: A Tribute to WT Baxter (edited by Irvine Lapsley), Edinburgh: ICAS: 

41-67. 
Whittred, G. and I. Zimmer. 1992. Financial Accounting: Incentive Effects and Economic Conse- 
quences. 3rd Ed., Holt, Rinehart, and Winston. 



The International 
Journal of 
Accounting 



Corporate Financial Disclosure in Emerging Markets: 
Does Economic Development Matter? 



Stephen B. Salter 

University of Cincinnati 



Key Words: Emerging markets. Disclosure, Foreign investment 



Abstract: This paper breaks with previous research by concentrating on emerging market econo- 
mies rather than developing countries. It tests the relationship between corporate financial 
disclosure and the sophistication of economies and capital markets within the context of the extant 
Cooke and Wallace (1990) model. It finds that, as posited in the model, firms in developed market 
economies have a significantly higher mean level of effective disclosure than those in emerging 
market economies. These differing levels of disclosure are modified by the importance of capital 
markets and a relatively low level of the uncertainty avoidance culture variable. The study also 
finds that the level of corporate disclosure is positively related to prior levels of corporate finan- 
cial disclosure regulation and is directly related to the ability to draw future foreign portfolio 
investment. 



This paper breaks from previous research! by concentrating on emerging market economies 
rather than developing countries. Emerging market countries are those countries in which 
capital markets have developed to the point of contributing to the national financial pool 
and are usually able to receive some external portfolio investment. This suggests that at 
some point such markets will fully emerge to become "developed" markets. Excluded are 
those countries that have not yet developed to the point of being viable areas for portfolio 
investments from the global investment community. 

In the early 1990s emerging markets seemed to be the answer to investors' prayers. In 
the period from its inception in 1988 to April 1997, the International Financial Corpora- 
tion's (IPC) index of investable emerging markets rose by a mean compound rate of 16 
percent per annum. This return was larger than either the developed markets as a whole, 
or the S&P 500 {The Economist, 1997). Despite the very significant return and continuing 
robust performance of the economies of the major countries that constitute the IPC index. 



Direct all correspondence to: Stephen B. Salter, Assistant Professor, Department of Accounting and Information 
Systems, University of Cincinnati, OH 45221-021 1, USA; E-Mail: saltersb@email.uc.edu. 

The International Journal of Accounting, Vol. 33, No. 2, pp. 21 1-234 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



212 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

emerging market stocks appear to be of relatively little interest to US and other institu- 
tional investors (The Economist, 1997). Why has this happened and does it relate to 
accounting? 

In a recent overview The Economist (1997:80) suggests that "The well known risks in 
emerging economies include patchy information about companies, ropey accounting prac- 
tices and lax regulation" are largely to blame. In a more formal academic setting Alford et 
al. (1993) model a lack of good disclosure (asymmetric information) as quotas limiting the 
quantity of an asset in an investors portfolio. This in turn supports earlier work by Adler 
and Dumas (1975) who point to asymmetric information as the second reason why global 
markets may be segmented, and Errunza and Losq (1985) who demonstrate that emerging 
markets are segmented from US markets and that such markets command a super risk pre- 
mium, i.e., shares listed solely in emerging markets command higher risk premiums than 
similar securities listed in a non-segmented market. Thus, while emerging markets con- 
tinue to perform well they seem to suffer directly or indirectly from information problems 
which can be related to poor disclosure. 

This paper examines four major questions: 

1 . Do systematic gaps in disclosure levels exist between emerging and developed mar- 
kets? 

2. Do these gaps continue to be important after controlling for global factors which 
have been found to affect disclosure levels? 

3. Is Corporate Financial Disclosure (CFD) associated with Corporate Financial Dis- 
closure Regulation (CFDR)? 

4. Can disclosure be described as an effective signaling technique to attract inward 
investment in a global market? 

The study draws on the theoretical work of Cooke and Wallace (1990), which develops 
an environmental model to explain differences in nominal Corporate Financial Disclosure 
Regulation (CFDR), and actual Corporate Financial Disclosure (CFD) between emerging 
and developed markets. The study uses data from the Center for International Financial 
Analysis and Research (CIFAR, 1991, 1993, 1995) disclosure indices for industrial firms 
in 14 emerging market countries and 19 developed countries at three points in time. The 
study fmds that the mean level of CFD for companies in developed markets is statistically 
significantly greater than those in emerging market economies. Further this relationship 
continues even after controlling for global factors known from prior research to affect lev- 
els of corporate disclosure (see for example, Salter & Niswander, 1995; Adhikari & 
Tondkar, 1992). CFDR is found to be significantly associated with CFD. Finally, some 
limited evidence is found among emerging markets that increased disclosure can be 
regarded as an effective tool in signaling that foreign portfolio and direct investment are 
welcome. 

The remainder of the paper starts with a brief review of the literature. This is followed 
by a description of the proposed models for determining patterns of actual corporate finan- 
cial disclosure (CFD) and corporate financial disclosure regulation (CFDR). Then the 
hypotheses, methodology, sample and results are presented. The paper concludes with a 
brief summary and proposals for future research. 



Corporate Financial Disclosure 213 

LITERATURE REVIEW 

Starting with Ball and Brown (1968), much of the US and non-US domestic accounting lit- 
erature in English has concentrated on the usefulness of accounting information. A large 
part of this literature is dedicated to understanding the relationship between accounting dis- 
closure and stock markets (see for example Atiase, 1988, 1994). At the same time, the lit- 
erature in the international finance area has concentrated on documenting and explaining 
the lack of integration among global capital markets. The global finance research has come 
to an initial conclusion similar to that of the domestic accounting literature that levels of 
financial reporting may affect the direction and force of stock market performance and 
indirectly, stock market integration (see Alford, 1993; Alford & Folks, 1996). Information 
asymmetry and global market segmentation thus appear to be linked. A logical follow-up 
question is, does actual corporate financial disclosure (CFD) differ between countries, and 
why? 

Evidence of inter-country disclosure difference has a fairly long but limited history (see 
Appendix 1 for a tabular summary of significant International Accounting literature on dis- 
closure). Tyra (1970) established that financial disclosure patterns differed among a 
sample of European companies grouped by country. More recently, Needles et al ( 1 99 1 ), 
examining pension reporting, find differences between six European countries. Frank 
(1979), Nair and Frank (1981), Belkaoui (1983), and Belkaoui and Maksy (1985) establish 
that differences may exist among countries. Most recently, Alford et al. (1993), using a 
capital markets based methodology for each of 16 developed economies, conclude that 
accounting numbers contain information content across a wide variety of markets. How- 
ever Alford et al. (1993) add a significant finding. They find that the relative information 
content of accounting disclosure varies from country to country. The US, Australia, France 
and the UK are found to have accounting data with relatively high information content, and 
that of Denmark, Germany, Italy and Sweden being less value relevant. Regrettably Alford 
et al. (1993) limit their work to developed markets. 

Explanations of cross-national differences in financial reporting practices have concen- 
trated on so-called environmental models primarily using cultural and other systemic 
variables at a global level. Much of the early theoretical literature suggests that financial 
reporting practices as a whole, and CFD as a subset of financial reporting, should be 
affected by and may be explained by a number of environmental factors including a coun- 
try's particular colonial history or stage of development (Mueller, 1967; American 
Accounting Association, 1977). Later (Nobes, 1983; Gray, 1988; Riahi-Belkaoui, 1995; 
Salter & Niswander, 1995) add cultural and market dimensions to the earlier studies and do 
some empirical testing. Alford et al. (1993) identification of groups of countries with good 
and poor information content ties closely with the models of Nobes (1983), Gray (1988), 
Salter and Niswander (1995), and Doupnik and Salter (1993). All of these models place 
countries in similar groups to Alford et al. (1993), citing socio-cultural reasons for disclo- 
sure levels. Despite the considerable work done, the environmental models and testing is 
incomplete, as Gemon and Wallace (1995: 86) note, "there is a need to factor dimensions 
other than culture such as industrialization and level of economic development, within a 
polycentric approach so as to recognize many of the factors in the accounting ecology of 
each country under consideration." 



214 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

Surprisingly, given the wealth of theoretical work on the connection between levels of 
development and CFD, there is very little empirical evidence that links level of develop- 
ment and CFD and none that look explicitly at disclosure in emerging markets. Some early 
studies (Frank. 1979: Nair & Frank, 1981) do provide results which suggest that financial 
disclosure can be linked to economic systems and level of development among many other 
variables. Other more recent studies (Belkaoui, 1983; Belkaoui & Maksy, 1985) find no 
relationship between economic welfare and financial reporting. What appears to be an 
open question is whether differences in disclosure continue to exist between developed 
market countries and that subset of developing countries identified as emerging market 
economies. Further, little testing has been done to explain the modifying effect of the 
proven global control variables such as culture and stock market activities as they apply in 
emerging and developed market economies. 

A MODEL OF CFDR: COOKE AND WALLACE (1990) AND BEYOND 

The difficulty of obtaining reliable company or national level information on CFD for 
emerging market countries led in the late 1980s and early 1990s to examining CFDR rather 
than actual CFD. The seminal work in this area, Cooke and Wallace (1990), tests an envi- 
ronmental model of global differences in CFDR, with emphasis on the difference between 
developed and developing countries. This model (Figure 1) posits that effective regulation 
will be the outcome of an interaction between nominal accounting regulation and the will- 
ingness of companies to follow guidelines and enforcement mechanisms. Both nominal 
accounting regulation (those regulations that have been published) and the relative 
enforceability of such regulation are in turn directly affected by the internal and external 
environment. The final result of the regulation process, "effective accounting regulation", 
is analogous to CFD. Since the available data at that time did not provide a basis for the 
measurement of CFD in a reliable manner, Cooke and Wallace (1990) present CFDR as a 
testable precursor to the final level of CFD. Cooke and Wallace (1990) then test the prop- 
osition that level of CFDR is related to level of development. 

The results from Cooke and Wallace (1980) can, at best, be described as mixed. Their 
initial non-parametric tests of differences in sample medians led to the view that "it was not 
possible to conclude that the developed countries differed significantly from the develop- 
ing countries in the intensity of their CFDR" (Cooke & Wallace 1990:97). While Cooke 
and Wallace (1990, page 98, Table 4) subsequently link GNP per capita and level of 
CFDR, the result is statistically significant in only one of the four regression tests in which 
it appears. This would appear to be less than compelling evidence that CFDR and eco- 
nomic development are linked. As Cooke and Wallace (1990) conclude, this lack of result 
may well be linked to the importation by emerging market countries of CFDR found in 
developed countries, particularly those with a colonial or economic dominance link. This 
being the case there would be no guarantee, since there is no underlying social or economic 
commitment to such imported standards, that CFD would mirror CFDR in these countries. 

One of the more interesting results that reported by Cooke and Wallace (1990) is that for 
developing market countries, CFDR is positively and significantly related to indices which 
measure the quality of the climate for inward foreign investment. This raises the interesting 
point that CFDR may be envisaged as a mechanism for signaling that the country is open 



Corporate Financial Disclosure 



215 



Internal 
Environment 



Nominal 

Accounting 

Regulation 




Effective 
Accounting 
Regulation 
= Disclosure 



External 
Environment 



Enforcement 
Mechanism 



Figure 1 . Cooke and Wallace (1990) Abbreviated Model 



for business. It is perhaps not unreasonable to extend this resuU to the idea that effective 
regulation (CFDR) should precede higher levels of foreign investment in the years that 
follow. 

Adhikari and Tondkar (1992) also test the relationship between CFDR and the environ- 
ment. Adhikari and Tondkar' s (1992) major contribution is in the use of an index of 
disclosure based on their examination of actual stock market listing and filing disclosure 
regulation for the world's 35 largest markets. As part of their model, Adhikari and Tondkar 
(1992) test the relationship between CFDR and development as measured by GNP per cap- 
ita, along with stock market and other economic variables. No significant relationship 
between CFDR and level of development was found. The only significant relationship 
found was between CFDR and stock market capitalization for the two previous years. 



216 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

Riahi-Belkaoui (1995) re-tests this relationship using the Adhikari and Tondkar (1992) 
index and interestingly does find a positive relationship with yet another measure of devel- 
opment, the United Nations Development Program's (UNDP) 1990 Human Development 
Index (HDD (United National Development Program, 1990). 

All of these results seem to indicate that the relationship between level of emergence 
from social/economic poverty and level of disclosure regulation is, at best, unclear. Further 
the CFDR literature provides only theoretical links between actual CFD, CFDR. and level 
of development. If the objective of CFDR is disclosure and CFDR does not lead to disclo- 
sure, it may be viewed as ineffective. This in turn, may lead to questioning the continuation 
of the regulatory process in its current form." 

Thus, despite the significant theoretical advances of the Cooke and Wallace (1990), 
Adhikari and Tondkar (1992), and Riahi-Belkaoui (1995) papers, the following interesting 
questions still remain unanswered: 

1 . Do companies in emerging market economies have different levels of disclosure 
from those in developed markets? 

2. Is there a relationship between CFD and CFDR? 

3. Is there a relationship between CFD and emergence from social/economic poverty? 

4. Do certain measurements of social/economic emergence do a better job of explain- 
ing the relationship between CFD and social/economic emergence? and, 

5. Building on the secondary findings of Cooke and Wallace (1990), is CFD and/or 
CFDR a form of effective signaling/inducement to foreign investors? 

HYPOTHESES 

The hypotheses that flow from the research questions in the immediately proceeding sec- 
tion are as follows: 

Hal: There is a lower national average level of corporate financial disclosure 
(CFD) for companies in emerging markets than for companies in developed 
markets. 

Ha2: There is a positive relationship between levels of corporate financial disclo- 
sure (CFD) and corporate financial disclosure regulation (CFDR). 

Ha3: There is a positive relationship between levels of corporate financial disclo- 
sure (CFD) and the base classification of a country's stock market as 
emerging or developed. 

Ha4: There is a positive relationship between levels of corporate financial disclo- 
sure (CFD)and the levels of national economic income as measured by gross 
national product per capita (GNPpc). 

Ha5: There is a positive relationship between levels of corporate financial disclo- 
sure (CFD) and the levels of socio-economic emergence as measured by the 
United Nations Development Programs (UNDP) Human Development Index 
(HDD (UNDP, 1988-1995). 



Corporate Financial Disclosure 217 



Finally, extending Cooke and Wallace's (1990:89) hypothesis that "countries with a favor- 
able environment (high evindex scores) are more likely to have more items under CFDR 
than those with low evindex scores," it is posited that one of the roles of effective CFDR is 
higher CFD and that the role of such CFD is to encourage future investment. The Cooke 
and Wallace (1990) finding that evindex is positively related to a country's CFDR is re- 
interpreted as a signaling hypothesis as follows: 

Ha6: The level of corporate financial disclosure is positively related to the future 
level of foreign investment. 

METHODOLOGY 

Dependent Variables 

The initial dependent variable in this study is CFD as measured by the mean volume of 
disclosure provided by firms in each country. (Table 1 contains a short description of each 
dependent and independent variable.) For the purposes of this study "The International 
Financial Reporting Index (IFRI) for Industrial Companies" from International Account- 
ing and Auditing Trends for 1991,1993, and 1995 is utilized (CIFAR, 1991, 1993, 1995). 
The IFRI is based on the mean disclosure scores of a sample of the largest industrial com- 
panies in a country. Each company's scores are extracted from an examination of its annual 
reports 1989, 1991, and 1993 respectively. In each case, the annual reports in the Center for 
International Financial Analysis and Research library were examined for the inclusion or 
omission of 85 items. Each one of the 85 items was either present or absent in the partic- 
ular annual report. The data were then divided into seven broad categories: general 
information, income statement, balance sheet, funds flow statement, accounting policies, 
stockholders' information and supplementary information. Within each category the per- 
centage of all available disclosed information items to all information items expected to be 
disclosed was calculated. The average of the seven categories was then calculated to pro- 
vide the company IFRI, which in turn was averaged for a national IFRI. IFRI is, therefore, 
the mean index of national disclosure and has a theoretical range of zero to 100, with 100 
indicating complete disclosure of all possible items. Appendix 2 provides a list of the items 
used by CIFAR in determining the IFRI scores. 

The strengths of the CIFAR data are as follows: 

1. It is based on actual annual reports rather than regulation or perception. For each 
annual report the analysts based in one of CIFAR' s two centers for research identi- 
fied the presence or absence of an item on the list of disclosures. Given that a 1/0 
(present/absent) classification is used, there is very little scope for the data collector 
to interpret or impose his or her view of accounting in the country that is analyzed. 

2. The data were audited by external sources (Cooke & Wallace, 1989). Cooke and 
Wallace's (1989: 48) summary evaluation was that "the compilers of the data 
reported in the two volumes have taken great care to prevent many of the inadequa- 
cies and pitfalls which feature in the previous data bases (Nobes, 1981), and a care- 
ful audit of the contents of this book did not reveal any significant biases and errors." 
Subsequent editions also completed a peer review process prior to publication. 



218 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



Table 1 . Definition of Variables 



Variable Name 



Description 



Dependent Variables 
IFRI 89 
IFRI 91 
IFRI 93 

Control Variables 
UNCERT 



MARKET 



Independent Variables 
ADTON 



EM 



GCS 



GNPC 



HDI 86-88 
HDI 88-90 
HDI 90-92 

DIRG91 
DIRG 92 
DIRG 93 

PIG 92 
PIG 93 



Country averages of disclosure based on average disclosure across seven categories of 
the companies surveyed in a country. Items surveyed and data sources are described in 
Appendix 2. 89, 91, 93 indicate the year of the annual reports surveyed. 



Uncertainty Avoidance is the degree to which the members of a society feel uncomfort- 
able with uncertainty and ambiguity. It is measured on a scale from to 100 (with one 
exception, Portugal). Salter and Niswander (1995) find significant relationship 
between this variable and all of Gray's (1988) accounting values. 

Mean Market Capitalization in USS divided by Gross Domestic Product in US$, for 
each of three periods immediately preceding the relevant IFRI index (1986-88,1986-90 
and 1990-92). 



An unadjusted measure of corporate financial disclosure regulation used in Adhikari 
and Tondkar (1992) 

Whether market is classified as emerging or developed by the Emerging Stock Markets 
Factbook (International Financial Corporation, 1992, 1996) in the relevant year. 

An measure of corporate financial disclosure regulation used in Cooke and Wallace 
(1990) based on the work of Gray, Campbell and Shaw (1984) 

Mean Gross National Product per capita in USS for each of three periods immediately 
preceding the relevant IFRI index (1986-88, 1986-90 and 1990-92 as reported in the 
World Development Report (World Bank, 1988-1995). 

Human Development Index for the relevant year as reported by the United Nations 
Development Program Human Development Report. Year represents actual year of 
data rather than date of the report. 

Foreign Direct Investment/Gross Domestic Product as reported in the World Develop- 
ment Report. Year represents actual year of data rather than date of the report. 

Portfolio Investment/Gross Domestic Product as reported in the World Development 
Report. Year represents actual year of data rather than date of the report. 



3. It clearly provides information on the number and nature of companies in each coun- 
try (see Table 1). 

4. The International Financial Reporting Index (IFRI) for Industrial Companies Index 
is available at three different points in time (International Accounting and Auditing 
Trends 1991,1993,1995. See CIFAR, 1991, 1993, 1995). This permits the testing of 
the results of the model for inter-temporal stability by repeating the analysis at three 
points in time. 

Independent Variables 



Economic emergence/development is a multi-faceted concept. Enthoven (writing in 
Nobes & Parker, 1991: 255) describes the process of social/economic emergence thus: 



Corporate Financial Disclosure 219 



... economic development can be considered to be 1. a country's ability to increase its 
per capita income or production — i.e., a transitional process between economic stagna- 
tion and economic progress; and 2. the ability to execute a series of structural, social 
and economic changes and improvements — a transformation process, e.g., more equi- 
table income distribution, improved medical services and housing, enhanced education 
and training, and greater employment. 

Based on this statement it appears that emergence may be measured on three dimensions: 
(1) economic wealth; (2) socio-economic progress; and (3) a composite indicator of both. 

In the literature on CFDR each of these has been utilized. The indicator variable used in 
Cooke and Wallace (1990) is the World Bank's classification of markets as developing or 
developed. In this study, for the purposes of testing Hypothesis 1, whether a difference 
exists between emerging and developed market CFD, this study uses a slightly different 
classification, i.e., the International Financial Corporations classification of a market econ- 
omy as emerging or developed in the Emerging Stock Markets Factbook (International 
Financial Corporation, 1992, 1996). This variable (EM) is used as the classificatory vari- 
able in the test of difference of means (r-test) for CFD between samples of emerging and 
developed market economies. It is also used as an independent variable in the OLS Regres- 
sion used to test Hypothesis 3. 

In testing Hypothesis 2, a test of the relationship between CFDR and CFD, two measures 
of CFDR are used: GCS and ADTON. The first measure, GCS, uses data from Cooke and 
Wallace (1990, page 96, Table 3) which, in turn, was extracted from Gray Campbell and 
Shaw (1984). The second measures, ADTON, uses Adhikari and Tondkar's (1992) index 
of disclosure. 

Hypotheses 3 through 5 test the efficacy of various measures of economic development 
in explaining disclosure levels. The construct of economic wealth, which is utilized in two 
of the recent studies (Cooke & Wallace, 1990; Adhikari & Tondkar, 1992) is operational- 
ized as gross national product per capita (GNP). As there is likely to be some lag between 
a country's changing economic fortunes and resultant accounting change, mean GNP for 
the three years preceding any disclosure measurement is used with a one year lag to the date 
of the data. This lag is not out of line with the time taken to revise standards in many coun- 
tries. Thus, the IFRI index data for 1991 (based primarily on 1989 annual reports) are related 
to the GNP per capita from 1 986 through 1 988 to test Hypothesis 4. Similar procedures were 
used for tests using the 1993 and 1995 IFRI indices. All data for GNP were extracted from 
the relevant World Development Report for ihQ^tdod 1988-1995 (World Bank, 1988-1995) 

As pointed out above by Enthoven (in Nobes & Parker, 1991) and echoed by Cooke and 
Wallace (1990), social/economic emergence is also a process of social as well as economic 
change and may not be measured simply by economic wealth. A country may be appar- 
ently wealthy but not yet considered to have emerged as a market or economy, e.g., the 
high income, oil producing countries in the late 1970s. In order to deal with this problem, 
the test of Hypothesis 5 uses a second metric measure of overall emergence, the Human 
Development Index (HDI) (United Nations Development Program, 1988-1995). This 
index was previously found to be related to the Adhikari and Tondkar (1992) index by 
Riahi-Belkaoui (1995). The HDI is: 

... an alternative measure of economic and social progress, because gross national 
product (GNP) is a poor measure of relative living standards. The index is a cocktail of 



220 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



life expectancy, adult literacy, average years of schooling and GDP per head (measured 
at purchasing-power parity). The UNDP now calculates the index for 173 countries. 
(The Economist, 1994: 110) 

The Economist (1994: 1 10) goes on to point out: 

For some countries the gap (between GDP and the HDI) is wide. For example, China 
ranks only 143rd in terms of its GNP per head, but is in 94th position in terms of the 
index. By contrast, Gabon's ranking in the UNDP's index (114th) is miles below its 
42nd position on GNP. South Africa, Saudi Arabia and the United Arab Emirates also 
rank much lower on the index. For rich countries the difference in ranking tends to be 
smaller. In 1994 Canada was top of the league (it ranks only 11th on GNP per head) fol- 
lowed by Switzerland (which ranks first on GNP). Japan, which topped the index in 
1993, fell back to third place. 

As with GNP, a one year lag and three year averaging procedure is used based on the year 
the data were collected by the United Nations Development Program (UNDP). 

Hypothesis 6 (the signaling effect of CFD) proposes that if high levels of CFD does 
indeed indicate openness to foreign investment, actual levels of foreign investment after 
some period should indicate the success of the CFDR or CFD. This proposition is tested by 
correlating foreign direct and foreign portfolio investment as a percentage of GDP for the 
years after 1990 to IFRI for each of the years 1989, 1991, and 1993. In the case of portfolio 
investment these statistics are not available before 1992 and the analysis is limited to the 
period 1992-1993. Both foreign direct and foreign portfolio investment as a percentage of 
GDP are extracted from the World Development Report (World Bank, 1993-1995). 

Control Variables 

The regression contains two control variables. The first is uncertainty avoidance 
(UNCERT): "the degree to which the members of a society feel uncomfortable with uncer- 
tainty and ambiguity" (Hofstede, 1984: 84) and how they deal with it. The second is a 
measure of stock market capitalization (MARKET) in US$ as a percentage of gross domes- 
tic product for the relevant year. Gray's (1988) model and Salter and Niswander (1995) 
find that both variables have strong global explanatory power for national levels of disclo- 
sure. The latter has also been found by Adhikari and Tondkar (1992) to be related to CFDR 
at a global level. Taking these articles together it can be argued that if the impact of market 
emergence on CFD is to be tested, then the impact of universal dimensions that have been 
shown to impact disclosure levels, must be controlled for. 

UNCERT is measured as the values reported in Hofstede (1991: 1 13)^ on a scale from 
approximately 100 (extreme fear of uncertainty) to zero (having no fear of uncertainty). 
Actual minimum and maximum scores are 8 and 1 12. 

MARKET is measured as the ratio of stock market capitalization to gross national prod- 
uct using the mean ratio for each of the three year periods immediately preceding the year 
for which the IFRI were calculated, 1986 to 1988, 1988 to 1990, and 1990 to 1992 respec- 
tively. The data source was the Emerging Stock Markets Eactbook (International Financial 
Corporation 1992, 1996) and the World Development Report (World Bank, 1988-1995). 



Corporate Financial Disclosure 



221 



Table 2. Details by Country of the Sample 





Number of 


Number of 


Number of 








Firms in 


Firms in 


Firms in 


/War/cef 






Sample 


Sample 


Sample 


Capitalization 


GDP 


Countries 


1989 


1991 


1993 


1993 


1993 


Emerging Markets 












Brazil 


15 


14 


25 


99,430 


444,205 


Chile 


6 


4 


7 


44,622 


43,681 


Colombia 


6 


6 


6 


9,237 


54,076 


Greece 


4 


4 


5 


12,319 


63,240 


India 


12 


29 


9 


97,976 


225,431 


Korea S. 


5 


7 


8 


139,420 


330,831 


Malaysia 


8 


18 


15 


220,328 


64,450 


Mexico 


4 


7 


7 


200,671 


343,472 


Nigeria 


7 


10 


10 


1,029 


31,344 


Philippines 


6 


8 


10 


40,327 


54,068 


Portugal 


8 


5 


10 


12,417 


85,665 


South Africa 


12 


21 


20 


171,942 


105,636 


Thailand 


7 


7 


5 


130,510 


124,862 


Turkey 


5 


5 


5 


21,605 


156,413 


Developed Markets 












Austria 


15 


9 


14 


28,437 


182,067 


Australia 


23 


25 


27 


203,694 


289,390 


Belgium 


7 


9 


9 


78,067 


210,576 


Canada 


22 


40 


40 


326,524 


477,468 


Denmark 


6 


14 


15 


41,785 


117,587 


Finland 


7 


16 


15 


23,562 


74,124 


France 


65 


64 


49 


456,111 


1,251,689 


Germany 


38 


52 


56 


463,476 


1.910,760 


Italy 


9 


13 


17 


136,153 


991,386 


Israel 


5 


6 


5 


50,773 


69,739 


Japan 


74 


96 


101 


2,999,756 


4,214,204 


Netherlands 


22 


22 


20 


181,876 


309,227 


Norway 


5 


12 


15 


27,380 


103,419 


Spain 


10 


15 


15 


119,264 


478,582 


Switzerland 


7 


14 


15 


271,713 


232,161 


Sweden 


7 


13 


25 


107,376 


166,745 


United Kingdom 


44 


83 


81 


1,151,646 


819,038 


New Zealand 


6 


5 


10 


25,297 


43,699 


U.S.A. 


200 


276 


248 


5,136,199 


6,256,899 


TOTAL 


677 


929 


919 


13.030,922 


20.326.134 



Sample 



The initial sample consisted of all countries for whom data were reported in Edition 2 of 
International Accounting and Auditing Trends (CIFAR,1991) provided that the countries 
were also represented in subsequent editions. Deletions were made for Hong Kong and 
Singapore which were upgraded during the period from emerging to developed markets. 
Taiwan, which is considered part of China by the UNDP and World Bank, was also 
excluded because no comparable GDP and HDI statistics could be found. The result was a 
net sample of 33 countries including all but two of those used in Cooke and Wallace (1990) 



222 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

and 28 of the 35 countries included in Adhikari and Tondkar (1992). This sample covers in 
excess of 90 percent of total global stock market capitalization in US dollars for 1993 and 
approximately 86 percent of global GDP for the same year. (See Table 2 for details on the 
number of companies and the value of the stock markets and GDP of the countries.) 



Analysis of the Data 

To test Hypothesis 1, the data were analyzed using a parametric r-test with the a 1/0 
variable as a classification tool and IFRI for each of the years 1989,1991 and 1993 as the 
dependent variable. Hypotheses 2 was tested using Spearman non-parametric correlations. 

Hypotheses 3 though 5 were tested for each of the IFRI data years (1989, 1991, 1993) 
using an OLS Regression in the following form: 

IFRIt = a + piEMERGENCEp +P2UNCERT + P3MARKETP + e. 

IFRIj represented the mean national disclosure scores for industrial companies for the years 
1989,1991 and 1993. EMERGENCEp is first represented by EM (a 1/0 variable based on 
IFC classification as a developed or emerging market) and subsequently by gross national 
product per capita (GNPC) or the Human Development Index (HDI) for the three year 
period ending in the year prior to t. MARKET and UNCERT are as defined previously. 

RESULTS 

Table 3 shows initial ?-tests for differences in each of the years' mean disclosure levels 
(IFRI) between developed and emerging market blocks are statistically significant. The 
mean CFD for companies in developed markets is higher than for those in emerging mar- 
kets for each of the three years. Throughout the period the mean disclosure level for emerg- 
ing market economies rises (on a scale of 1 to 100) from 60.5 to 66.42, and that of 
developed market economies from 69.05 to 74.16. While CFD in emerging markets has 

Table 3. f-test for Equality of Means on Disclosure for Industrial Firms 

Number of Two Tail 

Countries Mean t Value Significance 

1989 Industrial Index 

Emerging Markets 14 60.5000 -2.699 .011 

Developed Markets 

1991 Industrial Index 

Emerging Markets 14 63.5000 -2.581 0.015 

Developed Markets 

1993 Industrial Index 

Emerging Markets 14 66.4286 -2.976 .006 

Developed Markets 

Notes: In all years, Levine's Test for equality of variance cannot be rejected. Therefore, /-tests assume equal variance 



14 


60.5000 


19 


69.0526 


14 


63.5000 


19 


69.5623 


14 


66.4286 


19 


74.1579 



Corporate Financial Disclosure 223 

Table 4. Correlation between CFD and CFDR Spearman Correlation Coefficients 

Subsamples 

A. Adhikari and Tondkar (1992) 

IFR189 .5518 

Sig. .002 



IFRI91 


.5742 
Sig. .001 


.9158 
Sig. .000 






IFRI93 


.5281 


.8899 


.9226 






Sig. .004 


Sig. .000 


Sig. .000 






ADTON 92 


IFRI 89 


IFRI 91 




B. Cooke and Wallace (1990) 








GCS 


.5452 
Sig. .016 








IFRI89 


.6267 
Sig. .004 


.2601 

Sig. .282 






IFRI91 


.6230 


.1928 


.9293 






Sig. .004 


Sig. .429 


Sig. .000 




IFRI 93 


.5948 


.2207 


.8453 


.9225 




Sig. .007 


Sig. .364 


Sig. .000 


Sig. .000 




ADTON 


GCS 


IFRI 89 


IFRI 91 



Notes: 1 . Variables are defined in Table 1 . 

2. Samples reflect numbers available in Adhikari and Tondkar (1992) and Cooke and Wallace (1990): N = 2& and 
A' = 1 9. respectively. 

3. Table 3 should be read as coefficient/2-tailed significance. 



risen slightly faster than in developed markets over the period 1989-1993, it is insufficient 
to close the gap and a statistically significant difference remained as of the end of 1993. 

Table 4 displays the relationship between CFD and CFDR. The Adhikari and Tondkar 
(1992) measure of CFDR, ADTON,^ is positively and significantly related to CFD at the a 

< .05 level. GCS, the Cooke and Wallace (1990) measure of CFDR is positively but not 
significantly related to CFD. The correlations also indicate that GCS and ADTON are 
related. It appears that CFD and CFDR are related. However, over a period of time [the 
Cooke & Wallace (1990) measure precedes IFRI by seven years] this relationship decays. 

Hypotheses 3 through 5 test whether CFD is related to various measures of social/eco- 
nomic emergence even after controlling for the global influences of culture and markets. In 
all years and for all combinations of variables the regression equations are significant at a 

< .05. In addition, despite using a somewhat different sample from Salter and Niswander 
(1995) and Adhikari and Tondkar (1992), all of the tests of hypotheses find the control 
variables to be significant and in the direction predicted by these studies, providing contin- 
ued support for the global importance of culture and markets to the determination of 
disclosure at a global level. 

In Hypothesis 3 the relationship between disclosure and market status was tested. As can 
be seen from Table 5 (Panel A) the EM variable (classification as a developed [1] or 
emerging market [0]) is significant at a < .05 for 1989,1991 and 1993. 



224 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 





CO °^ 


«*i 




.« 




••* 




*J 




«> 




■« 








a 




g^ 


^ 


a: 




"^ 








'< 




fSJ 




-? 




1 


h~ 


^ 

^ 


!^ -- 




ix: . 


£5 


0: .O) 


5 


5 


iy 








^u 




■i« 




V. 




!3 




§ 


1- 


^ 


^ § 






^ 




5 




>~, 




v» 




a 








C 


^- 


^ 
S. 


S;. 






53 




6« 








,21 








5 




ii 




s 


QC 9J 


E>^ 


Uj ^ 




— J 


f«^ 




•2 








'2 




s 




Q 




S 




S 




^ 
1 


S g^ 




to 


£. 




i* 




c 




60 




•5 








•5 








3 




«^ 


3> 


-t 


■>- 






«> 




c 




« 




a. 










c 




Q) 




T3 




C 




Q) 




Q. 




0) 




Q 



O: — iZ: 
O O O 
O O O 



f<-j 0\ 00 

o o o 
o o o 



ON oc r- 

— — (^1 

On in vr^ 

<^i r-i f^i 



U_ U. U. 7 





t^ 


^ 




.!< 




>! 




%i 




1^ 








« 




=1. 






^ 










^ 




K, 




1 




i 


h~ 


<& 
c 


Uj ^ 


g 


ic . 


•<••«« 


QC .O) 


,^ 


s « 


5 


§ 


s 








a 




;j 




tti 




^ 


K- 


^ 


Lu gj 


1. 
3S 

1 


QC ra 


53 




C<5 




Q 




5 












a. 


h~ 


a 


£- 


w 
^ 


O -S* 


Cu 


^ « 


a. 


:::) 


:?: 




o 




2f 




















:i 


K- 


%i 


CC 0) 


1.. 

55 


u] 5 


^ 
^ 
^ 


^ 1 






Q 








•2 








c; 








5 




« 




•5 


o ^ 


i^ 


Q- ^ 


%> 


^ •§" 


I 


ej ^ 


a 




a. 




C 




a 




U 




a« 




















IS 




,^ 


^ § 


t« 


CD ^ 


05 








!U 








2! 




« 




a. 






.^^ 




c 




01 




^ 




c 




01 




CL 




0) 




Q 



cc r- n 



— — r<i 

— (N — 

o o o 



ri ri ri 



Ov 1/^ vC 

ri oi oi 



— — ri 





"o 






^ 












1/5 






^ 
■g 






£. 






»> 






a: 






"^ 












1^ 






^ 






h. 






't 






^ 


^ 




^ 


















^ 






?< 






k. 






'^ 






s 






t« 






<j 






5 


1- 




a: 


ix: . 




o 
^ 


QC .O) 




S '^ 




5 


5 










5j 






a 






>3 






'^ 






2: 


K 




s 


Uj 0) 




c 


is: 5 


r-, 


1 


^ 5 




<3 

1 


1 ^ 




«5 


h- 




s 


OC *- 


S 


s 

5 


m 
::3 




1 


K- 




:5 


QC Q) 

Uj 3 




^ 


S! 


(■*". 




'^' 


2f 
















:i 






^ 






>. 






s 






^ 






a 












"S 






1^ 






^ 












'S 


















a 






•S 












k! 






^ 












1 


<b 




a 
a 


If 


rr^, 


•5 

1 






G 






^ 


^ 




a 


C 




o 


Q) 




a. 


& 


z 




Q 



O) o r^J r«-i 

?:: f — 1 ^ f — ■, 



— a^ ^ 
r^4 — r^i 

IT) O ON 



■^ O (N — 



OC On — 









f- 










c 


■5 










> 


ON 


Ol 


oc 


-a 


O 


in 


00 




c 


c 




r<~i 


' — ' 




ea 



— — r-1 





< < 




— rJ 


O^ — r^, 

00 ON ON 





Q::: Oi Q£ 
U. U. tt. 2 



Corporate Financial Disclosure 225 

Table 6. Spearman Correlation between CFD, CFDR and Investment 



Spearman Correlation Coefficients 


DIR91 


.4248 
Sig. .065 












DIR92 


.3296 
Sig. .125 


.9295 
Sig. .000 










DIR93 


.1969 
Sig. .250 


.8150 
Sig. .000 


.9295 
Sig. 








PIG 92 


.0156 


-.3359 


-.2581 


-.0079 








Sig. .479 


Sig. .120 


Sig. .187 


Sig. .344 






PIG 93 


.1497 


-.2470 


-.0267 


.1402 


.7753 






Sig. .305 


Sig. .197 


Sig. .464 


Sig. .316 


Sig. .001 




IFRI89 


.1776 


.0773 


.0729 


.1834 


.4263 


.3996 




Sig. .272 


Sig. .396 


Sig. .402 


Sig. .265 


Sig. .064 


Sig. .078 


IFRI91 


.1048 


.1287 


.1021 


.1598 


.4731 


.2444 




Sig. .361 


Sig. .330 


Sig. .364 


Sig. .293 


Sig. .044 


Sig. 200 


IFRI 93 


.2320 


.0044 


-.0133 


.1282 


.3583 


.2913 




Sig. .212 


Sig..49 4 


Sig. .482 


Sig. .331 


Sig. .104 


Sig. 156 




ADTON 92 


DIR91 


DIR92 


DIR 93 


PIG 92 


PIG 93 



Note: 1 . All vanables are defined in Table 1 . 

2. DIR and PIG indicate direct and portfolio investment as a percent of GDP for the relevant year. 

3. N = 14 for all correlations. A' is limited to emerging market countries for which data are available. 

Hypotheses 4 posits a relationship between gross national product per capita and level of 
disclosure. As Cooke and Wallace (1990) note for CFDR, wealthier countries can afford 
the infrastructure and effort of higher disclosure, less wealthy countries cannot. This direc- 
tion is true for CFD in all of the time periods of this study. In Table 5 (Panel B) it can be 
observed that IFRI for 1989 and 1993 has a positive and significant relationship with gross 
national product per capita (GNPC) at a < .05. For 1991 the relationship is positive but sig- 
nificant only at a < .0665. 

Hypothesis 5 tests the relationship between CFD and the Human Development Index 
(HDI). Should this hypothesis be supported it would argue that disclosure relates not only 
to affordability but also priorities as countries ration available wealth. In fact, as Table 5 
(Panel C) illustrates, this relationship was only found to be significant and positive for 
1993 at a < .05. In 1991 the relationship is positive but only significant at a < .09 and 
although positive, it is not significant at all for 1989. It is interesting to note that social 
wealth becomes increasingly important in the later years of the time period, implying that 
countries whose disclosure indices are improving are those that are moving upwards in the 
social development index (HDI). 

Finally, Hypothesis 6 tested the relationship between CFD as a form of signaling and 
actual foreign direct investment and foreign portfolio investment. This test is conducted as 
Cooke and Wallace (1990) suggest solely for emerging economies. The results (Table 6) 
indicate that while CFDR, measured using the Adhikari and Tondkar (1992) index, is pos- 
itively related to direct and portfolio investment as a percentage of GDP, the relationship is 
not significant at a < .05. 



226 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

There is however a significant relationship between CFD, as measured by IFRI 1991, 
and the 1992 portfolio investment at the a < .05 level. Similarly, IFRI for 1989 has rela- 
tively weak relations, a < .10 for portfolio investment in 1992 and 1993. The research 
indicates no relationship between CFDR and foreign direct investment. 

Discussion of Results 

The initial (^test) results indicate that average level of CFD in emerging markets contin- 
ues to be significantly lower than those in developed markets. This does not preclude 
exceptions to this result. Chile, for example, has higher disclosure than some developed 
markets such as Austria. It does however provide evidence of an ongoing problem. The 
findings are a vindication of Cooke and Wallace's (1990) hypothesis that development 
impacts on disclosure regulation, and when conjoined with the effectiveness of such regu- 
lation, to actual CFD. Given evidence in the extant financial literature (Alford, 1993) that 
information asymmetry and global market integration are inversely related, the persistent 
levels of difference found in this study between mean disclosure levels in emerging and 
developed market economies indicates that emerging market economies may be in need of 
assistance with the regulatory and enforcement process for financial reporting, if the global 
capital market is to be integrated. This would seem to argue strongly for the lASC to work 
on establishing a common disclosure GAAP rather than its current program in which 
efforts have been concentrated on measurement rather than disclosure. One brief rider to 
this is the need to make sure that rules are actually enforced as simple importation of rules 
may not be enough (see Donleavy, 1993, for some evidence on this). Findings on the rela- 
tionship of CFDR and CFD offers hope in this area. 

In examining how such a strong CFD might develop, the results of the OLS regressions 
provide some insight. Initially, these indicate that levels of national income (GNPC) may 
impact on the ability of a country to afford the creation and enforcement of extensive dis- 
closure regulations. Richer countries tend not only to have more extensive regulation, but 
also to enforce those regulations that exist. 

Perhaps more interesting is that (as shown in Table 5 Panel C) CFD in 1993 was also a 
product of social allocation as indicated by the positive relationship of IFRI and HDI. Even 
though some countries may not be as wealthy as others, the relative importance placed on 
social development can influence the level of disclosure. Thus, the will to disclose may 
grow out of improved social conditions, however with only one year's results this conclu- 
sion should be taken with some caution. 

Finally, in the OLS results it is interesting to note that the measures of social/ economic 
emergence are important even after controlling for the global factors of culture and mar- 
kets. As countries grow richer they disclose more. It is found that at a global level, a 
country's cultural predilections may hold back its progress towards full disclosure. A 
strong need for non-debt investor capital can, however, move even a relatively low disclo- 
sure, highly uncertainty avoidant country towards greater disclosure. The beta coefficients 
(which are not disclosed here for space reasons) show that a one percent increase in wealth 
or market capitalization has roughly equivalent positive impacts on disclosure patterns, 
while a one percent increase in uncertainty avoidance can lead to CFD being approxi- 
mately half a point lower. This would mean countries with a high uncertainty avoidant 



Corporate Financial Disclosure 227 

cultural disposition will have to work harder at increasing disclosure than those with a less 
resistant cultural disposition. 

The results of these disclosure studies are limited in value if we cannot formally make 
the link to investment. Portfolio investment in 1992 is linked to CFD for 1989 and 1991, 
indicating that prior CFD is related to levels of portfolio investment. Portfolio investment 
in 1993 is significantly related only to CFD in 1989. In either case, it appears that for 
emerging markets CFD precedes investment with a clear lag. Not surprisingly, foreign 
direct investment does not exhibit a similar link. Investors who make portfolio investments 
depend on public financial reporting data. Foreign direct investment is more likely to be 
green field (i.e., new physical facilities) and hence little concerned with historical account- 
ing information. Even acquisitions are unlikely to be as dependent on public data as 
managers often seek to fulfill strategic rather than portfolio needs. 

In conclusion, though not as strongly as one would like, there appears to be a causal link 
between CFDR, CFD and investment. CFDR can enhance CFD, and CFD in turn appears 
to be linked to portfolio investment. Those who desire to develop the investment potential 
of emerging markets first need to improve levels of effective CFDR and the resultant cor- 
porate financial disclosure. 

CONCLUSION AND LIMITATIONS 

This paper tested the relationship between national levels of disclosure and social/eco- 
nomic emergence of nations within the context of the Cooke and Wallace (1990) model. It 
finds that, as posited in the model, firms in developed market countries have a significantly 
higher mean level of effective disclosure than those in emerging market economies. This 
lack of disclosure is modified by the importance of markets and a relatively low level of the 
uncertainty avoidance culture variable and is directly related to the ability to draw foreign 
portfolio investment. While not tested, this may be extrapolated to imply that those coun- 
tries that see rapid growth in their stock markets are likely to see the greatest growth in dis- 
closure over time. This growth may be modified in high uncertainty avoidant countries by 
a national reticence about disclosure. 

This study is limited by the sample used. The IFRI data are limited by the number of 
available annual reports in the CIFAR database. The basic CIFAR database represents the 
world's 1000 largest companies and is likely to provide information on those companies 
available for investment to the institutional community. The sub-sample used in this study 
takes particular care to ensure that disclosure practices are representative by selecting (with 
one exception) only those countries where at least five companies are used to distill the 
country averages. 

The study can be improved if a larger number of firms can be studied in the emerging 
market countries or the relationship between disclosure and investment confirmed over a 
longer period of time. However, these data are simply not available at this time. 

The IFRI disclosure index is calculated based on the presence or absence of certain dis- 
closure items. Because measures of the depth and breadth of disclosure on each item were 
not available the data are less than perfect. Future studies may wish to use more detailed 
breakdowns when they become available, to fomi a company by country disclosure matrix. 
The literature review that preceded this study did not reveal any literature that effectively 



228 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 2, 1 998 

utilized depth and breadth items to determine disclosure effectiveness or its statistical rela- 
tion to market reaction. The existence of such literature would be a pre-condition to any 
study attempting to use depth of disclosure as a dependent variable. 

This study provides evidence that levels of CFD in emerging market economies appear 
to suffer from a structural deficit, i.e., even though there is growth in the level of disclosure 
from year to year, there still remains a significant difference in the level of CFD between 
emerging and developed market economies. It further posits that change is likely to be 
most difficult in countries where there is a culture of avoiding uncertainty and where the 
stock market is weak. Given that culture is relatively slow to change, the strongest influ- 
ence for increases in CFD will be the demand for information that would arise from a 
growing stock market. 

Finally the study finds that regulation alone is not enough. Evidence is presented that the 
Cooke and Wallace (1990) model of CFDR and CFD is correct and that for regulation to 
work there must be a strong desire and capacity for enforcing CFDR. In the absence of this, 
the CFDR of countries will draw ever closer together while their CFD will continue to 
move far apart. 

Acknowledgments: The author would like to acknowledge the assistance of Professors Clare Rob- 
erts, David Sharp, and R.S.O. Wallace, and the anonymous reviewers, all of whose comments added 
greatly to the development of this manuscript. 



Corporate Financial Disclosure 



229 



T3 P 



a 


3 






Ij 


'5. 




a 


n 


u 


C3 




o 


<u 




^ 



OX) E 



-£ D. ^ 



Q. U O 






•s ^ 



a 


Q 


c« 


O 


03 


■5 


C/2 




< 


N 



■a e 



D s ;:i: .Si 



•- _ -' ° 

5 c !5 -ii 

2 -^ S E 



.s D .t: o 



1) '-t- 



■73 ■*. PJ X! 



■~ Q. "2 c 



j2 i_ _ — 
•7; o 5 — 



H ^ < 



73 Of) 2 60 



c S 



Q -s •£ 



< ac ^ hS 






•S^ 



1 ^ 



eg On 
^ Ov 

•a — 



UJ £ 5 c5 



.S? ^ 








(U 




■ — 


c 


— 







13 
> 


Ai 




c/"j 


D 


-0 





_< 









M 


c 



^ 


3 





a 
c 


>> 




Z 




C 


X) 


> 


"3 
U 


^ 







c 

s 


~o 






c 


"H. 

X 


C3 
3 


3 


C 
3 


1) 
> 


1 


.0 

"x 

c 


c 

03 


T3 

< 






c3 

Ofj 


■a 

c 







C 


^0 


3 


00 


1) 
c 


C3 


-5 

E 


OJj 


3 




'% 


3 




c 

03 



— C 3 

'x o o 

c. o! y 



c 5 



-5 3 



d 00 ■■= 



£ § "o ■« ^ <" 

o '-> '5 3 u -£ 

.i2 '-C > -a .2S 03 

Q ■£ < > Q E 



— c 



X a. 

3 Q 



s s ^ 



•H -^ -^ 



o _u 



x X .^ 



U ■- 
3 ^ 

(5 u 






SJ ON 2 



O 



03 ■— 3 (U 



4J -= :g 



H -o -5 



03 -^ 

00 Z 



j^ o on 



ii c/T Q. E 



P "3 



O i£ 



•E. = S 



§ B- 



*-* *- ^ c 

t- t. ■*- c 

03 Q. .t; 03 

§ 5 I e .E 

B 'S- -^ x) c 



-T= tii c 



Q 
O 
o 

7- °^ 
c Q 

O! U 



O Q, 



>^Q ^ 



00 Q. O 'E 



2 E 



* .y 



3 -n — 



Q. 


c 







IE 


u 


X 





c 







•a 


J2 








1) 


u 


^ 


.:^ 


J2 


sg 


H 


E 



< H 



230 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 






» .= 



to .ii Q. 3 



C/) 



c E c 



'i P ?= 



_ •.= "^ 
^ ~ c 
c^ '^ ^ 



>i — _o S 



= a 


3 


= Q. 


o 


"o ti 


XI 


i> =5 


c 


o tU 


.G 


CJj vO 


n 



a c3 a 



(U 


,^ 


jj 


^^ 


r3 


o 


rt 




f"!" 




r~- 






■_^ 


•5 


C 
3 




o 


i. 


O 
1) 


O 


oi 


O 


■ — ' 


CJ 


0. 


u 




c 




D 
U 


c 
•a 


Z 

a 


c 

(U 

73. 


c 


3 
G 
o 


'a. 


o 


c 


> 


^ 


-3 


o 


.i: 


£ 


^ 


p 



■^ o 



> E 



CTSwC/l^OO OJ C.- 



S ^ o 



^ "^ 



^ I 



^ o 



o 


o 


3 




T3 
C 




o 


00 

-a 






c 


eij 


O 


lU 


>> 


^ 


ol 


3 






c 
o 


1 


c 

g. 
3 


> 


c 

CO 

c 


06 


3 

5 


x; 

P 


a: 

Q 


_d 


.5 


y; 


tu 


^ 


x 


s 


■a 




u 


c 




£ 


o 


■q 


o 


o 


> 

3 
00 


2 

o 


c 
o 
ca 


3 
O 
o 

OJO 

c 



Q D- 



(J 5 



-3 

B 
c 

OJ 


x: 


C3 

3 


c 


00 
X 


c 






"B- 


S3 




3 


Q. 




a 


X 


_^ 


C^ 


(U 


■a 


o 


■^ 


■J-. 


c 


flj 


OJ 


O 


X 


1) 

00 


"^ 


5 


:r. 


7! 


_CJ 


00 


o 



<u o — 
■S 00 5 -z: 



— -y- U 



c c c 
Z U ^.S 



.2 E 



S Sou S ■£ Q. 



— -*r <L> QJ 



-y; tii — 



D 


u^ 




O 


O 


o 




.2 


^ 


"« 


OJ 


o 



Hj C lO tA g 

H .-3 c Q -r: 



H D. 



H tu 



■o 
c 

Q. 

a 

< 






Corporate Financial Disclosure 



231 



Appendix 2. List of CIFAR Variables by Group (2nd edition) 



Group A 

General Business Information 

1. Address/Telephone/Fax/Telex (at least one is 
given) 

2. Product Segment 

3. Geographic Segment 

4. Management Information 

5. subsidiaries Information 

6. Future Plans/Chairman or CEO's Statement (at 
least exists) 

7. Breakdown of employees 

8. Fiscal Year- End 

Group B 
Income Statement 

9. Consolidated Income Statement 

10. Cost of Goods Sold Clearly Segregated 

11. Complete Income Statement 

12. Sales Reported 

13. Sales, general and Administrative Expenses 
Reported 

14. Operating Income Reported 

15. Foreign Exchange Gains/Losses Reported 

16. Extraordinary Gains/Losses Reported 

17. Income Tax expense reported 

18. Minority Interest Reported 

19. Net Income Reported 

Group C 
Balance Sheet 

20. Balance Sheet Fully Disclosed 

2 1 . Current Assets Separated from Fixed Assets 

22. Current Liability Separated from Fixed Assets 

22. Current Liability Separated from Long-Term Lia- 
bility 

23. Owners' Equity Separated from Liability 

24. Separated of Non-Equity Reserves and retained 
earnings 

25. Cash and Equivalents Reported 

26. Accounts Receivable Reported 

27. Inventories Reported 

28. Current Assets Reported 

29. Fixed Assets on Asset Side 

30. Goodwill and Other Intangibles 

31 . Total Assets Can Be Derived 

32. Shareholders' Equity Changes 

33. Appropriation of Retained Earnings 

Group D 

Funds Flow Statement 

34. Funds Flow Statement Disclosed 

35. Extensive Funds flow Statement 

36. Funds from Operations Separated 



37. Funds Definition Exists 

38. Cash Flow Statement 

Group E 
Accounting Policies 

39. Accounting Standard 

40. Financial Statements Cost Basis 

41. 50% Long-Term Investment 

42. Starting Point for Funds Statement 

43. R&D Costs 

44. Pension Costs 

45. Reasons for Extraordinary Items 

46. Inventory Costing Method 

47. 20% Long-Term Investment 

48. 21-50% Long-Term Investment 

49. Acquisition Method 

50. Accounting for Goodwill 

5 1 . Deferred Taxes 

52. Outside Manager of Pension Funds 

53. Long-Term Financial Leases 

54. Foreign curtency Method 

55. Foreign Currency Translation Gain/Losses 

56. Discretionary Reserves 

57. Minority Interest Effect Separated 

58. Contingent Liabilities 

Group F 

Stockholders' Information 

59. Disclosure of Dividends Per Share 

60. Disclosure of Earnings Per Share 

6 1 . Number of Shares Outstanding 

62. Information if Multiple Share exist 

63. Par Value 

64. Total Dividends 

65. Stock Split/Dividend/Rights (if applicable) 

66. Stock Price 

67. Stock Exchange Listing 

68. Volume Traded 

X69. Basic Shareholding data 

70. Diluted Earnings Per share 

71. Quarterly/Interim Dividends Reported 
X72. Common share Outstanding Disclosed 

73. Changes in Capital 

74. Different Dividends for Multiple Classes of Share 

75. Earnings Per Share for Multiple Classes of Share 
X76. Majority Shareholders Disclosed 

77. Significant Shareholders 

78. Composition of Shareholdings 

Group G 
Special Items 

79. Earnings Per Share Numerator 

80. Earnings Per Share Denominator 



232 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 



81 . Notes to Accounts In 4th Edition but 

82. Disclosure of Subsequent Events Not Found in 2nd Edition 

83. Remuneration of Directors and Officers 

84. R&D Costs Group G 

85. Capital Expenditures SUPPLEMENTARY INFORMATION 

86. Financial Ratios Computed 85. Financial Summary 

87. List of Board Members and their Affiliations 

88. Exports Reported ^°'^- ** "X" Denotes Not Found in 4th Ed. 
X89. Graphs/Charts/Diagrams 

X90. Factory /Staff/Product Photographs 



NOTES 

1 . Cooke and Wallace (1990) test two models using two regression methods, ordinary least squares 
and modified generalized least squares. GNP is significant in one of the MGLS forms. 

2. Emenyonu and Gray (1992) discuss this issue relative to harmonization in the European Com- 
munity. 

3. Evindex is an overall indication of the profit opportunity in a country, based on its political envi- 
ronment, probability of being able to remit dividends and return capital to the foreign investor, 
and the extent to which nationals are given preference over foreign companies. Further details 
are contained in Cooke and Wallace (1990), page 89. 

4. The 1991 version uses 90 questions. 

5. Hofstede (1991) contains data from 53 countries and regions. It includes data from Hofstede's 
(1980) original study of 39 countries and subsequent data collected between 1980 and 1990. 

6. As the sample was relatively small, non-parametric tests were also carried out. The results using 
a Wilcoxon Rank Sum Test were identical to those of the parametric /-tests. 

7. Throughout this paper, the expressions "significant" or "significantly" indicate differences sig- 
nificant at a < .05 unless otherwise indicated . 

8. The samples used to test these relationships reflect the countries available in Cooke and Wallace 
(1990) and Adhikari and Tondkar (1992). 

REFERENCES 

Adhikari, A. and R. Tondkar. 1992. "Environmental Factors Influencing Accounting Disclosure 
Requirements of Global Stock Exchanges." Journal of International Finance, Management 
and Accounting, 4(2) (Summer): 75-105. 

Adler, M. and B. Dumas. 1975. "Optimal International Acquisitions." Journal of Finance, 20: 1-19. 

Alford, A. 1993. "Assessing Capital Market Segmentation: A Review of the Literature." in Hand- 
book of International Financial Integration, (edited by Stanley R. Stansell) Basil Blackwell. 

Alford, A. and W. R. Folks, Jr. 1996. "A Test for Increased Capital Market Integration." Financial 
Review, 1-23. 

Alford, A., Jones, J. Leftwich, R. and M. Zmijewski. 1993. "The Relative Informativeness of 
Accounting Disclosures in Different Countries." Journal of Accounting Research, Interna- 
tional Accounting Supplement, 3: 183-223. 

American Accounting Association. 1977. "Report of the Committee on International Accounting 
Operations and Education, 1975-1976." The Accounting Review, 52 (Supplement): 65-132. 

Atiase, R. K. 1988. "Accounting Disclosures Based on Company Size: Regulations and Capital Mar- 
kets Evidence." Accounting Horizons, 2(1) (March): 18-26. 



Corporate Financial Disclosure 233 



1994. "Trading Volume Reactions to Annual Accounting Earnings Announcements: The 



Incremental Role of Predisclosure Information Asymmetry." Journal of Accounting & Eco- 
nomics, 170) (May): 309-329. 

Ball, R. and P. Brown. 1968. "An Empirical Evaluation of Accounting Income Numbers." Journal of 
Accounting Research, 6 (Autumn): 159-178. 

Belkaoui, A. 1983. "Economic, Political and Civil Indicators and Reporting and Disclosure Ade- 
quacy: Empirical Investigation." Journal of Accounting and Public Policy, 2(3): 207-219. 

Belkaoui, A. and M. Maksy. 1985. "Welfare of the Common Man and Accounting Disclosure Ade- 
quacy: An Empirical Investigation." The International Journal of Accounting Education and 
Research, 20(2): 81-94. 

Center for International Financial Analysis and Research (CIFAR). 1991. International Accounting 
and Auditing Trends. 2nd Ed. (edited by V. Bavishi) Princeton, NJ. 

. 1993. International Accounting and Auditing Trends. 3rd Ed. (edited by V. Bavishi) Princ- 
eton, NJ. 

. 1995. International Accounting and Auditing Trends. 4th Ed. (edited by V. Bavishi) Princ- 



eton, NJ. 

Cooke, T. E. and R. S. O. Wallace. 1989. "Global Surveys of Corporate Disclosure Practices and 
Audit Firm: A Review Essay." Accounting and Business Research, 20(11): 47-58. 

. 1990. "Financial Disclosure Regulation and its Environment: Review and Further Analy- 
sis." Journal of Accounting and Public Policy, (Summer): 79-1 10. 

Donleavy, G. 1993. "Prospects for Accounting Harmonization in the Asian Pacific Region in the 
1990s." Presented at the International Seminar on Accounting, Center for International Edu- 
cation and Research in Accounting, University of Illinois, Champaign, IL. 

Doupnik, T. and S. Salter. 1993. "An Empirical Test of a Judgmental International Classification of 
Financial Reporting Practices." Journal of International Business Studies, 24( 1 ): 41-60. 

The Economist. 1994. "Emerging Market Indicators." (June 4-10): 1 10. 

The Economist. 1997. "Remember Emerging Markets." (February 22): 79-80. 

Emenyonu, E. and S. Gray. 1992. "EC Harmonisation: An Empirical Study of Measurement prac- 
tices in France, Germany and the UK." Accounting and Business Research, (Winter): 49-58. 

Errunza, V. and E. Losq. 1985. "International Asset Pricing under Mild Segmentation: Theory and 
Test.'' Journal of Finance, 40: 105-124. 

Frank, W. 1979. "An Empirical Analysis of International Accounting Principles." Journal of 
Accounting Research, 17(2): 593-605. 

Gernon, H. and R. S. O. Wallace, 1995. "International Accounting Research: A Review of its Ecol- 
ogy, contending theories and Methodologies." Journal of Accounting Literature, 14: 54-106. 

Gray, S. 1988. "Towards a Theory of Cultural Influence on the Development of Accounting Systems 
Internationally." Ai'acM.v, 3: 1-15. 

Gray, S., Campbell, L. and Shaw, J. eds. 1984. International Financial Reporting in 30 Countries. 
England: Macmillan. 

Hofstede, G. 1980. Culture's consequences: International differences in work related values. Bev- 
erly Hills: Sage Publications. 

. 1984. "Cultural Dimensions in Management and Planning." Asia Pacific Journal of Man- 
agement, (January). 

. 1991. Culture and organizations: Software of the mind. Maidenhead, UK: McGraw-Hill. 



International Financial Corporation. 1992. Emerging Stock Markets Factbook. Washington, DC. 
International Financial Corporation. 1996. Emerging Stock Markets Factbook. Washington. DC. 
Larson R, and S. Kenny. 1995. "An Empirical Analysis of International Accounting Standards, 

Equity Markets, and Economic Growth in Developing Countries." Journal of International 

Financial Management & Accounting, 6(2) (Summer): 130-157. 
Mueller, G. 1967. International Accounting. New York: Macmillan. 



234 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



Nair, R. D. and Frank. W. G. 1981. "The Harmonization of International Accounting Standards, 
1973-1979." The hiteniationalJournal of Accounting Education and Research. 77(1): 61-77. 

Needles. B., M. Powers, and L. Revsine. 1991. "Financial Disclosure and Institutional Characteris- 
tics: Pension Reporting Differences across Six Countries." International Journal of 
Accounting. 26: 190-205. 

Nobes. C. W. 198.: "An Empirical Analysis of International Accounting Principles: A Comment." 
Journal of Accounting Research, 79(1): 268-270. 

. 1983. "A Judgmental International Classification of Financial Reporting Practices." Jour- 
nal of Business Finance and Accounting, 70(1): 1-19. 

Nobes, C. and R. Parker. 1991. Comparative International Accounting. 3rd Ed. New York: Prentice 
Hall. 

Price Waterhouse International (PWI). 1979. International Surrey of Accounting Principles and 
Reporting Practices in 64 Countries, (edited by R. D. Fitzgerald. A. D. Stickler and T. R. 
Watts), Scarborough, Canada: Butterworths. 

Riahi-Belkaoui, A. 1995. "Accounting Information Adequacy and Macroeconomic Determinants of 
Economic Growth: Cross-CountPy' Evidence." Advances in International Accounting, 8. 67- 
77. 

Salter. S. B. and F. Niswander. 1995. "Cultural Influence on the Development of Accounting Sys- 
tems Internationally: A Test of Gray's (1988) Theory." Journal of International Business 
Studies. 26(2) (Second Quarter): 379-398. 

Tyra. A. 1970. "Financial Disclosure Patterns in Four European Countries." International Journal of 
Accounting. 6: 89-101. 

United Nations Development Program. 1988-1995. Human Development Report. New York: Oxford 
University Press. 

The Worid Bank. 1988-1995. World Development Report. New York: Oxford Uni\ersity Press. 



The International 
Journal of 
Accounting 



Ownership Effects on Audit-Detected Error 
Characteristics: An Empirical Study 
in an Emerging Economy 

K. Hung Chan and Phyllis L. L. Mo 

The University of California-Riverside, The Chinese University of Hong Kong 
and The Hong Kong Polytechnic University 



Key Words: Audit planning; emerging economy; error characteristics; ownership effects. 



Abstract: The presence of foreign subsidiaries and local companies, each playing a significant 
role in the local economy is a typical phenomenon in the business environment of emerging econ- 
omies. The objective of this study is to extend the research concerning the relationship between 
environmental factors and error occurrence by examining the impact of organizational ownership 
(foreign subsidiaries in Hong Kong vs. local Chinese companies) on error characteristics. The 
second objective of this study is to examine the empirical characteristics of errors in an emerging 
economy. Hong Kong, with references to relevant U.S. studies. Hong Kong is part of the Chinese 
Economic Area, a Big Emerging Market identified by the U.S. Department of Commerce. In the 
past two decades, while there have been numerous empirical studies on error characteristics for 
U.S. audit data, there is a scarcity of such studies using non-U. S. data. Due to differences in orga- 
nizational culture, nature of business transactions as well as accounting practices, the error 
characteristics detected in audit populations in emerging economies may be significantly different 
from those discovered in the U.S. Results of this study should facilitate audit efficiency and effec- 
tiveness through improved audit risk assessment for each ownership type company and should 
also alert management of multinational corporations to incorporate the potential differences in 
error patterns in designing and implementing effective accounting controls for companies outside 
the U.S. 



The Usefulness of Empirical Evidence on Error Characteristics 

Recent studies have suggested that knowledge of financial statement errors is an impor- 
tant component of audit expertise (Kinney, 1975; Libby, 1985; Libby & Frederick, 1990). 
For example, auditors are shown to rely on their knowledge of population error frequency 



Direct all correspondence to: Professor Phyllis L. L. Mo, Department of Accountancy, The Hong Kong Polytech- 
nic University. Hung Hom, Kowloon, Hong Kong, P.R.C.; Tel: (852) 2766-7034; Fax: (852) 2330-9845; E-Mail: 
acphmo@polyu.edu. hk. 

The International Journal of Accounting, Vol. 33, No. 2, pp. 235-261 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



236 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 2. 1 998 

in analytical review (Tuttle, 1996). With the knowledge of error characteristics, auditors 
would have more accurate anticipation of errors. As a result, the efficiency and effective- 
ness of audit would be enhanced by placing greater focus on areas that are most likely to 
have errors (Bedard & Biggs, 1991). However, individual auditors in general experience 
relatively few audits, about 10 to 15 per year (Abdolmohammadi, 1987) and detected 
errors in financial statements are rare events (Wright & Ashton, 1989). Even the most 
experienced auditors have limited direct experience with financial statement errors (Ash- 
ton, 1991). Therefore, empirical evidence provided by aggregating and examining the data 
in audit workpapers helps overcome auditors' limited knowledge of errors through direct 
experience. 

In the past two decades, numerous empirical studies have focused on the nature and fre- 
quency of errors detected in U.S. audit populations (e.g., Ramage et al., 1979; Johnson et 
al., 1981; Hylas & Ashton, 1982; Ham et al., 1985; Kreutzfeldt & Wallace, 1986; Bell & 
Knechel, 1994). With the increase in the availability of empirical evidence on error char- 
acteristics, auditors have been able to develop appropriate audit methodologies, sampling 
plans and associated estimators to infer total population errors (Neter & Loebbecke, 1975; 
Dworin & Grimlund, 1984; Chan, 1996). Information on the relative frequency of errors 
and the distribution of these errors are also useful for auditors to assess audit risk and to 
quantify prior judgments on the size of error in substantive testing (Steele, 1992, p. 102). 

Environmental Factors Affecting Error Characteristics 

More recent research has attempted to examine the relationship between error character- 
istics and environmental factors like internal control and audit firm type (Kreutzfeldt & 
Wallace, 1990; Icerman & Hillison, 1990, 1991; Wright & Wright, 1996; Petroni & Beas- 
ley, 1996). Information concerning the impact of internal control on error occurrence can 
enhance audit planning in different control strength settings. Our study examines the 
impact of different types of ownership on error characteristics. This information should be 
useful for auditors in audit planning for clients of different ownership and for corporate 
management in designing effective accounting controls. 

Lack of Non-U. S. Studies on Error Characteristics 

Although previous research in the U.S. has accumulated an extensive knowledge base of 
financial statement errors, little empirical evidence exists about the characteristics of errors 
detected in accounting populations outside the U.S. In particular, there is a scarcity of such 
studies in emerging economies. Johnson (1987) investigated the relationship between cli- 
ent characteristics and error type and size using U.K. data. Entwistle and Lindsay (1994) 
examined the existence, cause and discovery of income-affecting errors based on Canadian 
data. However, in these studies, no effort was made to compare the results with data from 
other countries. Houghton and Fogarty (1991) analyzed audit adjustments from U.S., U.K. 
and South African audit engagements to determine the environmental characteristics and 
conditions associated with the occurrence of errors. Their study focused primarily on the 
inherent risk characteristics of errors and had devoted little attention to investigating coun- 
try differences. 



Ownership Effects on Audit-Detected Error 237 

The Growth of Emerging Economies and the Global Audit Market 

Two megatrends in the decade ahead are the globalization of business and the growth of 
the emerging markets (Naisbitt & Aburdene, 1990). The Big Emerging Markets (BEMs) in 
Asia, which include the Chinese Economic Area (China, Hong Kong and Taiwan), attract 
enormous foreign direct investments from the world's most competitive multinational cor- 
porations (U.S. Department of Commerce, 1995). Of the world's ten largest recipients of 
foreign direct investment in the period from 1988 to 1992, seven were from the BEMs. Dur- 
ing the period 1989 to 1993, U.S. direct investment in the BEMs increased by 125 percent 
as compared to the 23 percent increase for the G-7 countries (Garten, 1996). This rapid 
growth of multinational business activities has also accelerated the development of the glo- 
bal audit market. In order to serve these multinational clients, large international accounting 
firms, in particular the U.S. -based Big Six have increased their operations in these emerging 
markets directly or through affiliates. The effects of globalization on audit business are 
many. For example, differences may exist cross-culturally on the notions of what constitute 
appropriate internal controls and reliability of accounting data. Also, differences in the 
assessment of risk level and materiality may create barriers for implementing unifomi audit 
approaches for international accounting firms. The current concern regarding the issues on 
audit risk, materiality and audit strategies is also reflected by the very high ranking of 
importance among auditing topics by accounting academicians (Bryan & Smith, 1997). 

The presence of foreign subsidiaries and local companies, each playing a significant role 
in the local economy, is one of the common characteristics of business environment in 
emerging economies. Given the potential differences in organizational culture between 
foreign subsidiaries and local companies (Chow & Hwang, 1995), the error characteristics 
may be different for different ownership companies. The objective of this study is to exam- 
ine the impact of different types of ownership (foreign subsidiaries vs. local companies) on 
audit-detected error characteristics. This information should be useful for auditors in for- 
mulating audit strategies for clients of different ownership. With the globalization of 
business, information about the differences in error attributes should also be useful for 
management of multinational corporations to design and implement effective administra- 
tive and accounting controls for subsidiaries outside the U.S. 

Due to differences in business practices, nature of business transactions and accounting 
practices, the error characteristics detected in accounting populations in emerging econo- 
mies may also be significantly different from those discovered in the U.S. Thus, the second 
objective of this study is to add to the profession's knowledge by providing empirical evi- 
dence on error characteristics in an emerging economy — Hong Kong. References will be 
made to the comparable results of relevant U.S. studies. Knowledge of error characteristics 
in different environments has the potential to enhance audit effectiveness and efficiency 
through improved audit risk assessments and the design of appropriate audit procedures 
tailored for the audit environment. 

The remainder of this paper is organized as follows. Background literature and research 
hypothesis are discussed in the next section. Common error characteristics in the U.S. are 
then reviewed, followed by a description of the research method. The paper proceeds to 
analyze the empirical characteristics of errors detected in Hong Kong and compare them 
with relevant U.S. studies. Finally, the paper concludes with a summary of results and 
discussions. 



238 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 2, 1 998 

BACKGROUND LITERATURE AND RESEARCH HYPOTHESIS 
The Study of Error Characteristics in Hong Kong 

Hong Kong was chosen for this study because of its unique characteristics as an emerg- 
ing economy with a rapid growing audit market for international accounting firms (Lee, 
1994), and because of its long tradition as a meeting point between East and West. Hong 
Kong has emerged as an international finance and trade center over the past several 
decades and is part of a Big Emerging Market identified by the U.S. Department of Com- 
merce (1995). It is ranked the world's 8th largest trading entity in terms of total trade 
values in 1995 (Economic Information and Agency, 1996). The number of companies 
listed in the Hong Kong Stock Exchange has grown by over 60% in the past decade (The 
Stock Exchange of Hong Kong, 1986, 1996). Total market capitalization has increased 
more than tenfold from US$35,769 million to US$445,636 million during the same period. 
Furthermore, since the adoption of open door policy by the People's Republic of China 
(P.R.C.) in 1978, many multinational companies have established subsidiary companies in 
Hong Kong as a stepping stone for entering the China market. Among the Big Emerging 
Markets, the Chinese Economic Area (China, Hong Kong and Taiwan) represents by far 
the largest and one of the most important emerging markets both now and in the foresee- 
able future. According to a 1993 World Bank estimate, the combined gross domestic 
product of this area in the year 2002 will total approximately US$10 trillion. This figure 
would represent the largest single regional proportion, surpassing the U.S.' projected GDP 
of US$9.7 trillion (Garten, 1996). In view of these significant developments. Big Six have 
rapidly expanded their operations in both Hong Kong and China to meet the surged 
demand. Five of the Big Six have more than 1,000 professional staff members in Hong 
Kong with the smallest one having about 700 (SCMP, 1997). 

Impact of Ownership Structure on Error Characteristics 

Accounting and management control systems are seen to be manifestations of culture 
and reflect basic cultural assumptions (Hofstede, 1991, p. 155). People of different national 
cultures have different preferences for, and reactions to, management practices. Accord- 
ingly, management philosophy, organizational culture and internal control systems are 
different for different cultural companies (Bimberg & Snodgrass, 1988). Chinese organi- 
zations are characterised by direct supervision and emphasize co-ordination through direct 
personal intervention of the owner and his/her relatives (Hofstede. 1991, p. 153). The con- 
trol environment and internal control system of Chinese companies are different from that 
of more formalized U.S. companies. 

Hong Kong has the unique characteristics of having a mixture of Western and Chinese 
business cultures. The types of companies present in Hong Kong include subsidiaries of 
multinational companies and local Chinese companies. To facilitate better co-ordination, 
comparability and control, multinational corporations tend to develop and maintain home- 
country organizational cultures in overseas operations. This kind of coercive institutional 
isomorphism as suggested by DiMaggio and Powell (1983) results in the phenomenon that 
subsidiary companies often adopt parent company accounting practices, internal control 



Ownership Effects on Audit-Detected Error 239 

system, performance and evaluation policies. Prior studies provide evidence that foreign 
subsidiaries often transplant home-country organizational cultures that differ from those of 
the local populace (Soeters & Schreuder, 1988; Chow & Hwang, 1995; Firth, 1996). 
Hence, the organizational culture of foreign subsidiaries in Hong Kong are likely to be dif- 
ferent from those of local Chinese companies. 

Since the strength of internal controls and management philosophy correlate signifi- 
cantly with the likelihood and nature of financial statement errors (e.g., Icerman & 
Hillison, 1990; Wallace & Kreutzfeldt, 1995; Wright & Wright, 1996). it is expected that 
the nature and frequency of errors detected would be different for different ownership com- 
panies. For example, with more formalized internal control systems, foreign subsidiaries in 
Hong Kong are expected to have less mechanical errors and lower error rates than local 
Chinese companies. To test the difference in error characteristics between different owner- 
ship structure, the following general hypothesis (in null form) is generated: 

Ownership Effect 

Hq: There are no significant differences in the direction, magnitude, variability, 
types, frequency and tainting distribution of errors detected between foreign 
subsidiaries and local Chinese companies in Hong Kong. 

Comparison with U.S. Studies 

Chinese society is characterised by having large power distance, strong uncertainty 
avoidance, less masculinity, long-term and collectivism orientated (Chow et al., 1995). The 
societal values of strong avoidance and large power distance prescribe that people would 
tend to adhere to rules and regulations. In an organizational context, staff would follow the 
prescribed operational procedures as closely as possible. According to Gray (1988), 
accounting values most relevant to the enforcement of accounting systems are profession- 
alism and uniformity. Hong Kong is classified as having lower professionalism and greater 
preference for uniformity than Anglo-American countries. These differences in societal 
and accounting values in Hong Kong may affect the occurrence of financial statement 
errors. For example, given the fact that foreign subsidiaries often adopt parent company 
accounting practices, internal control system and transplant home-country organizational 
culture as discussed above, the stricter compliance with rules and regulations by the Chi- 
nese accounting personnel in foreign subsidiaries in Hong Kong may lead to less routine 
errors compared to companies operating in Anglo-American countries. 

Results of the Hong Kong sample, particularly foreign subsidiaries are analyzed with 
reference to Ham et al. (1985) and other U.S. studies to examine the country differences 
and to determine the universality of some error characteristics found in prior literature. 
Results in Ham et al. ( 1985) were chosen as the main reference for U.S. studies because of 
the similarities of the data sets. The nature of the companies selected in this study resem- 
bles closely that of Ham et al. (1985) in terms of firm size, as well as to the fact that both 
samples consist of private companies. However, because of the difference in time periods 
of the samples studied (Hong Kong: 1990-1992. Ham et al.: five annual audits prior to 
1985) and other extraneous factors, no formal hypothesis is set to test the level of signifi- 



240 THE INTERNATIONAL JOURNAL OF ACCOUNTING VoL 33, No. 2, 1 998 

cance of the difference in the error characteristics between foreign subsidiaries in Hong 
Kong and Ham et al. (1985). It should be mentioned that as prior error studies at different 
time periods (1975-1996) show consistency in major error characteristics, including error 
directions, error magnitude and frequency (see next section), the different time periods of 
the samples studied may not be a hindrance for general comparison. 

ERROR CHARACTERISTICS IN PRIOR STUDIES 

Previous research on error characteristics includes empirical studies on different attributes 
of error detected, such as the causes, frequency and distribution of errors, and the environ- 
mental effects on error characteristics. The great majority of prior studies provide evidence 
on error characteristics of U.S. accounting populations (e.g., Ramage et al., 1979; Johnson 
et al., 1981; Hylas & Ashton, 1982; Kreutzfeldt & Wallace, 1986; Icerman & Hilhson, 
1990, 1991) with a few exceptions for Canada, U.K. and South Africa (e.g., Johnson, 1987; 
Entwistle & Lindsay, 1994; Houghton & Fogarty, 1991). Results of these studies suggest 
that accounting populations do possess a number of common characteristics. Some of the 
more salient features for auditing are as follows: 

1. Populations may have overstatement errors only, understatement errors only, or 
both. Most errors in accounts receivable audit are overstatements, while in inventory 
audits, errors tend to be more evenly distributed between overstatements and under- 
statements (Johnson et al., 1981; Ham et al., 1985; Willingham &. Wright, 1985). 
Detected accounts payable and purchase errors tend to be understatements while 
sales errors tend to be overstatements (Ham et al., 1985; Kreutzfeldt & Wallace, 
1986). With the exception of inventory, the results confirm the common assumption 
made by auditors that assets and revenue errors are likely to be overstatements while 
liabilities and expense errors are likely to be understatements. 

2. Cutoff and mechanical errors represent the most likely source of material financial 
statement error for inventory, accounts receivable and accounts payable (Hylas & 
Ashton, 1982; Ham et al., 1985; Bell & Knechel, 1994; Entwistle & Lindsay, 1994). 

3. The error incidence (the proportion of accounts that are in error) varies significantly 
among accounting populations and the error rates in inventory audits tend to be sub- 
stantially higher than those for accounts receivable (Johnson et al., 1981; Ramage et 
al., 1979). 

4. The distributions of taintings (the proportion of a dollar unit that is in error) are non- 
normal and characterised by pronounced discontinuities at +100%, particularly so 
for accounts receivable for which 100% overstatement errors are frequently present 
(Johnson et al., 1981; Neter & Loebbecke, 1975). One of the explanations suggested 
for this phenomenon is that a 100% overstatement tainting may reflect a single trans- 
action, while smaller taintings may reflect accounts with numerous transactions. An 
entire account receivable may not be confirmed due to dispute over one invoice or a 
confirmation cut-off problem. 

Despite the above common features, certain inconsistencies were found among prior 
studies. For example, a number of studies found that errors in accounts receivable favour 



Ownership Effects on Audit-Detected Error 241 

overstatements (Ramage et al., 1979; Johnson et al., 1981; Kreutzfeldt & Wallace, 1986; 
Icerman & Hillison, 1990, 1991), but Johnson (1987) found only a slight bias toward 
overstatements. 

In addition, the occurrence of errors in financial statements is found to be affected by a 
number of environmental factors like inherent and internal control risks. For example, 
Kreutzfeldt and Wallace (1986), Wright and Wright (1996) found that as assessed internal 
control weakens, the frequency of errors increases and the adjustments are more likely to 
have an effect on income. Icerman and Hillison (1990) also provided evidence that the 
strength of internal control correlates negatively with error rates. 

In summary, previous research has accumulated an extensive knowledge base of finan- 
cial statement errors predominantly from North American data. However, there are very 
limited findings regarding the nature, frequency and distribution of errors across different 
cultural settings. In particular, there has been no studies on error characteristics in the Chi- 
nese business culture. 

RESEARCH METHODOLOGY 

Data Collection 

Data in this study were obtained from an international accounting firm in Hong Kong. 
All major prior empirical studies on error characteristics adopt this single-firm approach of 
data collection (Ramage et al., 1979; Ham et al.. 1985; Kreutzfeldt & Wallace. 1986, 1990; 
Wright & Ashton, 1989; Wallace & Kreutzfeldt, 1995; Wright & Wright. 1996, 1997). 
Testing the differences in error characteristics detected for samples from the same account- 
ing firm is a rather conservative approach as the error differences may be understated due 
to the clientele effect. It is possible that companies choosing the same accounting firm may 
tend to have similar error characteristics. Though this single-firm approach may have lim- 
ited the examination of the differences in the effects of ownership that would have been 
possible had the audit files been selected from more than one international accounting firm, 
this is a good procedure to facilitate the comparability of data and to control for the con- 
founding effects of the differences in the audit client portfolios and audit procedures across 
different accounting firms. 

One of the distinguishing features of this study is the control over the data collection pro- 
cess yielding more reliable results. As the data were extracted directly by the researchers 
from the audit working papers, this data collection procedure helps reduce the potential 
variation in the definition of errors among auditors. For example, one auditor may consider 
additional provision for bad debts as an error whereas another may not. Since this study 
focused on balances before any adjustments for such provisions, it consistently excluded 
all these "errors" from the data analysis and eliminated this potential source of variation. 
More important is that this direct assessment of data allowed the researchers to identify the 
causes of the errors and also to understand how auditors dispose the errors found. Without 
detailed review of the working papers, it is hard to identify the unreconciled differences of 
customer accounts not investigated by auditors due to their perceived immateriality, as will 
be explained later. Most of the previous studies collected data by sending questionnaires to 
accounting firms (e.g., Johnson et al., 1981; Kreutzfeldt & Wallace, 1986, 1990; Entwistle 



242 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 

Table 1 . Number of Audits Used in This Study Categorized by Ownership Type and Firm Size 







Average Net Sales (Million U.S. Dollars) 




Small 


Medium 




% Distribution by 


Ownership Type 


(<$10) 


(>$10) 


Total 


Ownership Type 


Foreign subsidiaries 


62 


37 


99 


61% 


Local Chinese companies 


38 


24 


62 


39% 


Total 


100 


61 


161 


100% 


% distribution by size 


62% 


38% 


100% 




(Net Sales) 










% distribution by ownership type 










for each size 










(Foreign Subsidiaries v. 


62% \ 


61% V. 






Local Chinese Firms) 


38% 


39% 







& Lindsay, 1994). Only Ham et al. (1985) had more control over the data collection as they 
were physically present to supervise and answer the questions of the audit staff who col- 
lected the data for them. 

Our data include audit files of three annual audits (1990-1992) for 60 companies. The 
sample reflects a wide range of firms in terms of size and industry. Using average net sales 
over the three years (1990-1992), company size ranges from US$1.2 million to US$450 
million. All companies in the sample are in non-regulated industries which include a cross- 
section of manufacturing and service-oriented firms. Regarding the ownership. 37 compa- 
nies are foreign subsidiaries (of which 29 are subsidiaries of U.S. companies) and the other 
23 are local Chinese companies. The foreign subsidiaries are similar to the local Chinese 
companies in terms of size (net sales), and both include a cross-section of service and man- 
ufacturing firms. Some of the companies had less than three years' audit files available for 
the authors' examination because of a change in auditors. Therefore, the number of annual 
audit files used in this study fell from 180 to 161. The data of Ham et al. (1985) were from 
the audit files of five annual audits for each of 20 companies selected by Price Waterhouse 
(Table 1). 

Observations were collected from three accounting categories, namely, accounts receiv- 
able, accounts payable and inventory. The balances of these three ledger accounts usually 
have a significant impact on the financial statement and are more vulnerable to have errors 
(Hylas & Ashton, 1982; Wright & Ashton, 1989; Entwistle & Lindsay, 1994). Like the 
study by Ham et al. (1985), all tests reported in these audits had been performed on samples 
selected on a judgmental basis. This is consistent with a recent survey on Hong Kong CPA 
firms which revealed that judgmental sampling was predominantly used by practitioners 
(Ng & Ho, 1993), and that most of the companies in Hong Kong are small to medium-sized 
(Sit & Wong. 1989, p.27). 

Definition of Errors 

An error is defined as a non-zero difference between the book and the audit values for an 
item. The book value is the amount recorded by the client before audit and the audit value 



Ownership Effects on Audit-Detected Error 243 

is the amount deemed by the auditor to be the correct value for that item. No differentiation 
was made between adjusting and non-adjusting errors as excluding the latter would distort 
the underlying error patterns. 

In this study, classification errors refer to the situation where the items tested have been 
posted to a wrong accounting category. An example of misclassification would be fixed 
asset being included as inventory. These errors involve balance-sheet types of accounts and 
would not have significant effect on net income. This definition of classification errors is 
similar to that defined by Ham et al. (1985, p.391). 

EMPIRICAL CHARACTERISTICS OF ERRORS IN HONG KONG 

Direction of Errors 

The directions of errors detected in accounts receivable, accounts payable, and inventory 
are summarised in Table 2. According to the above definition for classification errors, 
occurrence of this type of error would also have the effect of overstating or understating the 
accounts balance. However, they are classified as a separate category for the discussion of 
directions of errors due to their special nature. 

Ownership Effect 

Chi-square tests were performed to test the difference in the distributions of the direction 
of errors between foreign subsidiaries and local Chinese companies. When classification 
errors were excluded, results for foreign subsidiaries in Hong Kong were significantly dif- 
ferent from local Chinese companies for accounts payable only. When classification errors 
were included in the Chi-square tests, significant differences were found for accounts pay- 
able and inventory. The significant difference in inventory between foreign subsidiaries 
and local Chinese companies is due to the large number of classification errors found in 
foreign subsidiaries. Reasons for this finding are explored in the types of errors section to 
be discussed later. 

Accounts payable errors found in local Chinese companies tend to be overstatement 
errors while the errors found in foreign subsidiaries tend to be understatement errors. Most 
of the overstatement errors found in local Chinese companies were mainly mechanical mis- 
takes which were related to the purchases of raw materials from suppliers in the People's 
Republic of China (P.R.C.). The companies were required to make prepayments to those 
suppliers before goods were received. When vendors' invoices were received, the account- 
ing staff of the companies recorded the acquisitions in accounts payable without netting off 
from prepayments. Although foreign subsidiaries may make similar errors when dealing 
with P.R.C. suppliers, in general, they have relatively fewer transactions with these suppli- 
ers. This finding reflects the importance of auditors' understanding about the culture and 
practices of clients' business environment in detecting errors. This also has the implication 
for management to design and implement effective controls to prevent duplicate payment 
to suppliers. 



244 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



Table 2. Direction of Errors 





Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong Total 


Number of 


# % 


# % 


(a) Accounts Receivable 



Overstatement Errors 


71 


57 


24 


58 


95 


57 


Understatement Errors 


36 


29 


8 


20 


44 


27 


Classification Errors 


18 


14 


9 


22 


27 


16 


Total Number of Errors 


125 


100 


41 


100 


166 


100 



Notes: Chi-square test for the difference in the direction of errors between foreign subsidiaries and local Chinese firms: 
X" (including classification errors) (d.f =2) = 3.440; 
X' (excluding classification errors) (d.f =1) = 1.947. 

(b) Accounts Payable 



Overstatement Errors 


51 


41 


61 


49 


112 


45 


Understatement Errors 


67 


53 


39 


32 


106 


42 


Classification Errors 


8 


6 


24 


19 


32 


13 


Total Number of Errors 


126 


100 


124 


100 


250 


100 



Notes: Chi-square test for the difference in the direction of errors between foreign subsidiaries and local Chinese firms: 
X' (including classification errors) (d.f =2) = 12.659*; 
X^ (excluding classification errors) (d.f =1 ) = 6.49*. 
* Reject the null hypothesis that the proportions are the same at the 0.05 level. 

(c) Inventory 



Overstatement Errors 


139 


31 


114 


57 


253 


39 


Understatement Errors 


125 


28 


83 


42 


208 


32 


Classification Errors 


185 


41 


3 


1 


188 


29 


Total Number of Errors 


449 


100 


200 


100 


649 


100 



Notes: Chi-square test for the difference in the direction of errors between foreign subsidiaries and local Chinese firms: 
X" (including classification errors) (d.f =2) = 48.577*; 
X~ (excluding classification errors) (d.f.= l) = 0.731. 
* Reject the null hypothesis that the proportions are the same at the 0.05 level. 

Comparison with U.S. Studies 

Except for accounts payable, results of the Hong Kong sample are consistent with prior 
studies. Accounts receivable errors tenti to be overstatement errors while inventory errors 
are fairly balanced between overstatements and understatements. Detected accounts pay- 
able errors in this study are quite evenly spread between overstatements and 
understatements and this is different from the results of U.S. studies for which accounts 
payable tends to be understated (Johnson et al., 1981; Ham et al., 1985; Kreutzfeldt & Wal- 
lace, 1986; Icerman & Hillison, 1990). This phenomenon is a net result of the ownership 
effect on accounts payable as the understatement errors found in foreign subsidiaries were 
balanced by the overstatement errors found in local Chinese companies. 

Focusing on foreign subsidiaries, directions of errors found are consistent with Ham et 
al. (1985) and other prior studies for all three accounting categories when classification 
errors were excluded from the comparison. However, when classification errors were 
included, significant differences were found for accounts receivable and inventory. Thus, 
classification errors represent the major cause for the differences between foreign subsid- 
iaries in Hong Kong and Ham et al. (1985). 



Ownership Effects on Audit-Detected Error 245 

In summary, these results indicate that the direction of errors of foreign subsidiaries dif- 
fers more from local companies than from U.S. companies. This result confirms our earlier 
expectation of cultural influence. 

Magnitude of Errors 

To test whether there is any significant difference in error magnitude among accounting 
categories, absolute values of the mean net errors of each accounting category were ranked 
from the largest (Rank 1) to the smallest (Rank 3) for each company. 

Ownership Effect 

Table 3 shows that the mean ranks among the three accounting categories are more dis- 
persed in local Chinese companies than in foreign subsidiaries. Results of the Chi-square 
tests show that the distributions of the relative magnitude of mean errors for foreign sub- 
sidiaries differ significantly from those of local Chinese companies for accounts receivable 
and inventory. Compared to foreign subsidiaries, local Chinese companies had smaller 
mean errors for accounts receivable and inventory. To better understand whether these dif- 
ferences in error magnitudes are due to the differences in the relative significance of 
accounts receivable to overall sales or of inventory to overall purchases, t-tests were con- 
ducted to test the differences in the mean ratios of accounts receivable to sales and of 
inventory to purchases between foreign subsidiaries and local Chinese companies respec- 
tively. Results of the tests indicate that the mean ratio of accounts receivable to sales for 
foreign subsidiaries (0.25) is significantly greater than that of local Chinese companies 
(0.1 1) (/? < 0.0001), whereas there is no significant difference in the mean ratio of inven- 
tory to purchases (0.12 v. 0.15, p = 0.1536) between foreign subsidiaries and local Chinese 
companies. Hence, plausible explanation for the smaller mean errors for accounts receiv- 
able found in local Chinese companies may be due to lower accounts receivable balance as 
a percentage of total sales because Chinese companies tend to have more cash sales. 

Comparison witfi U.S. Studies 

As shown in Table 3, accounts payable errors in the Hong Kong sample are on average 
the largest of the three accounting categories and accounts receivable errors have the small- 
est mean ranking. Foreign subsidiaries in Hong Kong had larger inventory errors but 
smaller accounts receivable errors. These results differ clearly from the U.S. studies 
(Johnson et al., 1981; Ham et al., 1985) where accounts receivable errors are the largest and 
inventory errors are the smallest. 

Variability of Errors 

Similar to the magnitude of errors, the variability of errors as measured by the coeffi- 
cients of variation among the three accounting categories were ranked from the largest 
(Rank 1) to the smallest (Rank 3) for each company. The objective of this ranking is to 
determine whether the errors of any one accounting category are more highly variable than 



246 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

Table 3. Relative Magnitude of Mean Errors in Absolute Dollars 





Foreign Subsidiaries 

# % 


Local Chinese Firms 


Hong Kong Total 


Rank 


# % 


# % 


(a) Accounts Receivable 



4 


20 





50 


6 


30 



13 


6 


17 


27 


14 


40 


60 


15 


43 



8 


40 


8 


53 


16 


46 


7 


35 


5 


33 


12 


34 


5 


25 


2 


14 


7 


20 



(1) (greatest) 

(2) 

(3) (smallest) 

Mean Rank 2.1 2.5 2.3 

Chi-square test for the difference in distributions of relative magnitude of mean errors between foreign subsidiaries and local Chi- 
nese firms: x" (d.f.=2) = 18.36*. 
*Reject the null hypothesis thai the distribution of relative magnitude of mean errors are the same at the 0.05 level. 

(b) Accounts Payable 
(1) (greatest) 
(2) 

(3) (smallest) 
Mean Rank 1.9 1.6 1.7 

Chi-square test for the difference in distributions of relative magnitude of mean errors between foreign subsidiaries and local Chi- 
nese firms: x" (d.f.=2) = 4.98. 

(c) Inventory 
(1) (greatest) 
(2) 

(3) (smallest) 
Mean Rank 1.8 1.9 1.9 

Chi-square test for the difference in distributions of relative magnitude of mean errors between foreign subsidiaries and local Chi- 
nese firms: x" (d.f.=2) = 8.78* 
*Reject the null hypothesis that the distribution of relative magnitude of mean errors are the same at the 0.05 level. 

Note J: To illustrate the ranking process, the mean errors in absolute dollars and their ranks for Company # 4 are shown as 
below: 



9 


47 


5 


33 


14 


41 


4 


21 


6 


40 


10 


29 


6 


32 


4 


27 


10 


30 





Accounts receivable 


Accounts pavable 


Inventory 


Mean error 


154,874.64 


2,700.00 


79,704.09 


Rank 


1 


3 


-> 



For example, results in Table 3(a) can be interpreted as follows. There were four foreign subsidiaries in Hong Kong 
whose mean errors in accounts receivable are greater than their mean errors in accounts payable and inventory. There 
were six foreign subsidiaries in Hong Kong whose mean error in accounts receivable are smaller than their mean errors 
in accounts payable and inventory. 

Note 2: Companies having errors in one accounting category only were excluded from the analysis. 



the errors of other accounting categories. Table 4 shows the results of the distributions of 
the relative degree of variability for the Hong Kong sample. 

Ownership Effect 

The underlying distributions of the degree of variability differ significantly between for- 
eign subsidiaries and local Chinese companies for accounts payable according to our Chi- 
square tests at a = 0.05. Accounts payable errors in foreign subsidiaries vary more than that 
in local Chinese companies. This may be explained by the difference in the distributions of 
the types of errors found (see Table 5. Part b). For foreign subsidiaries, there were a signif- 



Ownership Effects on Audit-Detected Error 247 

Table 4. Relative Degree of Variability 





Foreign Subsidiaries 

# % 


Local Chinese Firms 


Hong Kong Total 


Rank 


# % 


# % 


(a) Accounts Receivable 






53 


6 


40 


16 


47 


5 


26 


6 


40 


11 


32 


4 


21 


3 


20 


7 


21 



(1) (greatest) 4 20 4 27 8 23 

(2) 6 30 5 33 11 31 

(3) (smallest) 10 50 6 40 16 46 
Mean Rank 2.3 2.1 2.2 

Chi-square test for the difference in the distributions of relative degree of variability between foreign subsidiaries and local Chi- 
nese firms: x" (d.f.=2) = 2.30. 

(b) Accounts Payable 

(1) (greatest) 7 35 5 36 12 35 

(2) 10 50 4 28 14 41 

(3) (smallest) 3 15 5 36 8 24 
Mean Rank 1.8 2.0 1.9 

Chi-square test for the difference in the distributions of relative degree of variability between foreign subsidiaries and local Chi- 
nese firms: x^ (d.f.=2) = 14.87* 
* Reject the null hypothesis that the distributions of relative degree of variability are the same at the 0.05 level. 

(c) Inventory 
(1) (greatest) 
(2) 

(3) (smallest) 
Mean Rank 1.7 1.8 1.7 

Chi-square test for the difference in the distributions of relative degree of variability between foreign subsidiaries and local Chi- 
nese firms: x" (d.f.=2) = 4.81 

Note: Companies having errors in one accounting category only were excluded from the analysis. 

icant number of large cutoff errors and immaterial "not identified" errors. Therefore, the 
overall error magnitude vary greatly. 

Comparison with U.S. Studies 

The overall findings of the present study as shown in Table 4 indicate that accounts 
receivable errors in the Hong Kong sample have the smallest variability whereas inventory 
has the largest. The high variability of inventory errors may be due to the difference in error 
magnitude found between testing individual inventory items and year-end cutoff problems. 
For instance, average pricing error of individual inventory items for one of the manufactur- 
ing companies in the sample was around US$100, but the cutoff error was more than 
US$40,000, and the resulting coefficient of variation was about 24. 

Ham et al. (1985) found no difference in the variability of errors among accounting cat- 
egories based on the standard deviations of the enor distributions (Ham et al.. 1985. Table 
4, p. 392). However, relative measure of the dispersion is a more appropriate index to use 
to compare variability. To facilitate comparison, the ranking of Ham et al.'s results was 
reconstructed using the coefficient of variation of the errors. Results of the revised ranking 
suggest that inventory errors are more highly variable than the errors of the other account- 
ing categories, consistent with the Hong Kong results. 



248 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 2, 1 998 

Types of Errors 

The new methodology of direct assessment of data in audit working papers allows us to 
have a more in-depth examination of different types of errors in this study. The types of 
errors were classified in more details than the Ham et al.'s study by including errors due to 
discrepancies "not identified". This type of error has not been investigated in prior studies. 
These errors occur mainly when the book value of an item audited does not agree with the 
value confirmed by customer or supplier. During substantive testing, auditors would rec- 
oncile the material difference but very often no further investigation would be done if the 
unreconciled difference is perceived to be immaterial. However, the concept of materiality 
should not be used at this stage as small difference may be due to netting off of large over- 
statement and understatement of balances in the customer account. 

Table 5 shows that 37% and 24% of errors found in accounts receivable and accounts 
payable respectively of the Hong Kong (total) sample, fall into the "Not identified" type. 
For foreign subsidiaries, these percentages are 38% and 32% respectively for accounts 
receivable and accounts payable. The significant number of unreconciled account balances 
found should alert management and auditors to the possible existence of fraud. Control 
procedures should be strengthened in these areas to prevent and detect any fraudulent 
transactions. 

Ownership Effect 

Results in Table 5 show that the hypothesis can be rejected for all three accounting cat- 
egories at 5% significance level, indicating a significant difference between local Chinese 
companies and foreign subsidiaries on the types of errors found. Cutoff errors for accounts 
payable in local Chinese companies occurred less frequently and represented insignificant 
dollar amount. The unique business practices of P.R.C. suppliers requiring prepayments 
and issuance of letters of credit for purchases explain this phenomenon. It is because com- 
panies would be more alert to the timing of transactions and less unrecorded liability would 
be resulted if purchases made near year end were not recorded in the proper period. More 
and larger mechanical errors as well as inventory pricing and valuation errors were found 
in local Chinese companies than in foreign subsidiaries. These differences may be attrib- 
uted to weaker internal control systems established in local Chinese companies. 

Comparison witti U.S. Studies 

In addition to the difference in "Not identified" errors discussed above, classification 
errors represent another major cause of difference between the Hong Kong sample and 
Ham et al. (1985). In particular, classification errors in Hong Kong represented 13% to 
29% of the total number of errors found in the three accounting categories. Classification 
errors in accounts receivable include misclassifying promotional charges claimable from 
customers, claims settlement receivable etc. as accounts receivable. For accounts payable, 
classification errors normally arise when sales discounts payable to customers are included 
in accounts payable. Whereas for inventory, classification errors mainly result from the 
inclusion of fixed assets in inventory. This type of error was minimal in Ham et al.'s (1985) 
investigation. 



Ownership Effects on Audit-Detected Error 249 

Table 5. Types of Errors 



(a) Accounts Receivable 


Number of 


Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong Total 


(frequency) 


# 


% 


# 


% 


# 


% 


Cutoff 


28 


22 


4 


10 


32 


19 


Pricing & Valuation 


12 


10 


10 


24 


22 


13 


Mechanical 


6 


5 


2 


5 


8 


5 


Classification 


18 


14 


9 


22 


27 


16 


Not identified 


47 


38 


14 


34 


61 


37 


Others 


14 


11 


2 


5 


16 


10 


Total 


125 


100 


41 


100 


166 


100 


Chi-square test for the difference 


in the distributions of types of 


errors (frequency) 


between foreig 


n subsidiaries and local Chinese 


firms: x-(d.f.=5)= 14.515*. 














Absolute Error Amount 


Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong 


Total 


($000) 


US$ 


% 


US$ 


% 


US$ 


% 


Cutoff 


3908 


68 


134 


21 


4042 


63 


Pricing & Valuation 


73 


1 


30 


4 


103 


2 


Mechanical 


548 


10 


81 


12 


629 


10 


Classification 


415 


7 


266 


41 


681 


11 


Not identified 


458 


8 


135 


21 


593 


9 


Others 


335 


6 


8 


1 


343 


5 


Total 


5737 


100 


654 


100 


6391 


100 



Chi-square test for the difference in the distributions of types of errors (absolute amount) between foreign subsidiaries and local 

Chinese firms: y} (d.f.=2) = 46.746*. 

* Reject the null hypothesis that the distributions of types of errors are the same at the 0.05 level. 

Note: Cells with expected value less than 5% were grouped with the next cells for Chi-square test. 

(b) Accounts Payable 



Number of 


Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong Total 


(frequency) 


# 


# % 


# % 


Cutoff 


24 19 


10 8 


34 14 


Pricing & Valuation 


17 13 


11 9 


28 11 


Mechanical 


22 18 


47 38 


69 28 


Classification 


8 6 


24 19 


32 13 


Not identified 


40 32 


22 18 


62 24 


Others 


15 12 


10 8 


25 10 


Total 


126 100 


124 100 


250 100 



Chi-square test for the difference in the distributions of types of errors (frequency) between foreign subsidiaries and local Chinese 
firms: x* (d.f.=4) = 13.147* 



Absolute Error Amount 


ruiciyn ou 


u^iuictiieii 


i-uuai ^niin 


:;:>t; riiini> 


nuny r\ui 


ly 1 uicti 


($000) 


US$ 


% 


US$ 


% 


US$ 


% 


Cutoff 


1738 


44 


80 


2 


1818 


21 


Pricing & Valuation 


467 


12 


25 





492 


6 


Mechanical 


458 


12 


1603 


34 


2061 


24 


Classification 


629 


16 


2908 


61 


3537 


40 


Not identified 


99 


2 


107 


2 


206 


2 


Others 


569 


14 


36 


1 


605 


7 


Total 


3960 


100 


4759 


100 


8719 


100 



Chi-square test for the difference in the distributions of types of errors (absolute amount) between foreign subsidiiuies and local 

Chinese firms: x" (d.f.=2) = 50.739* 

* Reject the null hypothesis that the distributions of types of errors are the same at the 0.05 level. 

Note: Cells with expected value less than 5% were grouped \\ ith the next cells for Chi-square test. 

(continued) 



250 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 



Table 5. Continued 



(c) Inventory 


Number of 


Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong 


Total 


(frequency) 


# 


% 


# 


% 


# 


% 


Cutoff 


190 


43 


54 


27 


244 


38 


Pricing & Valuation 


55 


12 


116 


58 


171 


26 


Mechanical 


13 


3 


14 


7 


27 


4 


Classification 


185 


41 


3 


T 


188 


29 


Not identified 


6 


1 


13 


6 


19 


3 


Total 


449 


100 


200 


100 


649 


100 


Chi-square test for the difference 


in the distributions 


of types of errors ( frequency ) bet' 


ween foreign 


subsidiaries and local Chinese 


firms: x" (d.f =3) = 58.606* 














Absolute Error Amount 


Foreign Subsidiaries 


Local Chinese Firms 


Hong Kong 


Total 


($000) 


US$ 


% 


US$ 


% 


US$ 


% 


Cutoff 


1983 


13 


3144 


44 


5127 


22 


Pricing & Valuation 


1565 


10 


3102 


43 


4667 


20 


Mechanical 


216 


1 


350 


5 


566 


3 


Classification 


12038 


75 


555 


8 


12593 


54 


Not identified 


222 


1 


5 





227 


1 


Total 


16024 


100 


7156 


100 


23180 


100 



Chi-square test for the difference in the distributions of types of errors (absolute amount) between foreign subsidiaries and local 

Chinese firms: X" (d.f.=2) = 82.819* 

* Reject the null hypothesis that the distributions of types of errors are the same at the 0.05 level. 

Noie: Cells with expected value less than 5% were grouped with the next cells for Chi-square test. 



Plausible explanations for the significant number of classification errors found in Hong 
Kong may include lower professionalism of accounting personnel and differences in 
business culture (Gray. 1988; Hofstede, 1991; Chow & Hwang. 1994). Proper classifica- 
tion of assets and liabilities should be facilitated if there is a comprehensive chart of 
accounts, and/or the accounting personnel who can exercise their professional accounting 
knowledge to classify the transactions by their nature. In addition, as the classification 
errors do not have an effect on income. Hong Kong companies tend to pay less attention 
to these errors. Subsidiaries of multinational companies are usually organized as profit 
centers to their respective parents, and the perfonnance of these profit centers are nor- 
mally evaluated on the basis of their income statements (Warren et al., 1996, p. 902). The 
subsidiaries are hence more concerned about errors affecting the profit. Finally, an addi- 
tional finding that most of the classification errors were recurring further supports the 
above explanation and suggests that Hong Kong companies rely on auditors to make the 
adjustments. 

Error Rates 

Two error rates, the rate of error incidence and tainting, were examined in this study. 
These two rates are important to auditors in assessing the likelihood of errors and making 
inference to populations errors (Ham et al.. 1985). For instance, rate of error incidence is 
useful to auditors for estimating the probability of occurrence of error in an account. 



Ownership Effects on Audit-Detected Error 251 

Whereas the commonly used estimators like modified moment bounds developed by 
Dworin and Grimlund (1984) and the simulation ratio estimators developed by Chan 
(1988, 1996) are based on the knowledge of tainting distributions. 

Rate of Error Incidence (R^) 

The definition of rate of error incidence (R^) is as follows: 

/?, = k/n, (1) 

where k = the number of errors found in an audit; n = the number of items tested in an audit. 
Table 6 summarises the rate of error incidence for the three accounting categories. 

Ownership Effect 

To test the ownership effect on error incidence. Chi-square tests for the distributions of 
error rates between foreign subsidiaries and local Chinese companies show significant 
difference at 5% level for all accounting categories. A one-way ANOVA was also per- 
formed to test if there is significant difference in mean rate of error incidence between 
foreign subsidiaries and local companies. The results show marginal significance at 10% 
level for accounts receivable and accounts payable. Foreign subsidiaries have higher 
error incidence rate for accounts receivable but lower error incidence rate for accounts 
payable. 

Comparison witti U.S. Studies 

The findings show that for the Hong Kong data, accounts payable has the highest error 
incidence rate (26%). Inventory has a higher error rate than accounts receivable (18% v. 
14%), which is consistent with U.S. empirical studies (e.g., Neter & Loebbecke, 1975; 
Ramage et al., 1979; Johnson et al., 1981). Overall, the mean error rates of the Hong Kong 
sample are lower than Ham et al. for accounts receivable and payable. In particular, a large 
number of Hong Kong companies had zero error incidence for accounts receivable (60%), 
accounts payable (45%) and inventory (41%), whereas for Ham et al., zero incidence rate 
only accounts for 7% to 14% of the distributions. This may be one of the reasons for Hong 
Kong auditors to use non-statistical sampling as previous research on statistical sampling 
has shown that when the rate of error incidence is low, most statistical estimators become 
unreliable (Frost & Tamura, 1982, p.l03; Neter & Loebbecke, 1975, Ch. 4). 

Consistent with our expectation, foreign subsidiaries have lower error incidence rates for 
accounts receivable and payable than Ham et al. (1985). This may be due to the stricter 
compliance with rules and regulations by the Chinese accounting personnel in foreign sub- 
sidiaries in Hong Kong. 

Tainting (Proportion of Eacti Dollar Unit in Error, R2) 

As described in Ham et al.'s study. 'A tainting is defined as the error amount of a line 
item in error divided by the book value of the line item" (Ham et al.l985, p. 398). Because 



252 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



D5 

C 

o — 
c "^ 

o 



■S CO 
-C E 

15^ 



Ol 


en 






Q) 


n 






O 




U. 


-Q 



CO 



D) 




C 




o 


-^ 


ic 


S 


c 


f2 


o 




1 




<h 




V) 




cb 




c 


!/) 


;C 


g 


O 


"c5 


ul 


o 




o 




-J 






« 




Qi 


c 


c 


■2^ 


.03 


9> 


■o 


^ 




o 


CO 


u: 


■§ 




CO 


05 




c 




o 


—^ 


^ 


is 


g^ 


f2 


o 




I: 




Q) 




t/) 




Q) 




C 


CO 


JC 


§ 


O 


^ 


lC 


o 




o 





CD 


cc 


Cll 


"n 






n 


CO 


U. 


i3 




CO 



=tfc 



% 



=tt 



UJ 



(-<-) — (N-^tOOlOvOfN — 



1/-, o — ior^C7>^^m 



oco — m — c^iONvD 



TtOOC^Iu-i^'^^Ciri 



C:COr<-i^(N00 — ^O 



3^ O O r-l ON ^ -^ ri O 



tTCO — ONOin — On 



LT, OC^-^t^ON — O 



'TfOO'l-^NOON — 00 



u-1 O o c o o 

oi iTi o m O lo 

C O — <N 1/^ r-; 

2 2 2 2 2 2 

O vO — — — -^ 

O r-l ir> o >n O 

O C O — r-l u^ 



1) ^ 



ON "^ 



— (N .ii^ 



^ £ 



> II 

O •"' 

c < E 
U ^ CT- 



Q o O U 



r- ^. 



< 2 





c 


> 




II 




u 


2 


r> 




Z 






7i 


1) 


<D 


c 


< 


1) 




rt 




C 


s: 




C3 




g 


a- 


1 


U 

■3 




p- 





'.5 

U 





c 


j: 




3 




Q 







U 










53 ^ 



y; i£ 60 





E 


< 
> 


II 


^.w 





rJ 







z 


^<! 


lU 


1) 
C 


< 


OJ 


c 




.>1 


a 




U 


^ 


a- 


OJ 










r3 


ILI 


■ = 



Q ° O O 



00 H 



a> D .^ 



S t=^ O. 



aj — 



Ownership Effects on Audit-Detected Error 253 

dollar-unit sampling was not used in the samples (as in Ham et al.). for comparative pur- 
poses. Ham et al.'s formula was adopted by weighting each tainting by the associated book 
value as follows: 

k 



R. = 



i = 1 



(2) 



k 
i= 1 



WTiere 



k = the number of errors found in an audit; 

n - the number of items tested in an audit; 

bvi = book value of the /th item in an audit; 

avj = audit \alue of the /th item in an audit. 

In order to avoid having undefined tainting, obsen ations which had zero book values were 
ignored. 

Ownership Effect 

The Chi-square tests for distributions of taintings between foreign subsidiaries and 
local Chinese companies indicate significant differences for accounts payable and inven- 
tory taintings. The impact of ownership type on mean tainting was further examined by 
using one-way ANOVA. In order to prevent the netting off of positive and negative taint- 
ings which will lead to understating the true mean error rate, absolute taintings were 
computed. Consistent with the Chi-square tests, significant differences in absolute mean 
tainting of inventor) (at 1<5^ level) were found. Higher absolute mean inventor}' tainting 
found in foreign subsidiaries is mainly due to more cutoff and classification errors 
detected. 

Comparison witli U.S. Studies 

The distributions presented in Table 7 show that the mean taintings of accounts receiv- 
able and accounts pa) able are lower, whereas mean tainting of inventor)- is higher for the 
Hong Kong sample as a whole and also for foreign subsidiaries compared with that of Ham 
et al. (1985). Consistent with the findings in the direction of errors that more overstatement 
errors were found in accounts payable, the mean tainting of accounts payable is positive. 
Similarto the prior U.S. studies (Johnson et al.. 1981; Neter& Loebbecke. 1975). the over- 
all distributions of taintings are non-normal per the Kolmogorov-Smimov Goodness-of-Fit 
tests ip < 0.01) for all three accounting categories. The distributions are also characterized 
by pronounced discontinuities at 1009^ taintings due to classification and cutoff errors 
found, particularly so for accounts payable and inventory. The mean inventory tainting of 
foreign subsidiaries is significantly higher than that of Ham et al. (40% v. 4%) because 
more 100% taintinas were found in foreign subsidiaries in Hong Kong. 



254 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 





o 


.^ 




i»: 


cn 




CD 


»i^ 




o 






i 






Cll 




o 


if 

C 


t/) 


§ 


^ 


c 




lL 





q) 


e 


c 


C31 


ca 


Ql 


Tl 






o 


10 


U. 


-u 




to 


CJl 




c 





o 



o 
o 



c c 

o g 

CO 



05 

c 
o — 

c *- 
o 

1 



Q) 



•b to 



to 

tu 

c c 

.05 tT3 

o w 

U -Q 
CO 



% 



LU 



O'^r-r^inriTt — o 



rr r) — 



O — r^(N(^i^o — r^r~ 



— — r<-, 



O .O 



0>/^i"*^'^'0 — 1^^ 



_ — rt 



O t^l ^ — 00 00 Ol r-'j O 



O n r- I/", ir, ON r- i/~i O 
— oi — — — C 



O — O r-4 rl- -^ r^l (^J to 



COO^Otr, vCoovOC 



— "^^ — P 



0\ ON o 

■^ ON >/^ 

o — r- 



2 2 2 2 2 2 

o o o o o o 

O tr> O O U-) O 

r-4 O O O O ot 



e -5 



£> S 



a o 

t:^ II 

< S 

> c: 

^ O ir 

Xl './^ ■^ ''*t 

'J ^ < 3 

c x: S^ <N 

^ 2 I Off 






Q ° 



O 



E - 



c 




v^ 


00 


t:j 


M) 




XI 


■^ 




'S 




3 


o 


* 

OO 


£ 




,o 


d 


c 


i 


< 
> 

O 


II 

D- 
II 


nO 
II 


X3 


o 


Z 




?^ 


OJ 




< 


■6 


ij 


c 


'.E 




o 


3 




U 


^ 


tn 


a- 






<L 


r^] 




''^ 


o 


c 


II 

11. 


x: 


Q 


_c 


O 


U 



o F 



^ ON ^ 

J:; C 00 

■^ II nC 

— - n. ly-i 

< X -t 

> -r II 



?:! .E 

c s: 

H U 

u — 

Q 2 



6 < 3 



£ If 
O u. 



u 



OJ I- — 



n 


3 


O 


"3 


o 


o 

D. 


1) 


Ui 


— 


P 


OJ 



— .:i ^ -s 



t^ tn :3 






Ownership Effects on Audit-Detected Error 



255 



Table 8 Summary of Ownership Effects on Error Characteristics: Results of Test of Hypothesis 

Chl-square tests for the differences in distributions of error attributes 

between foreign subsidianes and local Chinese companies 

(Hypotheses were rejected at 5°o level of significance) 

Accounts Receivable Accounts Payable Inventory 



Error Characteristics 

Direction of Errors 

— including classificaiion error 

— excluding classification error 

Magnitude of Errors 

— distributions of the relative significant 

magnitude of mean errors 

Variability' of Errors 
— distributions of the relative degree 
of variability 

T\ pes of Errors 

— distribution of frequency significant 

— distribution of absolute amount significant 

Error Rates 

— distribution of rate of error significant 

incidence 
— mean rate of error incidence significant* 

— distribution of taintings 
— mean absolute tainiins 



significant 
significant 



significant 



significant 
significant 

significant 

significant* 
significant 

sienitlcant* 



significant 



significant 



significant 
significant 



significant 

sisnificant 



Sole: Ownership effect HypotheN;^ 

Hq: There are no significant differences between foreign subsidiaries and local Chinese companies in Hong Kong. 
* Hypothesis was rejected at ]0'^ level of significance. 



SUMMARY OF RESULTS AND DISCUSSIONS 

This studs provides some exploratory evidence on the impacts of ownership structure on 
audit-detected error characteristics. Results of test of hypothesis as summarised in Table 8 
indicate that the error characteristics of Hong Kong's foreign subsidiaries, differ signifi- 
cantly from local Chinese companies. Differences in internal control system, nature of 
transactions and organizational culture lead to great variations in the error characteristics 
of foreign subsidiaries from those of local Chinese companies. The implication of these 
results is that when stud\ ing error patterns tor other emerging economies, these ownership 
effects should be carefully considered. 

Table 9 provides a summarN of significant differences in the directions, types, frequency 
and tainting distributions of errors among foreign subsidiaries, local Chinese companies. 
Ham et al. and other U.S. studies. Some of the important findings are: 

1. The direction of errors in accounts payable differs significant!) between different 
ownership type of companies (foreign subsidiaries vs. local Chinese companies). 
Accounts payable in local Chinese companies tends to be overstated, while results in 
foreign subsidiaries are consistent with the U.S. studies and are mosth understate- 
ment errors. Most of the overstatement errors in local Chinese companies are due to 
lack of adequate internal control system to take into account the unique business 
practice of Chinese (P.R.C.) companies which require prepaNinents for purchases. 



256 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 



"3 ^ 



Uj -■ 









C3 

Q. 


> 




o 




? 


C 


Q 




ic 




o 


~ 


-^ 




05 




x; 


C 


"3 
C 




c 




•o 


o 


O 




^ 






= 


o 










^ 


c 






c 


c 
o 


o 


D. 


c 




o 


> 


5 


y 



E U 



< .S 



o ^ s 



_ o — 

S p E 






E 53 = 






o -H 



> X) fc > 

— i£ Si" >> ^ ^ 



^ T3 E 



CA 


(U 


.X.J 


■-" 


I-. 


rs 




<u 


> 


S 

GJ 


1) 
3 


2? 


'5j 
u 


X3 


X 


a 


<u 


:^ 










C 



1) o 3 -a 



J .E a •£ £ 



c 


IT) 


^ 


^ 


? 


;3 

E 






(D 


c 


> 


p 



£J o 



:*- "^ 



E =: i= r , " 



•.z e 



•3 '-J 



U E 



o O '^ 



en ■*r 






a o ■;= -- = ■■' 3 



■— t- o C 






o 


>> 




£ 


^ 


> 




1-. 

T3 
C 


.§, 




c 


i: 




n 


£ 


o 


o 


o 


E 




d 


>< 


'£ 




Q. 


r3 




W/ 


o 




^ 


O 


a. 








c. 


O 




E 


t 


o 


3 


E 


"5 


3 

c 


o 


3 


.c 


CJ 


o 


_o 


n 




^O 


:3 


^ 




c 


_3 


1) 
c 


_3 




c 


-a 

3 


> 
so 


1£ 
U 


> 



3 £ 5 ■— 






■r: - ^ j= <"i ^ c: 



■3 o o ii c !:; 

— • — 3 -1 frt i-^ 



E i= O ^ a- 



•r S =* 



^. o 5 y .SP c 

^O 3 '? O !^ 5 

'E U £ E * '-it 



c i ;^ 



P a 



'3 C O u 



Ownership Effects on Audit-Detected Error 



257 



fc: . 

1) u 



2 ,o 



J= 


o 


E 




a 




b 


a 

3 


o 


o 


O 




c 


o 



Z £ 





_«j 




X) 


C 


r3 
> 


<L> 






'S 


oj 


o 


a. 


aj 



o E 



00 ^ 

•- o 
I -1 



E 




c 

1) 


1 


? 




'3 


E 




> 
o 


b 




-a 


E 



(U .s 



6J) •- 



00 .b 

c-^ iS 

!= i; « 



OJ 


J2 


O 




E 


^ 


— 


^ 


OJ 


c/:: 


OJ 


c 


w 


C3 


jC 






-C 




i> 


i2 


JJ 


o 




OJ 

> 


^ 


v: 


>", 


o 

00 

c 


> 

o 


00 

c 
c 


c 

OJ 
3 




0) 










03 


^ 


.^ 


;/; 




u 


00 

c 


c 


5 


**- 




3 




O 
c 


c 


O 

u 


2 


'3 


o 

< 


'o 


a 



<- 3 '^ 







CO 


D 




£J 


c/: 


^ 


^^ 


CB 


00 


_o 


X 




c 




1) 


73 


c 


JJ 


00 


o 




CO 


£ 


s 


'3 





^ • S ^ ^- S 

■^ C y C CO 

l_ •— X) U •" 

o >^ y a ^ 

(u o c iS c 

X) ti CO y; QJ 






■5 i5 ^" > 



£ £ 



-o 2 



^ § 



E "o y 



1^ i2 E .E 



•E t .£? 



X) 


c 


3 






'3 






C 

op 


2 


5 


5 



1> ^ fa O ^ - 

~ aj ^ "^ o 00 

■a ."S -^ '-5 72 'S 

*e CJ ri — o fc 



3 r2 (U tu _£ 



3 S .E 



OJ 


o 


-a 


t^ 


(U 


£ 


t 

OJ 


c 

CO 


"3 


E 




c 


u 




(U 


00 


CO 


s 


OJ 


op 


c 


E 


'E 

00 


_3 


!E 



p O o -^ O 



fc - 



— 'C y 









258 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

2. More and larger mechanical errors as well as inventory pricing and valuation errors 
are found in local Chinese companies because of the differences in the form of rela- 
tionship with suppliers and weaker internal control system. On the whole, more cut- 
off errors are found for foreign subsidiaries due to more extensive involvement in 
international trade. 

3. Foreign subsidiaries tend to have higher mean rate of error incidence for accounts 
receivable and higher mean absolute tainting for inventory. However, the mean rates 
of error incidence and mean absolute tainting for accounts payable tend to be lower 
than local Chinese companies. 

4. A large number of "Not identified" type of errors found in the Hong Kong sample is 
mainly attributable to the perceived immateriality of the unreconciled differences 
between book values and the confirmed balances from customers. This indicates that 
differences in the perception of the accounting concept of materiality may affect the 
errors detected by auditors. No prior studies on this type of errors is available for 
comparison and further research on this area is warranted. Also, classification errors 
in the Hong Kong sample are significantly larger and more frequent than that in the 
U.S. studies and this type of error is recurring. Though this type of error does not 
affect the income statement, it would affect the "true and fair view" of the balance 
sheet. 

Knowledge of specific error characteristics in different audit environments should help 
auditors and researchers modify relevant audit procedures or techniques by taking into 
account the differences identified, so as to increase the effectiveness and efficiency of local 
audits. For example, auditors should pay special attentions to detect overstatements in 
accounts payable for transactions with Chinese (P.R.C.) suppliers instead of focusing on 
detecting unrecorded liabilities. Hong Kong auditors should put more emphasis on detect- 
ing cutoff and classification errors in addition to testing pricing and mechanical errors of 
transactions and account balances. The differences in the error characteristics found in 
Hong Kong and their underlying reasons should have implications for auditors in design- 
ing audit sampling plans and choosing appropriate error estimators for non-U. S. 
accounting populations. As the performance of certain error estimators is affected by the 
error distribution of the accounting population, those estimators developed based on U.S. 
data may be unreliable for estimating errors in accounting populations in non-U. S. jurisdic- 
tions. Finally, information about the likely causes and location of errors in non-U. S. 
accounting populations should also alert management of multinational corporations to 
incorporate the potential differences in error patterns in designing and implementing effec- 
tive accounting controls for subsidiaries outside the U.S. For instance, our data reveal that 
management of corporations should devote more efforts on providing specific guidelines 
such as an adequate chart of accounts to ensure proper classification of transactions and 
balances. Effective information system will help management make better decisions. 

Generalization of the above results may be limited to the extent that data were based on 
the clients of a single international accounting firm. This approach may have understated 
the differences in the effects of ownership that would have been possible had the audit files 
been selected from more than one accounting firm in Hong Kong. However, in order to 
control for the likely confounding effect of the differences in the audit client portfolios of 
different accounting firms and the differences in audit procedures, it is better to use audit 



Ownership Effects on Audit-Detected Error 259 

data from a single accounting firm. More importantly, the mixture of foreign subsidiaries 
and local firms in Hong Kong, each playing a significant role in the local economy, is typ- 
ical of the business environment in emerging economies. Thus, the focus of this study is to 
compare the differences in enor patterns between different ownership companies (local 
Chinese companies vs. foreign subsidiaries) in Hong Kong. Separating the firms in Hong 
Kong into local Chinese companies and foreign subsidiaries should not necessarily lead to 
a cross country comparison since foreign firms often have organizational cultures that are 
different from those in their home countries as soon as they transplant into host countries 
(Chow & Hwang, 1995). 

The new approach of data collection by direct assessment of audit working papers allows 
us to evaluate the underlying reasons for the causes of different errors and provide more 
reliable results. Therefore, the empirical results provided in this study should help enhance 
our understanding of the impact of organizational culture and business practices on error 
characteristics in other emerging economies. Further research should be devoted to devel- 
oping an empirical error characteristics database for accounting populations in other 
emerging economies such as the P.R.C. because of the increasing economic importance in 
world trade and its unique business culture. The findings of such studies should have impli- 
cations for the development of the global audit market. Audit technologies which are 
effective in one national setting can be ineffective or even dysfunctional in another (Chow 
& Hwang, 1994). It is important to understand the error patterns of different ownership 
firms as well as the differences between the U.S. and non-U. S. audit populations so as to 
provide guidance to auditors as to when and how audit technologies can be effectively 
transferred to non-U. S. jurisdictions. 

REFERENCES 

Abdolmohammadi, M. J. 1987. "Decision Support and Expert Systems in Auditing: A Review and 
Research Directions," AccoM/z/mg and Business Research, (Spring): J 73-185. 

Ashton, A. H. 1991. "Experience and Error Frequency Knowledge as Potential Determinants of 
Audit Expertise," The Accounting Review, (April): 218-239. 

Bedard, J. C. and S. F. Biggs. 1991. "Pattern Recognition, Hypothesis Generadon, and Auditor Per- 
formance in an Analytical Task," The Accounting Review, (July): 622-642. 

Bell, T. and W. R. Knechel. 1994. "Empirical Analyses of Errors Discovered in Audits of Property 
and Casualty Insurers," Auditing: A Journal of Practice & Theory, (Spring): 84-100. 

Bimberg, J. G. and C. Snodgrass. 1988. "Culture and Control: A Field Study," Accounting, Organi- 
sation and Society, 13: 447^64. 

Bryan, B. J. and L. M. Smith. 1997. "Faculty Perspectives of Auditing Topics," Issues in Accounting 
Education, 12(1): 1-14. 

Chan, K. H. 1988. "Modelling Accounting Populations for Ratio Estimation in Audit Sampling," 
Accounting and Business Research, (Winter): 15-22. 

. 1996. "Esdmating Accounting Errors in Audit Sampling: Extension and Empirical Tests of 

a Decomposition Approach," Journal of Accounting, Auditing and Finance, (Spring): 153- 
161. 

Chow, C. W. and R. N. Hwang. 1994. "The Cross-Border Transferability of Audit Technology: An 
Exploratory Study in the U.S. -Taiwan Context," Advances in International Accounting, 7: 
217-229. 



260 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2. 1998 



and . 1995. "The Interaction Between National Culture and Organizational Culture 



in Accounting Firms: Some Evidence from the Pacific Rim," Asia-Pacific Journal of Account- 
ing, (December): 85-96. 

Chow. L. M.. G. K. Chau and S. J. Gray. 1995. "Accounting Reforms in China: Cultural Constraints 
on Implementation and Development," Accounting and Business Research, 26: 29^9. 

DiMaggio, L. E. and W. W. Powell. 1983. "The Iron Cage Revisited: Institutional Isomorphism and 
Collective Rationality in Organizational Fields." American Sociological Review: 147-160. 

Dworin, L. D. and R. A. Grimlund. 1984. "Dollar Unit Sampling for Accounts Receivable and Inven- 
tor)," The Accounting Review; (April): 218-241. 

Economic Information and Agency. 1996. Hong Kong Economic Yearbook. Hong Kong: Economic 
Information and Agency (in Chinese). 

Entwistle, G. and D. Lindsay. 1994. "An Archival Study of the Existence, Cause, and Discovery of 
Income-Affecting Financial Statement Misstatements." Contemporary Accounting Research, 
(Summer): 271-296. 

Firth. M. 1996. "The Diffusion of Managerial Accounting Procedures in the People's Republic of 
China and the Influence of Foreign Partnered Joint Ventures," Accounting, Organization and 
Society; 21: 629-654. 

Frost, P. A. and H. Tamura. 1982. "Jackknifed Ratio Estimation in Statistical Auditing." Journal of 
Accounting Research, (Spring): 103-120. 

Garten, J. E. 1996. "The Big Emerging Markets." The Columbia Journal of World Business, (Sum- 
mer): 6-31. 

Gray, S. J. 1988. "Towards a Theor\- of Cultural Influence on the Development of Accounting Sys- 
tems Internationally," Abacus, 24: 1-15 

Ham, J., D. Losell and W. Smieliauskas. 1985. "An Empirical Study of Error Characteristics in 
Accounting Populations," The Accounting Review; (July): 387^06. 

Hofstede, G. 1991. Cultures and Organizations: Sofhvare of the Mind. Berkshire: McGraw-Hill 
International (UK) Limited. 

Houghton, C. and J. Fogarty. 1991. "Inherent Risk," Auditing: A Journal of Practice & Theory; 
(Spring): 1-21. 

Hylas, R. E. and R. H. Ashton. 1982. "Audit Detection of Financial Statement Errors," The Account- 
ing Review; (October): 751-765. 

Icerman, R. C. and W. A. Hillison. 1990. " Distributions of Audit-Detected Errors Partitioned by 
Internal Control," Journal of Accounting, Auditing & Finance, (Fall): 527-543. 

and . 1991. "Disposition of Audit-detected Errors: Some Evidence on Evaluative 

Materiality," Auditing: A Journal of Practice & Theory; (Spring): 22-34. 

Johnson. J., R. Leitch and J. Neter. 1981. "Characteristics of Errors in Accounts Receivable and 
Inventory Audits," The Accounting Review; (April): 270-293. 

Johnson, R. 1987. "Auditor Detected Errors and Related Client Traits — A Study of Inherent and 
Control Risks in a Sample of U.K. Audits," Journal of Business Finance & Accounting, 
(Spring): 39-64. 

Kinney, W. R. 1975. "A Decision-theorv' Approach to the Sampling Problem in Auditing," Journal 
of Accounting Research, (Spring): 117-132. 

Kreutzfeldt, R. W. and W. A. Wallace. 1986. "Error Characteristics in Audit Populations: Their Pro- 
file and Relationship to Environmental Factors," Auditing: A Journal of Practice & Theory, 
(Fall): 20-43. 

and . 1990. "Control Risk Assessments: Do They Relate to Errors'?" Auditing: A 

Journal of Practice & Theoty; (Supplement): 1-26. 

Lee, D. S. 1994. "Further Evidence on Auditor Concentration: The Case of a growing Market," The 
International Journal of Accounting, 29: 234-250. 



Ownership Effects on Audit-Detected Error 261 



Libby, R. 1985. "Availability and the Generation of Hypotheses in Analytical Review." Journal of 
Accounting Research, (Autumn): 648-667. 

and D. M. Frederick. 1990. "Experience and the Ability to E.\plain Audit Findings." Journal 

of Accounting Research, (Autumn): 348-367. 

Naisbitt, J. and P. Aburdene. 1990. Megatrends 2000. New York: Megatrend Ltd. 

Neter, J. and J. Loebbecke. 1975. Behaviour of Major Statistical Estimators in Sampling Accounting 
Populations: An Empirical Study. Auditing Research Monograph 2, AICPA. 

Ng. J. Y. M. and S. W. M. Ho. 1993. "Statistical Sampling or Judgemental Sampling. A Hong Kong 
Study," Modelling, Measurement and Control, 7: 53-63. 

Petroni, K. and M. Beasley. 1996. "Errors in Accounting Estimates and Their Relation to Audit Firm 
Type." Journal of Accounting Research, (Spring): 151-171. 

Ramage. J. G., A. M. Krieger and L. L. Spero. 1979. "An Empirical Study of Error Characteristics in 
Audit Populations," Studies on Auditing — Selections from Research Opportunities in Audit- 
ing Program. Journal of Accounting Research, (Supplement): 72-102. 

Sit, V. and S. L. Wong. 1989. Small and Medium Industry in an Export-oriented Economy. Hong 
Kong: Centre of Asian Studies. University of Hong Kong. 

Soeters, J. and H. Schreuder. 1988. "The Interaction Between National and Organisational Culture in 
Accounting Firms." Accounting, Organisations and Society, 13: 75-85. 

South China Morning Post (SCMP). 1997. "Merger Creates Audit King." January 4. 

Steele, A. 1992. Audit Risk and Audit Evidence: The Bayesian Approach to Statistical Auditing. Lon- 
don: Academic Press Ltd. 

The Stock Exchange of Hong Kong. 1986. Securities Bulletin. May. Hong Kong: The Stock 
Exchange of Hong Kong Limited. 

The Stock Exchange of Hong Kong. 1996. Securities Journal December Trading Record. Hong 
Kong: The Stock Exchange of Hong Kong Limited. 

Tuttle, B. M. 1996. "Using Base Rate Frequency Perceptions to Diagnose Financial Statement Error 
Causes," Auditing: A Journal of Practice and Theory, (Spring): 104-121. 

U.S. Department of Commerce. 1995. The Big Emerging Markets: 1996 Outlook and Sourcebook. 

Wallace, W. and R. W. Kreutzfeldt. 1995. "The Relation of Inherent Risk and Control Risk to Audit 
Adjustments," Journal of Accounting, Auditing & Finance, (Summer): 459-483. 

Warren, C. S.. P. E. Fess and J. M. Reeve. 1996. Accounting, 18 edition. Cincinnati. Ohio: South- 
western College Publishing. 

Willingham, J. J. and W. F. Wright. 1985. "Financial Statement Errors and Internal Control Judg- 
ments," Auditing: A Journal of Practice & Theory, (Fall): 57-70. 

Wright, A. and R. H. Ashton. 1989. "Identifying Audit Adjustments with Attention-Directing Proce- 
dures," The Accounting Review, (October): 710-728. 

Wright, A. and S. Wright. 1996. "The Relationship Between Assessments of Internal Control 
Strength and Error Occurrence, Impact and Cause," Accounting and Business Research, 27: 
58-71. 

Wright, A. and S. Wright. 1997. "An Examination of Factors Affecting the Decision to Waive Audit 
A.6.]\isX.mQn{.s,,'' Journal of Accounting, Auditing & Finance, (Winter): 15-35. 



The International 
Journal of 
Accounting 



Differential Reporting in Singapore and Australia: 
A Small Business Managers' Perspective 

S. Mitchell Williams and Greg Tower 



Key Words: International accounting. Culture. Differential reporting, Financial accounting 



Abstract: This study examines societal values on two key issues of differential reporting, the pre- 
ferred level of disclosure and perceived balance of costs relative to benefits of compliance. A 
theoretical framework developed by Gray (1988) is utilised, linking Hofstede's (1980) societal 
values to issues in differential reporting and the accounting subcultural value of secrecy. 

Interactive multiple regression analysis is used to ascertain the effect of power distance, uncer- 
tainty avoidance and individualism on the perceptions of the sun'ey groups towards issues of 
differential reporting. Findings from this study indicated that the perceptions of small business 
managers in Singapore and Australia were consistent with prior literature. Uncertainty avoidance 
and to some extent power distance were found to have a significant effect on small business man- 
agers perceptions. This study indicates that the current association between societal values, 
accounting subcultural dimensions and accounting practice as depicted by Gray (1988) may have 
to be rearranged. 



This paper reports the results of empirical tests that assess the significance of cultural influ- 
ence on small business managers attitudes toward accounting disclosure requirements in an 
international context. Prior research suggests that cultural differences may help to explain 
international differences in accounting systems and patterns of international accounting 
development (Perera. 1989; Belkaoui & Picur, 1991). Specifically, the paper examines the 
cultural impact on small business manager perceptions about two key issues in differential 
reporting. 

1. the perceived level of cost and benefits associated with small business financial 
statements accounting disclosures; and 

2. the degree of support for differential accounting disclosure requirements. 



Direct all correspondence to: Associate Professor Greg Tower, School of Business, Murdoch University, South 
Street, Perth Australia, 6150; Email : tower@commerce.murdoch.edu.au 

The International Journal of Accounting, Vol. 33, No. 2, pp. 263-268 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



264 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 2, 1 998 



Section two reviews the links between culture and accounting disclosure leading to the 
development of the hypotheses. In section three the research methodology is then explained. 
Results of the tests are described and their significance discussed in sections four and five. 

CULTURE AND ACCOUNTING VALUES 

The notion of differential reporting suggests that certain reporting entities may be 
exempted from the application of specific accounting standards because of their size, legal 
structure, ownership and/or the presence of a dependent user (Nair & Rittenberg, 1983; 
McCahey & Ramsay, 1989). International studies have generally concluded that small 
business managers perceive the costs of complying with accounting standards to be greater 
than the benefits. This is due to their perception that there are a limited number of users 
requiring such data and that compliance with accounting standards may disclose strategic 
information to competitors (Nair & Rittenberg, 1983; Carsberg, Page, Sindall & Waring, 
1985). FASB (1983) and others have concluded there is a need to exempt small business 
entities from full compliance with promulgated accounting standards. The research to date, 
has been limited primarily to Anglo-American nations and has therefore ignored cultural 
influences relevant to disclosure perceptions. 

Culture is operationalised in this study in line with Hofstede (1980, p. 26) who defined 
this concept as "the collective programming of the mind which distinguishes the members 
of one human group from another". Gray (1988) argued that the seminal work of Hofstede 
(1980) provided insights about the evolution of accounting systems. As noted by Perera 
and Mathews' (1990, p. 230) "the extent of disclosure in financial reports would seem to 
differ between countries in line with differences in the value orientations of the preparers 
of these reports." Gray (1988) linked Hofstede's (1980) four societal value dimensions 
(uncertainty avoidance, power distance, individualism and masculinity) to four accounting 
value dimensions (professionalism versus statutory control; uniformity versus flexibility; 
conservatism versus optimism; and secrecy versus transparency). 

The accounting sub-cultural value of greatest importance to this study is the secrecy/ 
transparency dimension. Gray (1988, p. 8) indicates that this dimension is a "preference for 
confidentiality and the restriction of disclosure of information about the business only to 
those who are closely involved with its management and financing as opposed to a more 
transparent, open and publicly accountable approach." Secrecy, Gray (1988) argued, can 
be most closely linked with the uncertainty avoidance, power distance and individualism 
dimensions. A preference for secrecy was thought to be consistent with a high level of 
uncertainty avoidance following from a need to restrict information disclosure so as to 
avoid possible conflicts, limit the uncertainties of competition and preserve security. 
Power distance is another potentially influential value as it deals with the restriction of 
information to preserve power inequalities. A preference for collectivism rather than indi- 
vidualism is also likely to be consistent with secrecy as it reflects more concern for the 
interests of the group most closely and directly involved with the management and financ- 
ing of the firm than with a wide range of external parties including potential investors and 
the public at large. Another dimension, long versus short term orientation, is added to this 
analysis (Hofstede & Bond, 1988). In line with the work of Eddie (1996). it is suggested 
that the value of long term orientation is associated with secrecy because of a tendency to 
preserve relationships, thrift and long range goals. 



Differential Reporting in Singapore and Australia 265 

It is felt that the degree of secrecy will tend to vary across countries with resulting differ- 
ences in the amount of information disclosed. Based on the above, the following null 
hypotheses are formed in regard to culture and respondent's view of differential reporting. 
Two respondent perception variables are considered: Preferred level of Disclosure (PLD); 
and Perceived Extent of Costs Versus Benefits (PECVB) related to disclosure. 

HI: Singapore and Australian small business managers will not differ significantly 

due to cultural values with respect to PLD. 
H2: Singapore and Australian small business managers will not differ significantly 

due to cultural values with respect to PECVB. 

It is hypothesized that the higher a country ranks in terms of uncertainty avoidance, collec- 
tivism feminity and power distance and long term orientation the more likely it is to be 
highly ranked in terms of secrecy. 

RESEARCH METHODOLOGY 

Because corporate size is related to disclosure requirements, corporation size have been 
used in prior research. Our interest in small business manager leads us to adopt following 
entity's size criteria: 

1. fixed production costs should not exceed $8 million; 

2. employee numbers should be greater than 10 but less then 100; and 

3. annual turnover should not exceed $15 million. 

These criteria were applied based on the qualification requirements in Singapore and Aus- 
tralia for membership as a small or medium sized business (Singapore Small and Medium 
Sized Business Association, 1993; Australian Small Business Association, 1993). 

The small business managers views were measured as to their perception of the Preferred 
Level of Disclosure (PLD) and the Perceived Extent of Costs Versus Benefits (PECVB) 
related to disclosure. The PLD is defined as the level of information a small business man- 
ager believes should be disclosed in the company's reports. The PECVB is a measure of 
the perceived costs and benefits to a small business manager upon expanded requirements 
to disclose information. The measures for both PLD and PECVB are related to the subcul- 
tural value of secrecy versus transparency. Secrecy can be interpreted to be similar to a low 
PLD and high PECVD. Thus in a country where secrecy is preferred small business man- 
agers will prefer a low level of disclosure. They will also perceive that the costs relative to 
benefits are outweighted if additional disclosure is required. 

The two dependent variables, PLD and PECVD, were measured using a range of item 
statements drawn from prior differential reporting literature. A copy of the questionnaire 
can be demanded from the author. All questions were scored on a seven point Likert scale. 
All scores for the statements related to the respective dependent variable were then added 
for each respondent and divided by the number of statements to arrive at a final mean score 
for each dependent variable. 



266 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

Table 1 . Small Business Managers Cultural Scores 

Calculated Score for Small Hofstede's (1980) and 

Cultural Dimension Business Managers Bond's (1988) Scores 

Individualism 

Singapore 20 8 

.■\ustralia 57 51 

Power Distance 

Singapore 81 74 

Australia 45 36 

I'nrertainty Avoidance 

Singapore 41 20 

Australia 67 90 

Masculinity 

Singapore 55 48 

Australia 63 61 

Long-term Orientation 

Singapore 38 47 

Australia 26 3 1 



RESULTS 

An o\ erall useable response rate of 57.75^ was obtained from the four hundred question- 
naire packages sent. Reliability of the instrument was measured across and within both 
groups using the alpha coefficient. The alpha coefficient across all subjects was 0.8934 
indicating that the treatment variables captured the desired construct independence. The 
coefficient for Singapore and Australia approached the magnitude for the overall alpha. 
Hence it is concluded that the research instrument was deemed to be reliable in both 
nations. Using the same techniques as Hofstede (1980). cultural scores for each societal 
dimension was recalculated using the data collected from this study. Table 1 illustrates that 
these results are similar to Hofstede's original results and other related studies (for example 
Harrison. 1993). 

Interactive univariate linear regressions were undertaken between each societal variable 
with respect to each nation (Table 2). From this table it can be seen that the signs of the 
slope coefficients are as expected in all cases for both dependent variables. The PLD and 
PECVD is positively correlated with individualism and masculinity and negatively corre- 
lated with uncertainty avoidance, power distance and long-temi orientation. Further, the 
statistics for uncertainty avoidance are significant at the \9c level, the 5^ level for power 
distance and 10*^ level for indi\idualism. In the case of masculinity and long-term orien- 
tation the statistics are not significant. 

A further set of multiple linear regressions were undertaken using a stepwise procedure. 
Findings from this procedure were consistent with the uni\ ariate lineai" regression analysis. 
The models to explain the PLD and PECVB were found to be ones containing only uncer- 
tainty avoidance and power distance. In both models, each independent variable was 
significant at the 10^ level. The inclusion of indi\ idualism these models did not signifi- 
cantly improve performance, while including mascuhnity and long-term orientation 
resulting in deteriorations in performance. 



Differential Reporting in Singapore and Australia 



267 



Table 2, Interactive Multiple Regression Analysis 







Power 


Uncertainty 




Long-Term 




Individualism 


Distance 


Avoidance 


Masculinity 


Orientation 


PLD 












Regression 


-0.080156 


-0.906456 


1.075399 


-0.216698 


-0.1M319 


Co-efficient 












Value of f-statistic 


-0.3666 


-1.707 


2.673 


-0.837 


-0.317 


Probability 


0.7146 


0.0892** 


0.0081* 


0.4043 


0.7516 


PECVB 












Regression 


-0.202483 


-0.257413 


0.738674 


-0.139753 


-0.145871 


Co-efficient 












Value of f-statistic 


-1.178 


-1.121 


2.37! 


-0.282 


-1.056 


Probability 


0.2402 


0.2633 


0.0198" 


(J. "9 


0.2978 



Notes: * = Significant at the 95% significance level; 
** = Significant at the 90% significance level. 



DISCUSSION 



The empirical results supports the rejection of both hypotheses. This supports the percep- 
tion that culture is a significant factor influencing the PLD and PECVB of small business 
managers in Singapore and Australia. However the proposed explanatory' models are only 
partially supported. The societal values most significantly related to the two differential 
reporting issues differential reporting are uncertainty avoidance and power distance. 

This study suggests that the differences in disclosure preferences of small business enti- 
ties are, in part, culturally based. Hence, there may be differential resistance by small 
company managers to accept international standards requiring more disclosure require- 
ments than existing domestic standards. 

An interesting alternative explanation for the lack of support for the influence of individ- 
ualism, masculinity and long-term orientation, arises from the work of Fechner and Kilgore 
(1994). They felt that cultural factors are more likely to be moderating rather than an inter- 
vening factors. Therefore the results of this study may not be registering the direct 
influence of the respective societal values on perceptions related to differential reporting, 
but rather their residual influence in moderating the relationship between secrecy and the 
views of small business managers. 

Further empirical research needs to be conducted, involving a larger number of countries 
to examine the strength of the respective relationships. Additional studies incorporating the 
perceptions of lenders, practitioners and large business managers could also provide valu- 
able insights. Longitudinal research could be of benefit in examining the influence of such 
factors as generational and cyclical effects. 



Acknowledgments: The authors wish to acknowledge the constructive comments of Bob Arm- 
strong. Mike Baziey. Ian Eddie. Cecil Pearson. Hector Perera. Malcolm Smith. Hume Winzar. an 
anonymous reviewer and participants of research seminars at Murdoch University, the International 
Accounting Group seminar (AAANZ) 1994, AAANZ Annual Conference 1995 and Eighth 
Asia-Pacific Conference on International Accounting Issues 1996 in earlier drafts of this paper. The 
authors wish to further express their gratitude to Coopers and Lybrand for their assistance in funding 
of this project. 



268 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 



REFERENCES 

Australian Small Business Association Directory of Small Business in Australia. 1993. Sydney Aus- 
tralia: Australian Small Business Association. 

Belkaoui. A. and R. D. Picur. 1991. "Cultural determinism and the perception of accounting con- 
cepts." International Journal of Accounting. Education and Research, 26(1), 1 18-130. 

Carsberg, B. V., M. J. Page, A. J. Sindall and I. D. Waring. 1985. Small Company Financial Report- 
ing. London: Prentice-Hall. 

Eddie, I. A. 1996. "The association between national cuhural values and consolidation accounting 
disclosures: An empirical study." Paper presented at the Annual Conference of the Accounting 
Association of Australia and New Zealand, Christchurch. 

Financial Accounting Standards Board Financial Reporting By Privately Owned Companies: A 
Summary Of Responses To FASB Invitation To Comment. 1983. Stamford, CN: Financial 
Accounting Standards Board. 

Frechner, H. H. E. and A. Kilgore. 1994. "The influence of cultural factors on accounting practice." 
International Journal of Accounting Education and Research, 29(4), 265-211 . 

Gray, S. J. 1988. "Towards a theory of cultural influence on the development of accounting systems 
internationally." A/7aa<.?, 24(\), 1-15. 

Harrison, G. L. 1993. "The cross-cultural generalizability of the relation between participation, bud- 
get emphasis and job related attitudes." Accounting, Organizations and Society, 17(\), 1-15. 

Hofstede, G. H. 1980. Culture's Consequences: International Differences in Work Related Values. 
Sage, Beverly Hills, CA: Sage. 

Hofstede, G. and M. H. Bond. 1988. "The Confucius connection from cultural roots to economic 
growth." Organisational Dynamics, 6( 1 ), 4-2 1 . 

McCahey, J. and A. Ramsay, 1989. "Differential reporting: Nature of the accounting standards over- 
load problem and a proposal for its resolution." Australian Accounting Research Foundation 
Discussion Paper. No 13, Caulfield. Victoria: Australian Accounting Research Foundation. 

Nair, R. D. and L. E. Rittenberg. 1983. "Professional Notes: Privately held businesses: Is there a stan- 
dards oxerload?" Journal of Accountancy, 155(2), February 82-96. 

Perera, M. H. B. 1989. "Towards a framework to analyse the impact of culture on accounting." The 
International Journal of Accounting, Education and Research, 24(1), 42-56. 

Perera, M. H. B. and M. R. Mathews. 1990. "The cultural relativity of accounting and international 
patterns of social accounting." Advances in International Accounting, 3(3). 215-251. 

Singapore Small and Medium Sized Business Association Directory of Small and Medium Business 
Entities in Singapore. 1993. Singapore: Singapore Small and Medium Sized Business 
Association. 



The International 
Journal of 
Accounting 



Colonialism and Accounting Education in Developing 
Countries: The Experiences of Singapore and Sri Lanka 



Hema Wijewardena and Senarath Yapa 

University of Wollongong, Australia 



Key Words: Accounting education and practice. Accounting profession. Professional accounting 
bodies. Colonial system. Accounting in developing countries. 



Abstract: This paper provides a comparative analysis of the nature of accounting education in 
Singapore and Sri Lanka. Both these countries were British colonies for nearly one hundred and 
fifty years and inherited their accounting education systems from the British. After fifty years of 
independence, Sri Lanka is still following the colonial system to produce its accountants. Sin- 
gapore, however, moved away from the colonial system within four years of independence. This 
paper indicates that if a developing country continues to depend heavily on foreign education pro- 
grams and accounting bodies to produce accountants locally, the consequences can be less than 
desireable. 



Almost all developing countries that were British colonies for a considerable length of time 
inherited the British accounting education system (Briston, 1978; Hove, 1986). During the 
early years of the colonial period, most of the sizable businesses in these countries were set 
up by British investors. The managerial personnel, including accountants, for these enter- 
prises were generally brought from the UK. At that time a person could obtain the status of 
professional accountant only by admission to one of the British professional accounting 
bodies. Only the small number of local people who could bear the cost of education and 
training abroad proceeded to England to obtain professional qualifications. Some British 
accounting bodies set up examination centers in a few major cities in developing countries 
allowing local people to obtain British professional accounting qualifications while work- 
ing in their own countries (Johnson & Caygill, 1971). A considerable number of local 
accounting students fulfilled the examination and practical training requirements of these 
professional bodies and became British qualified accountants. They occupied dominant 



Direct all correspondence to: Hema Wijewardena, Department of Accounting and Finance, University of Wol- 
longong, NSW 2500, Australia. E-mail: hema@uow.edu.au. 

The International Journal of Accounting, Vol. 33, No. 2, pp. 269-281 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



270 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

positions in the accounting profession in these countries, particulariy after gaining inde- 
pendence. Some continue to act as consultants and advisers to their respective governments 
on accounting related matters. 

The experiences of many previously British colonies is that a small nucleus of British 
qualified accountants created a monopolistic and elite professional body that is virtually a 
carbon copy of the Institute of Chartered Accountants of England and Wales. These pro- 
fessional bodies have similar examination and training structures and an identical emphasis 
upon auditing as the British counterparts (Briston, 1978). Accordingly, despite the exist- 
ence of a local professional accounting body and good quality universities and technical 
colleges, many of these developing countries, even after gaining independence, continued 
to follow the same colonial system to produce accountants (Perera, 1975; Ghartey, 1978; 
Briston, 1978; Wallace, 1990). Moreover, in some countries the local professional body 
appears to exert control over the supply of accountants by limiting the membership only to 
those who complete its own examinations. These measures allow them to maintain the 
"status" of their members. According to Briston (1978: 108), the group of British qualified 
accountants who hold key positions in the local profession have a vested interest in perpet- 
uating the accounting education system they followed, partly because of the high rewards 
it provides and partly because they are not prepared to admit that the system may no longer 
be relevant or adequate. However, several countries, previously under British rule, have 
moved away from the colonial system of accounting education by making use of their uni- 
versities and technical colleges to produce competent accountants in sufficient numbers for 
their local organizations (Osieghu, 1987; Moores & MacGregor, 1992; Tan et al., 1994; 
Linn, 1996). 

Singapore and Sri Lanka were British colonies for nearly one hundred and fifty years. 
Both these countries inherited their accounting education and practice almost entirely from 
the British system. Consequently, at the initial stage of their development, the accounting 
education systems of Singapore and Sri Lanka were very similar. The current state of 
accounting education in these two countries is, however, significantly different. Compared 
with Sri Lanka, Singapore appears to have made greater progress in the field of education 
and training of accountants. Singapore within four years of attaining independence adopted 
an effective system for producing its accountants locally (Fong & Foo, 1992; Wee, 1994; 
Tan, et al., 1994). Sri Lanka, after fifty years of independence, is still following the old 
colonial system to educate accountants. Singapore, economically inferior to Sri Lanka dur- 
ing the early years of post-independence has achieved a remarkably higher economic 
development in recent decades and has emerged as one of the newly industrialised coun- 
tries (NIC). In 1995, Singapore recorded a per capita income of 22,500 US dollars, second 
only to Japan in the entire Asian region, whereas per capita income was only 640 US dol- 
lars in Sri Lanka (World Bank, 1996). It has been reported that Singapore's accounting 
education and practices contributed significantly to its economic success (Foo, et al., 1993; 
Tan, et al., 1994). Singapore and Sri Lanka are an interesting case study of the historical 
development of accounting education and economic development in two countries. We 
hope to gain insights into: (1) why one country is still following the old colonial system 
while the other has shifted away from it; and, (2) how these events may have effected the 
respective economies. 



Colonialism and Accounting Education 271 

ACCOUNTING EDUCATION IN SINGAPORE 

Historically, except for the brief Japanese occupation in the 1940s, Singapore was a British 
colony for nearly one and a half centuries gaining independence in 1959. Consequently, its 
general education from primary to university level was inherited from the British education 
system and accounting education was no exception. The British system of accounting edu- 
cation was imposed on Singapore during the colonial period in a number of ways: (1) the 
export of British accounting personnel to Singapore; (2) the export of British accounting 
qualifications; (3) the establishment of British professional accounting bodies' examina- 
tion centers in Singapore; (4) the involvement of British experts in the planning, directing, 
organising, teaching and providing assistance in the development of academic institutions 
in Singapore; and (5) the general British influence upon the business, education and admin- 
istrative environments in the early days of Singapore (Foo, 1988). 

Prior to 1956, Singapore did not have a program of studies leading to a local qualifica- 
tion in accounting. A foreign professional accounting qualification was the only avenue 
through which a person could expect an accounting job. particularly a job in the public sec- 
tor. The only accounting qualifications available were obtained by examinations conducted 
by overseas professional accounting bodies, such as the Association of Certified Corporate 
Accountants of the United Kingdom ( ACCA), the Institute of Cost and Works Accountants 
of the United Kingdom (ICWA), and the Australian Society of Accountants (ASA). 

The first local accounting program leading to a Bachelor of Commerce with specialisa- 
tion in accounting was launched by the Nanyang University in 1956. In the following year, 
the Department of Commerce at the Singapore Polytechnic was established to offer, among 
other courses, a full-time course leading to the College Diploma in Accounting (Fong & 
Foo, 1992). In 1958, the Department of Commerce at the Singapore Polytechnic was 
replaced by the Department of Accountancy with the objective of offering both full-time 
and part-time courses leading to a Professional Diploma in Accounting (Tan et al., 1994). 
Soon after gaining political independence, the authorities of Singapore realised the impor- 
tance of producing accountants through their own higher educational institutions without 
depending on foreign accounting bodies and what was perceived to be out-dated education 
systems. Consequently, the professional accounting diploma awarded by the Singapore 
Polytechnic was recognised in 1963 as an adequate qualification for admission to provi- 
sional membership of the Singapore Society of Accountants (SSA). The SSA was the local 
professional accounting body established by the government for the purpose of registering 
professional accountants and regulating the practice of the profession of accountancy in 
Singapore. During the 1965-66 academic year, the Department of Accountancy at the Sin- 
gapore Polytechnic was renamed the School of Accountancy and the accountancy program 
was upgraded from a diploma to a university degree signifying the transformation of the 
polytechnic to a university college. As a result of negotiations between the college and the 
University of Singapore, the latter agreed to award its accounting degree to students of the 
Singapore Polytechnic. In 1969, the amalgamation of the School of Accountancy with the 
Department of Business Administration of the University of Singapore represented another 
milestone in the historical development of an independent accounting education system in 
Singapore (Sunday Times, 1968). At the time of the merger, the School of Accountancy 
was relocated to the University of Singapore campus. As a further development in 1971, 
the Bachelor of Commerce (Accountancy) program offered by Nanyang University since 



272 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

1956 also received its professional recognition, subject to practical training, from the Sin- 
gapore Society of Accountants. In 1978, joint courses in accounting were introduced by the 
Nanyang University and the University of Singapore. The two schools of accountancy 
merged in 1980 to form the School of Accountancy at the National University of 
Singapore. 

After the reorganization of the Singaporean university system through the formation of 
the National University of Singapore and the Nanyang Technological Institute, the coun- 
try's accounting education system achieved its highest growth rate. The School of 
Accountancy of the National University of Singapore was physically relocated at the Nan- 
yang Technological Institute in 1987 and the School of Accountancy was renamed the 
School of Accountancy and Business in 1990. In 1991, the Nanyang Technological Insti- 
tute became a full-fledged university and is now named the Nanyang Technological 
University (NTU). The School of Accountancy and Business of this university has gained 
a reputation today as the leading centre for undergraduate and postgraduate accounting 
education in Southeast Asia. The Bachelor of Accounting degree awarded by the Nanyang 
Technological University is based on a 3-year full-time program of study. In addition to its 
Bachelor of Accountancy degree program, it also offers a professional postgraduate pro- 
gram leading to a Master of Business Administration in Accounting. Both these accounting 
degrees are recognised by the Institute of Certified Public Accountants of Singapore 
(ICPAS) for admission to its membership, subject to approved practical experience. The 
Bachelor of Accountancy program of NTU, at its various stages of development, has pro- 
duced nearly 10, 000 accounting graduates. By the end of 1992, 7442 of these graduates 
had become professional accountants by obtaining the ICPAS membership. In addition to 
the undergraduate degree, the School of Accountancy and Business at NTU also offers two 
postgraduate research degrees leading to the Master of Accountancy (M.Acc) and the Doc- 
tor of Philosophy (PhD) in Accounting (Wee, 1994). 

Since its inception, the Singapore professional accounting body, [initially as the Sin- 
gapore Society of Accountants (SSA) in 1963 and later as the Institute of Certified Public 
Accountants of Singapore (ICPAS) in 1987], has maintained a close relationship with the 
university's School of Accountancy. This liaison is evidenced by the fact that the Institute 
was consulted at each stage of the transition of the School from the Singapore Polytechnic 
to the present Nanyang Technological University. A representative of the School of 
Accountancy and Business is appointed by the Minister of Finance as a statutory member 
of the Council of the ICPAS. Through various committees, the School of Accountancy and 
Business also maintains close rapport with the professional accounting body, business 
community and other professional organizations to ensure the continuing relevance of its 
degree programs (Tan, et al., 1994). 

ACCOUNTING EDUCATION IN SRI LANKA 

During the colonial period, business activity in Sri Lanka was directed toward the planta- 
tion sector introduced to the economy by the British (Ramanathan, 1952). In order to facil- 
itate the investment of British capital, plantation joint stock companies were introduced in 
the middle of the nineteenth century. Initially, these companies were owned by British 
investors and required management and accounting personnel came from the U.K. Even 



Colonialism and Accounting Education 273 

though these firms were actually located in Sri Lanka, they were managed as if they were 
in Britain. No attempt was made to develop an accounting system suitable to local condi- 
tions (Perera, 1975). Local people were trained by British accountants to the British system 
and employed in operating the British firms. Until about 1925 there were no professionally 
qualified accountants in the government service. An exception was the Government Rail- 
way, where a few professionally qualified accountants were recruited from England, 
apparently for the purpose of training accounting personnel for the Railway (Report of the 
Special Committee Appointed to Investigate into the Structure of the Accounting Service, 
1949). 

Beginning around 1890 a few private educational institutions conducted classes in com- 
mercial subjects, including accounting, mainly for students preparing for the British 
external examinations held in Sri Lanka. The most popular of these were the examinations 
leading to the London Chamber of Commerce certificates and the Cambridge certificates 
with the first certificates dating back to 1891 (De Silva, 1969). However, no program of 
study leading to a local qualification in accounting was conducted by any organization 
until 1943. Even though the Ceylon Technical College at Maradana was set up by the 
colonial government in 1893, accounting education was not given a place in its programs 
for another fifty years. Only after 1942 did the Ceylon Technical College take steps to 
organise and offer certificate and diploma courses in accounting. Accordingly, a commer- 
cial certificate course for bookkeepers and a diploma course for prospective accountants 
were launched by the Technical College in 1943 and 1946 respectively. These courses 
were modelled on similar programs of studies offered in the U.K. Since the Diploma in 
Accountancy was a four-year evening course offered at the professional level the admis- 
sion to the course was restricted to those who were engaged in accounting related activities. 
The curriculum of this course was quite similar to those of the leading professional 
accounting bodies in the U.K. 

During 1941-1959, the only authoritative body of accountancy existing in Sri Lanka was 
the Accountancy Board established by the government to prescribe regulations and con- 
duct examinations for selecting suitable candidates for the accountancy service (Report of 
the Commission of Inquiry on Technical Education, 1963). Those who were selected by 
the Accountancy Board through its examinations were called Ceylon Registered Accoun- 
tants. The examinations conducted by this body were based on similar examinations of the 
British professional accounting bodies. The Accountancy Board also organised classes for 
prospective accountants in collaboration with a few private academies. A number of pri- 
vate academies conducted classes for accounting students who independently prepared for 
the external examinations of British professional accounting bodies, for the first time in 
Colombo in 1920 (Johnson & Caygill, 1971). There was no local professional body of 
accountants in Sri Lanka even by the late 1950s, thus, prospective accountants in Sri Lanka 
depended on the professional bodies in the U.K. for their professional qualifications. The 
most prominent of these professional bodies were the Institute of Chartered Accountants in 
England and Wales, the Institute of Incorporated Accountants, the Association of Certified 
Corporate Accountants, and the Institute of Cost and Works Accountants. Among them, 
the first two required the candidates to be articled under practising accountants, whereas 
the last two did not have such a requirement. All prospective chartered accountants were 
required to go to the U.K. to be articled for five years, whereas it was possible for the Incor- 
porated Accountants to be articled in Sri Lanka for four years and two months before going 



274 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

to England to take their examinations. The membership of the other two professional bod- 
ies was open to those engaged in accounting activities and it was obtainable locally by 
completing the examinations and satisfying the conditions as to the candidate's experience 
and character. Primarily based on the knowledge acquired through the Diploma in Accoun- 
tancy course conducted at the Ceylon Technical College, a considerable number of 
accounting students completed the examinations of the above professional bodies and 
became British qualified professional accountants. Over the past three decades, in addition 
to the accounting courses offered by the premier technical college at Maradana, similar 
courses were conducted by most of the regional technical colleges. 

The Institute of Chartered Accountants of Sri Lanka (ICASL) replaced the Accountancy 
Board in December 1959 under the provisions of the Act of Parliament No. 23 of 1959. 
Since that time it has functioned as the only local professional body of accountants in Sri 
Lanka. From its inception, the ICASL was the main local center of accounting education 
and training in the country. It provided the opportunity for prospective accountants to 
become qualified as Chartered Accountants within the country. However, apart from the 
fact that chartered accountants could be produced locally, the method of education and 
training used for producing such accountants continued to be the same as that of the Insti- 
tute of Chartered Accountants of England and Wales. Following the British model, the 
ICASL also introduced its own examinations and only those who passed those examina- 
tions and successfully completed a five-year period of practical training as articled clerks 
under the supervision of chartered accountants (called principals) were admitted to the 
membership of the Institute as 'Chartered Accountants'. 

The ICASL has also been engaged in providing a study program to its registered students 
for enabling them to prepare for the intermediate (Licentiate) and final (Professional) 
examinations. Both formal education and on-the-job training adopted by the ICASL 
stressed conformance with the requirements of the Companies Ordinance which was mod- 
elled on the British Companies Act of 1929. Consequently, a heavy emphasis was placed 
on the legal and auditing aspects of accounting with an emphasis on the technical or 
mechanical aspects of accounting (Perera, 1975). Referring to the situation in Sri Lanka, 
Perera commented that. 

Practically trained accountants tend to eliminate from serious consideration all abstract 
and abstruse concepts of accounting, possibly because such complexities are not well 
received or understood by them. They are inclined to view accounting education with a 
more narrow perspective, and those who are trained under them will have the same atti- 
nide(1975:94). 

Until recently, the system of 'articles' played a major role in the whole program of educa- 
tion and training provided by the ICASL. Under the terms of this training scheme, the prin- 
cipal was expected to allow study-time and provide on-the-job training for the trainee 
called 'articled clerk'. Since this system was adopted from the U.K. it was generally 
assumed that training under articles was adequate for local requirements, even without any 
monitoring of the type of training received by an articled clerk. However, experience indi- 
cated that articled clerks were often used for mechanical and routine work that could be 
handled by bookkeepers or others of more limited capacity. They were seldom given chal- 
lenging work or real responsibility (Perera, 1975). Furthermore, in 1973, the Report of the 



Colonialism and Accounting Education 275 

Committee on the Future Training of Accountants in Sri Lanka pointed out that the system 
of accounting education and training based almost exactly upon that of the British char- 
tered accountant was inadequate for the country's needs and proposed instead a much more 
flexible and relevant system (Accountant, 1973; Manoharan, 1974). In response to the rec- 
ommendations of this committee, the ICASL changed the name of its training scheme from 
'articles' to 'practical training' and reduced the duration of training from 5 to 3 years for 
university graduates and 4 years for non-graduates. It is interesting to note that this reduc- 
tion in the duration of practical training was nothing more than directly following the same 
change that had been introduced previously by the Institute of Chartered Accountants of 
England and Wales (ICAEW, 1997). As a response to the comments made by the above 
committee, the ICASL also introduced a new examination structure. However, according 
to Briston (1978), the new structure was "a rehash of traditional accounting subjects rather 
than a fundamental reassessment of the subjects in which a qualified accountant should be 
skilled". Referring to these changes, Briston further noted that, 

The disappointing remedy prescribed in Sri Lanka following such a foresighted analy- 
sis of the disease is largely attributable to deep-seated British influence exercised 
directly through underlying commercial attitudes and through the cadre of U.K. quali- 
fied professional accountants in that country ( 1978: 115). 

As such, the type of education and training received by prospective accountants in Sri 
Lanka has remained practically the same from the inception of the ICASL. The total num- 
ber of chartered accountants produced by the ICASL during the 36-year period from 1959 
to 1995 amounted to only 1,680 (The Chartered Accountant, 1995). The examination fail- 
ure rate is extremely high. Consequently, many school leavers have depended on foreign 
professional bodies to acquire professional qualifications. 

Although the Sri Lankan university system was established in 1942, it did not include 
commerce as a separate discipline until the beginning of 1960. The Vidyodaya University 
pioneered in this area by launching two bachelor's degree programs in Business Adminis- 
tration and Public Administration at the general and honours levels. Both programs 
included a considerable number of accounting subjects. The Bachelor of Arts (Economics) 
program of this university also provided a specialisation in accountancy. In 1961, the Uni- 
versity of Ceylon (Peradeniya) introduced a program of study leading to the Bachelor of 
Commerce degree. This program included a number of accounting subjects. When the uni- 
versities in Sri Lanka were reorganised in 1972, all the universities came under central 
administration and consequently each university became a campus of the University of Sri 
Lanka. One of the significant developments of this reorganization was the rapid expansion 
of commerce education in the university system. For example, in addition to the Business 
and Public Administration degree programs, a new Bachelor of Commerce degree program 
with an emphasis on accounting subjects was introduced at the Vidyodaya Campus in 
1973. Similar programs were started in other university campuses in Kelaniya, Colombo, 
Ruhuna and Jaffna. These campuses were renamed as separate independent universities in 
1977. Although the accounting subjects were offered as a major component of undergrad- 
uate degree programs in commerce and management, a comprehensive accounting degree 
program was not offered by any university in Sri Lanka until 1992. 



276 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

A separate academic department for accounting was set up for the first time and a com- 
prehensive bachelor's degree program in accounting was started at the University of Sri 
Jayewardenepura in 1992. This four-year program of study is designed to cover the theo- 
retical and practical aspects of accounting required for a high-quality academic and 
professional degree in accounting. Another important feature of this program is its practi- 
cal training scheme. Under this scheme, every undergraduate student is required to 
complete a 60-week program of practical training in a selected organization. This is a com- 
pulsory requirement satisfied in the third and fourth years of the student's program of 
study. However, this accounting degree is still not recognised by the ICASL as a sufficient 
qualification for meeting the examination requirement for its membership. 

COMPARISON OF ACCOUNTING EDUCATION IN SINGAPORE AND SRI LANKA 

Our discussion in the preceding two sections reveals that, despite the similar colonial influ- 
ence on the two countries, there exist a number of differences between Singapore and Sri 
Lanka in terms of their accounting education systems. The most obvious difference is that 
while Singapore successfully moved away from the colonial system of producing accoun- 
tants, Sri Lanka is still following the same old system. In Singapore, only the practical 
training and the continuing professional development activities are handled by the profes- 
sional accounting bodies. Professionals in many countries have concluded that the univer- 
sity is the most appropriate institution to organize and offer comprehensive programs of 
study that provide the foundations for competent accounting professionals. By adopting 
this model, Singapore has been able to produce high-quality accountants locally in suffi- 
cient numbers to support their expanding economy (Tan, et al., 1994). The three-year 
Bachelor of Accounting degree awarded by the university is accepted by the professional 
accounting body in Singapore as an adequate qualification for professional recognition 
without further examination, subject only to the practical experience. As such, the univer- 
sity accounting education has enabled the Singaporean professional accounting body 
(ICAPS) to increase its membership from 344 in 1964 to 7,444 in 1992 and concentrate 
more effectively on the professional development of accountants in the country (Tan, et al., 
1994). 

In Sri Lanka, even the four-year accounting degree with 60-week practical experience is 
not accepted by the ICASL as an adequate qualification for granting exemptions from its 
professional examinations. As shown in Table 1, the rate of failure at these examinations is 
enormously high. Several reasons seem to have contributed to the poor student pass results 
on the ICASL examinations. A principal reason is the inadequate teaching time and cover- 
age of subject matter devoted to each subject in the study programs. The professional 
accounting body is not a full-time educational institution and does not have a full-time 
teaching staff who can devote individual attention to the different student needs. The 
amount of time devoted to lectures, tutorials and assignments and subject matter coverage 
at a full-time university is much greater than those of a study program provided by the pro- 
fessional body. 

In 36 years, the ICASL has produced only 1,680 professional accountants with an annual 
supply as low as 47. Since 617 of these accountants have left the country for employment 
abroad, the actual number of locally qualified professional accountants working in Sri 



Colonialism and Accounting Education 277 



Table 1 . Results of Examinations Conducted by the Institute of Chartered Accountants of Sri Lanka- 
1994 





Number of 


Number of 


Percentage of 


Percentage of 


Title of Examination 


Candidates 


Passes 


Passes 


Failure 


Licentiate Part 1 


5,074 


1,045 


21 


79 


Licentiate Part II 


2,008 


749 


37 


63 


Professional Part I 


1,260 


290 


23 


77 


Professional Part II 


498 


111 


22 


78 


Professional Part III 


275 


63 


23 


77 


Professional Unit I 


21 


4 


19 


81 


Professional Unit II 


46 


2 


4 


96 



Source: Annual Report of ICASL 1 994. 

Lanka was only 1,063 in 1995 (ICASL, 1995). Even when the accountants with British 
qualifications are added to this figure, the total number of professionally qualified accoun- 
tants working in Sri Lanka is only around 2,000. For a country with 17.9 million people, 
this seems grossly inadequate to sustain economic development. By contrast, Singapore 
with only 2.9 million people has over 8,000 professionally qualified accountants today. 

The establishment of a local accounting body in Sri Lanka (ICASL) in 1959 was 
undoubtedly a very important step toward the development of accounting education and 
practice in the country. Unfortunately, the ICASL accounting curriculum is not designed to 
suit the local needs, instead, it is a replica of the accounting curriculum of the Institute of 
Chartered Accountants of England and Wales (ICAEW) as indicated in Table 2. 

Another feature of the deep-rooted colonial influence on accounting education at the 
professional level in Sri Lanka is the heavy emphasis placed on the legal and auditing 
aspects of accounting with inadequate attention being devoted to managerial accounting. 
As a result, accounting education in Sri Lanka concentrates on the technical or mechanical 
aspects of accounting. In this regard, what Enthoven observed in most developing coun- 
tries three decades ago is still applicable to Sri Lanka: 

Unfortunately, in most developing economies accounting is still not viewed as a tool for 
such management purposes as realistic comparison, evaluation, and decision making. 
Its primary objective is still the accumulation of (historical) data for financial statement 
and auditing purposes. Although this is a necessary and valuable function, it is not 
wholly satisfactory for the essential "development programming" in these economies. 
That the accounting requisites of a mature economy are different from those in a coun- 
try at or near the "take off point should be stressed (Enthoven, 1967: 109). 

The above situation is apparent in examining accounting education programs in Sri Lanka. 
For example, cost and management accounting courses in the curriculum of the ICASL 
account for only 10.5 per cent of the curriculum (Table 2). A large proportion of what 
remains is devoted to the basic objectives and procedures of accounting and how to comply 
with the technical requirements for corporate accountability, legal compliance and audit- 
ing. All of these topics are agreed to be essential elements in accounting. However, they are 
more of a preventive and detective character than directly supporting the development of 



278 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1998 



Table 2. Subjects for the Examinations of ICASL and ICAEW 



Institute of Chartered Accountants 
of England and Wales (ICAEW) 



Institute of Chartered Accountants 
of Sri Lanka (ICASL) 



1959 



1960 



Intermediate: 

Bookkeeping & Accounts (incl. Companies) 
Bookkeeping & Accounts (incl. Partnerships) 
Bookkeeping & Accounts (inch Executorship) 
Auditing 

General Commercial Knowledge 
Taxation and Cost Accounting 
Final: 

Advanced Accounting — Part 1 

Advanced Accounting — Part 2 

Auditing (incl. Investigations) 

Taxation 

General Commercial Knowledge, Cost and 

Management Accounting 
English Law — Part 1 
English Law — Part 2 



Intermediate: 

Bookkeeping & Accounts 1 

Bookkeeping & Accounts 2 

Auditing 

General Commercial Knowledge 
Final— Part 1: 

Advanced Accountancy 1 

Advanced Accountancy 2 

Partnership and Company Law 

Mercantile Law 
Final — Part 2: 

Management Accountancy 

Auditing 

Taxation 

General Commercial Knowledge 



1996 



1996 



Foundation Education: 

Financial Accounting and Auditing 

Business Law 

Economics 

Introduction to Financial Decisions 

Company Law 

Management and Marketing 
Intermediate: 

Auditing and Professional Issues 

Financial Reporting 

Taxation 

Business Planning and Finance 

Management Infonnation and Control 
Final: 

Advanced Auditing and Financial Reporting 

Advanced Taxation 

Advanced Business and Financial Management 

Multidisciplinary Case Study 



Licentiate I: 

Financial Accounting 

Business Math., Statistics & Data Processing 

Business Communication (English ) Paper 1 
Licentiate II: 

Cost and Management Accounting 

Auditing 

Business Environment (Economics, Law, Taxation & 
Management) 
Professional I: 

Accounting Theory 

Auditing (Principles, Techniques & Procedures) 

Economics, Finance and Commerce 

Commercial and Industrial Law 

Business Communication (English) — Paper 2 
Professional II: 

Advanced Financial Accounting 

Taxation 

Corporate Law 

Information Technology 
Professional III: 

Management Accounting & Operations Research 
Techniques 

Financial Management 

Auditing (Practice) 

Management 



Sources: 



Artliur N. Long (I960), Training Accountant in Great Britain, The Accouniing Review. July, p.457-58: ICASL, 
Annual Report 1994; ICAEW, Training to Become a Chartered Accountant. July 1996. 



Colonialism and Accounting Education 279 

entrepreneurial skills (Standish, 1983: 5). The development of entrepreneurial skills is 
extremely important for the developing economy like Sri Lanka. 

In Singapore, students who obtain high marks at the GCE advanced level examination 
and aspire to pursue an accounting career can enter the accounting profession through a 
university degree program. This opportunity to advance to professional status through for- 
mal education enables the professional accounting body in Singapore to admit 
academically superior and competent accountants to the profession in relatively large num- 
bers. By contrast, Sri Lankan students who have not been able to obtain the high marks 
required for admission to university degree programs are the ones who normally register 
for examinations of the ICASL and British professional accounting bodies. Most of these 
students depend on private tutoring to study and prepare for examinations of these profes- 
sional bodies. Nevertheless, the rate of failure at these examinations is extremely high, 
certainly due in part to the low academic level of students seeking the qualification. Stu- 
dents who obtain the highest aggregate marks at the GCE Advanced Level examination 
and are admitted to the accounting degree program at the University of Sri Jayewar- 
denepura are not exempted from the examination requirement of the ICASL. 
Consequently, we fear that some of them are diverted to non-accounting careers. It is a pity 
that the apparently most qualified students are not encouraged to enter the accounting pro- 
fession. The situation in Sri Lanka provides a classic example of a developing country 
where the colonial influence on accounting education is so powerful that even the political 
authorities do not dare to break it despite a clear need for more qualified accounting 
professionals. 

Sri Lankans in large numbers continue to depend on a number of British professional 
accounting bodies to obtain professional qualifications. A considerable number of these 
candidates have become fully qualified professional accountants, however, many others 
complete only parts of the examinations. The British professional examinations are based 
on the subject matter applicable to the British economy. This is appropriate for Britain. 
However, the Sri Lankan economy is very different from the British in many ways, thus a 
considerable amount of the subject matter covered in the above examinations is not rele- 
vant for a Sri Lankan accountant. For example, subjects like British Taxation and British 
Company Law are almost totally irrelevant in Sri Lanka. One should not assume that what 
might be good accounting for a developed country will automatically be relevant and good 
for an developing nation and its development process (Enthoven, 1973). For accounting to 
be an effective contributor to a country's economic development, what prospective 
accountants study must be relevant to the social, political, legal, and economic conditions 
within which they operate (Briston, 1978; Hove, 1986). As such, the accountants produced 
through studies and examinations based on a developed Western country are unlikely to 
contribute effectively toward meeting the needs of the developing economy in Sri Lanka. 

CONCLUSION 

As mentioned previously, accounting education developed rapidly in Singapore mainly as 
a result of its prompt recognition and encouragement by the professional accounting body. 
Sri Lanka would have made a much greater progress by now, if the university authorities 
had taken similar steps to establish accounting departments and accounting degree pro- 



280 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

grams in their universities. The major reason for their reluctance to set up accounting 
departments and degree programs is the non-acceptance of university accounting education 
by the ICASL for professional recognition. In most developed and fast developing nations, 
universities play the major role in producing accountants who can contribute effectively to 
the nation's economic development. For example, Korea established its first university 
department for accounting in 1978. By the end of 1989, it had established similar depart- 
ments and accounting degree programs in 50 universities with a total enrolment of nearly 
15,000 accounting students (Min, Song & Kim, 1993). Similarly, in China many universi- 
ties have accounting departments offering accounting degree programs at both undergrad- 
uate and postgraduate levels (Lin & Deng, 1992). In contrast, the Sri Lankan university 
system still has only one accounting department with less than 400 students for the whole 
country. 

Sri Lankan political and educational leaders must pay a greater attention to accounting 
education and take steps to make it relevant and appropriate to solving the problems of eco- 
nomic development. 

NOTES 

1. The country was known as 'Ceylon' until the name was changed to 'Sri Lanka' in 1972. 

2. In Singapore and Sri Lanka, students are admitted to universities on the basis of the results 
obtained at the General Certificate of Education (Advanced Level) Examination. 

REFERENCES 

Accountant: Journal of the Institute of Chartered Accountants of Sri Lanka. 1973. Second Quarter: 
7-25. 

Briston, R. J. 1978. "The Evolution of Accounting in Developing Countries", International Journal 
of Accounting Education and Research, 14(2): 105-120. 

De Silva, S. L. 1969. "Technical Education: Early Attempts and Recent Developments." Education 
in Ceylon — A Centenary Volume, Colombo: The Ministry of Education and Cultural Affairs. 

Enthoven, A. J. H. 1967. "Accounting and Development Programming." The International Journal 
of Accounting Education and Research, i(l): 107-20. 

. 1973. Accounting and Economic Development Policy, New York. Amsterdam, North Hol- 
land: Elsevier. 

Pong See Weng and Poo See Liang. 1992. School of Accountancy and Business: Origin and Devel- 
opment, Singapore: Nanyang Technological University. 

Poo See Liang and Ng Shwn Yng. 1993. "Singapore." In T. E. Cooke and R. H. Parker (Eds.), Finan- 
cial Reporting in the West Pacific Rim. London: Routledge. 

Ghartey, A. 1978. "A New Perspective for Accounting Education in Ghana," The International Jour- 
nal of Accounting Education and Research, 14(1): 121-32. 

Hove, M. R. 1986. "Accounting Practices in Developing Countries: Colonialism's Legacy of Inap- 
propriate Technologies," International Journal of Accounting Education and Research, 22( 1 ): 
81-100. 

Institute of Chartered Accountants of England and Wales (ICAEW). 1997. Communique from the 
Department of Education and Training, 16 April. 

• 1996. Training to Become a Chartered Accountant, July. 

Institute of Chartered Accountants of Sri Lanka (ICASL). 1994. Annual Report 1994, Colombo. 



Colonialism and Accounting Education 281 



Institute of Chartered Accountants of Sri Lanka. 1995. Directory of Members and Firms, Colombo. 

Johnson, T. J. and M. Caygill, 1971. "The Development of Accountancy Links in the Common- 
wealth," AccoM«//ng a«^fi»i7«e5.y /?6'.s'eaA'c/z, /, (Spring): 155-73. 

Lin, Zhijun and ShengHang, Deng, 1992. "Educating Accounting in China: Current Experiences and 
Future Prospects," The InternationalJournal of Accounting, 27: \6A-11 . 

Linn, Rob. 1996. Power, Progress and Profit: A History of the Australian Accounting Profession, 
Melbourne: Australian Society of Certified Practising Accountants. 

Lorig, Arthur, N. 1960. "Training Accountants in Great Britain," The Accounting Review, (July): 
457-58. 

Manoharan, M. 1974. "Socialisation of Knowledge Monopoly and the Scheme for the Future Train- 
ing of Accountants," Accountant (Sri Lanka), (First Quarter): 23. 

Min, H. K., Ja Song and J. S. Kim, 1993. "Accounting Education in Korea: Current Trends and the 
Challenge for the Future," International Journal of Accounting, 28{\)\ 78-87. 

Moores, K. and A. MacGregor. 1992. "Accounting Education in New Zealand," The International 
Journal of Accounting, 27(1): 69-79. 

Osiegbu, P. 1. 1987. "The State of Accounting Education in Nigeria," The International Journal of 
Accounting Education and Research, 22(2). 

Perera, M. H. B. (1975), "Accounting and its Environment in Sri Lanka," Abacus, 1 1(1): 85-96. 

Ramanathan, N. 1952. Foreign Plantation Investment in Ceylon, Colombo. 

Report of the Commission of Inquiry on Technical Education, Sessional Paper X . 1963. The Govern- 
ment Press, Ceylon. 

Report of the Special Committee Appointed to Investigate into the Structure of the Accounting Ser- 
vice. 1949. Sessional Paper 16, November, Colombo. 

Singapore Society of Accountants (SSA), Annual Report 1972. 

Standish, P. E. M. 1983. "Accounting Education in Australia: 19S2-83" Accounting and Finance, 
23(1): 2-30. 

Sunday Times. 1968. December 17, Singapore. 

Tan Meek Meng, Pang Yang Hoong and Foo See Liang. 1994. "Accounting Education and Practice: 
The Singapore Experience," International Journal of Accounting, 29(2): 161-83. 

The Chartered Accountant (Sri Lanka). 1995. 30(\) 

Wallace, R. S. O. 1990. "Accounting in Developing Countries: A Review of the Literature," 
Research in Third World Accounting, I: 3-34. 

Wee Liang Tan. 1994. "An Innovation in Accounting Education: The MBA (Accountancy) in Sin- 
gapore, Accounting Education, i(2): 1 15-31. 

World Bank. 1996. The World Development Report, New York: Oxford University Press. 



The International 
Journal of 
Accounting 



Book Review 



Japanese Accounting — A Historical Approach by Kyojiro Someya, Claredon Press, 
Oxford, 1996, 241 pp, $70. 

Many articles and books have been written on Japanese management practices, production 
and inventory maintenance systems, and business culture. Little, however, has been written 
on the distinct Japanese approach to accounting. The collection of Professor Someya' s 
essays presented in this book reflects the evolution of Japanese accounting over the 50 year 
period following the second World War. Tracing the author's footsteps through his various 
research projects also exposes the reader to the different views of other prominent Japanese 
researchers. Professor Someya, a former president of the Japanese Accounting Associa- 
tion, is currently the Director of the Japan Tax Institute and the focus of his research 
reflects the changes in the economic and business conditions in Japan. 

The Japanese economy suffered a devastating blow during the second World War, fol- 
lowed by a high level of economic growth. During this time, there were many challenging 
economic developments. The Japanese accounting research, through its practical applica- 
tions, has contributed significantly to revitalizing the Japanese economy. Some examples 
include the development of a suitable financial reporting system assisted in controlling the 
rampant post-war inflation, rationalizing Japanese business management, and establishing 
and fostering the Japanese stock exchange. 

The work described in this book spans three main areas of research. The first deals with 
the history of Japanese accounting. The second focuses on financial accounting theory. The 
third concentrates on cash flow accounting in the context of the difficulties related to the 
high inflation in Japan in the immediate post-war period. 

After a brief overview of his course of accounting research, Professor Someya describes 
in the second chapter the accounting 'revolutions' in Japan. In particular, he details the 
introduction of investor-oriented financial reporting and other factors that contributed to 
the evolution of the Japanese accounting practices. Chapter 3 describes accounting and 
financial reporting in Japan under the commercial code and the securities and exchange 
law. It also discusses the Financial Accounting Standards for Business Enterprises 
(FASBE), the international accounting standards, and the tax system. Chapter 4 deals with 
Japanese accounting principles and the users of financial information. In particular, it high- 
lights the impact of the changes in the social environment on the Japanese accounting 
principles. Chapter 5 presents external views and their impact on major revisions to the 
Japanese authoritative accounting literature. Chapters 6 through 8 describe traditional Jap- 
anese bookkeeping procedures and contrast them to current Japanese and common 
international procedures. 



The International Journal of Accounting, Vol. 33, No. 2, pp. 283-291 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



284 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

Chapter 9 describes the three domains of financial reporting: income measurement, 
cash flow accounting, and balance sheet items. It describes the development of Japa- 
nese financial accounting by detailing the distinction between accounting for capital 
maintenance and accounting for decision making. Chapter 10 describes the author's pro- 
posal for the incorporation of "cash-cost" classification to replace the "current-fixed" 
classification of balance sheet items. This essay is consistent with the author's prior 
writing, which advocated the inclusion of a fund statement among the other financial 
statements. Chapter 1 1 details the distinction between cash flow versus flow of com- 
modities (production, consumption, and distribution of social wealth). Professor 
Someya contends that the objective of business accounting is to present both the cash 
flow and flow of commodities. Hence, the author demonstrates the need for three finan- 
cial reporting domains: accounting for income measurement (reflecting the flow of 
commodities), cash flow accounting, and balance sheet presentation, to incorporate both 
the cash flow and the flow of commodities and to account for the discrepancies 
between the two statements. 

Chapter 12 presents Professor Someya' s views about the role of accounting in industry 
and society. By measuring, recording, and disseminating the economic activities of indi- 
viduals and organizations, accounting contributes to the industrial development and to 
society at large. Chapter 13 discusses the accounting unit of measure and the translation 
of foreign currency transactions and financial statements of foreign subsidiaries. Between 
1949 and 1971, the exchange rate between the Yen and the U.S. Dollar remained stable 
as established by the IMF. Since August 1971, however, there have been wide fluctua- 
tions in the exchange rates, which caused significant accounting problems. Professor 
Someya argues that exchange rate fluctuations should not be considered as related to the 
attributes being measured, but rather, to the accounting unit of measure. He advocates the 
translation of financial statements of foreign subsidiaries into domestic currency by using 
the "current" exchange rate prevailing on the balance sheet date. The second part of the 
book ends with Chapters 14 and 15, dealing with accounting standard selection and its 
socio-economic consequences. In this recent essay from 1993, Professor Someya con- 
tends that "...in to-day's society we have reached a point where accounting standards 
cannot be established without considering their social and economic conse- 
quences."(page 147). 

The third part of the book deals with "cash flow" accounting. This issue has received 
special attention by the author because of periods of high inflation in the history of Japan, 
for example, at the end of the Second World War. The accounting profession was chal- 
lenged to avoid confusing higher nominal sales figures coupled with lower nominal costs 
of sales against the economic reality of losing due to the erosion in the purchasing power 
of the money. The income statements and balance sheets, which were based on the accrual 
method did not reflect the real value and economic activity of the Japanese enterprises and 
this called for the emergence of cash flow accounting. Accordingly, Chapters 16 through 
20 describe the preparation and use of cash flow and fund accounting statements in Japan. 
Finally, Chapter 21 describes how heads of accounting departments for major Japanese 
companies view the statements of cash flow. 

The writing and translation of Professor Someya are generally very clear, although occa- 
sionally there are statements which seem to be distorted by the difficult task of translation. 
For example, on page 2. the author very ably describes a misconception, prevalent during 



Book Review 285 

inflationary times, confusing "nominal" revenues and expenses with "real" revenues and 
expenses. He states: "...to continue showing profits but still be plagued by a lack of cash 
means that a company is in fact operating below cost." I believe that the author does not 
mean that there is a "lack of cash" during inflationary times, but rather, that there is a lack 
of purchasing power during inflationary times. 

There is only one point in which I allow myself to have a different opinion than that of 
the distinguished author. Professor Someya advocates the translation of financial state- 
ments of foreign subsidiaries into domestic currency by using the "current" exchange rate 
prevailing on the balance sheet date. In my opinion, the logic behind the "temporal" 
method as required, sometimes, by FASB 52 is preferred. It is more consistent with the 
accounting treatment of the other issues as it allows for historical exchange rates for items 
when they were measured by the "historical" cost. 

In conclusion, I believe that this collection of essays by Kyojiro Someya presents a sub- 
stantial contribution to the field of accounting. The author has tried to address not only the 
basic accounting developments in Japan, but also to trace the socio-economic background 
and the reasons for these developments. Readers of Japanese financial statements, accoun- 
tants, potential investors, and creditors will find this book concise, useful and very 
readable. 

Reviewed by Moshe Hagigi 
Boston University 
Boston, Massachusetts, USA 
Accepted by Belverd E. Needles, Jr. 



Accounting Research in Lund, edited by Kristina Artsberg, Anne Loft and Stefan Yard, 
Lund University Press, Lund, 1993, 248 pp, ISBN 91-7966-242-0 (SEK 196) 248 pp. 

The worst thing about this book is its title, which provokes the questions, "Where is 
Lund?" and "What possible interest can there be in the accounting research there?" The 
answer to the first question is easy: Lund is a small town in Southern Sweden, whose prin- 
cipal claim to fame is that it is the site of that country's second oldest university. The 
answer to the second question is more problematical, but I hope that, by the end of this 
review, I will have persuaded at least some of my readers that at least part of the accounting 
research carried out at Lund deserves their attention. 

The book consists of thirteen separate papers. The editors claim in their introduction that 
the papers have two common characteristics: they are all concerned in various ways with 
the relationship between accounting and its social and organisational context, and that they 
are all in some way "interdisciplinary." Thus the papers reflect a distinctively Swedish 
approach to research which for the non-Swedish reader enhances their interest and origi- 
nality. I consider this claim later in the review. At the outset I make the point that the papers 
cover a very wide field, including standard-setting, company law, taxation, organisational 
matters, budgeting and auditing. Apart from the fact that all the papers reflect the Swedish 
approach to research, there is no common theme running through the book. Hence it is very 
unlikely that anyone (apart from reviewers!) will read the book from cover to cover. Fur- 
thermore the papers are of very mixed quality: some are excellent; two or three a frankly 



286 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 2, 1 998 

rather poor and which would be likely rejected by a re fereed journal. Faced with this diver- 
sity, I feel that the most useful way to review this book is to give a short analysis and 
evaluation of each paper, concentrating on those which I consider to be the more interest- 
ing for the non-Swedish reader. 

Determinants of Accounting Choices by the Auditing Profession: Kristina Artsberg 

The first paper is concerned principally with standard-setting in Sweden, concentrating 
on the standards set by the Swedish auditing profession, FAR. The research consists of an 
analysis of the twenty standards issued by FAR up to 1989, backed up by interviews with 
seven leading auditors. The main conclusions are that, over the period 1957-1989, there 
was a change in valuation principles from prudence to matching, a change in recognition 
criteria from form to substance and a change in legitimation from law to practice. The 
paper is a shortened version of the author's doctoral thesis, which was published in Swed- 
ish in 1992. In editing her thesis for this book, the author seems to have left out many 
important points. The paper is disjointed and the basis for many of its conclusions is 
unclear. A further weakness is that the paper is rather out of date; the reported research was 
completed in 1990. Hence the recent reform of the Swedish standard-setting system, which 
led to the setting up of the Accounting Council in 1989, is not mentioned. Regrettably the 
first paper in the book is not one of the best, but readers should not be put off. Many of the 
following papers are much better. 

Accounting and Taxation: Kristina Artsberg & Christer Nilsson 

This paper is excellent. It gives a very clear analysis of the role and influence of taxation 
on financial reporting in Sweden, where the state claims to regulate financial reporting in 
the public interest (largely, but not exclusively, for taxation purposes). Most of the leading 
actors in the accounting field in Sweden consider that the connection between accounting 
and taxation is desirable. This is in sharp contrast with the position in the Anglo-Saxon 
countries, where the accounting profession considers that the influence of tax rules on 
financial reporting is most harmful. The difference in assessment is attributed to the differ- 
ent principal function of accounting: in the Anglo-Saxon countries, the informative 
characteristics of accounting are stressed; in Sweden, the distributional and calculative 
functions are more important. Clearly these different approaches create problems for inter- 
national accounting harmonisation. One possible solution is to concentrate on disclosure 
and not on valuation, that is Swedish companies should be allowed to retain their tax- 
driven valuations on condition that they provide additional information. The great value of 
this paper is that it challenges, in a very clear and well-argued way, the conventional wis- 
dom of the Anglo-Saxons, that in financial reporting the interests of the shareholders 
should have priority over those of the state. The paper should be compulsory reading for all 
students in Anglo-Saxon countries who accept the dogma that the principal function of 
financial reporting is to provide information for the capital market. 



Book Review 287 

Accounting Harmonization: Olaf Arwidi andJ[\e Development 
of Budgetary Control in Sweden: Olaf Arwidi & Lars Samuelson 

Olaf Arwidi contributes two papers. The first paper (on accounting harmonization) is 
very difficuh to follow and in your reviewer's opinion is of very limited interest. The sec- 
ond paper traces the changing role of budgeting in Sweden from the 1950s, when the 
principal objective was cost control, through to the 1990's when budgeting serves a multi- 
tude of purposes including facilitating the delegation of responsibility to decentralized 
operations. The tasks and methods of budgeting have grown quantitatively, but this does 
not mean that budgeting has become "better," simply that it has become more complex. An 
important current trend is the greater use of non-financial measures, relating to such mat- 
ters as quality and the environment. Specific reference is made to the T50 project of a 
major multi-national which aims to reduce all activity times by 50%. The author concludes 
that more research is needed on the effect of non-financial measures. Your reviewer agrees 
completely: to concentrate on time to the exclusion of other factors would seem to be the 
surest way of going bankrupt. 

The Role of Administrative Arrangements in Coordinating Federative Structures: 
Karin Jonnergard 

This paper is on "federative organisations," specifically retail cooperative societies, 
where the central organization is owned by the member cooperatives, in complete contrast 
to the typical group of companies, where the central organization (the holding company) 
owns the subsidiaries. Based on case studies of two "federative organisations" (in Sweden 
and in Canada) undertaken in 1983-5, the author demonstrates very clearly how the success 
of this organizational form depends on a value system that binds the members together, 
backed up by matching administrative arrangements. The paper is well-researched and 
well-written. For your reviewer, its great value is that it deals with a form of business orga- 
nization that is fundamentally different from the limited company/corporation which 
dominates the text-books, and thus it provides a useful stimulus to questioning conven- 
tional wisdom. The paper's greatest weakness is that the research on which it is based is 
over ten years old and is thus principally of historical interest. 

From Gemeinschaft to Gesellschaft: Karin Jonnergard, 
Per Arvidson & Jbrgen Carlsson 

Karin Jonnergard is also the joint author of this beautifully written and well argued paper 
which is based on the ideas of the little-known Swedish sociologist, J. Asplund. "Gemein- 
schaft" refers to less formal family-like social organisms which are based on mutual trust 
and solidarity. "Gesellschaft" refers organizations, such as commercial enterprises, which 
are based on formal contractual relationships, often reflecting the economic interests of the 
members. The authors hypothesise that, in recent years, there has been a shift from 
Gemeinschaft to Gesellschaft in Swedish society. The authors present a detailed analysis 
of two Swedish organizations: the retail cooperative movement (the subject of the previous 
paper) and the police force. Accounting has been a major factor in this shift — as a facilitat- 



288 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 2, 1 998 

ing factor not as a causal factor — in that a Gesellschaft seeks to measure what a 
Gemeinschaft considers to be either immeasurable or not worth measuring. An interesting 
point is that the shift from Gemeinschaft to Gesellschaft can be interpreted as a bid by an 
organization to achieve greater legitimacy in relation to the rest of society. Over the last 
thirty years, the Swedish retail cooperative movement has lost not only market share but 
also the respect of many Swedes, who regarded it as highly inefficient by comparison with 
commercial firms. By adopting the characteristics of Gesellschaft, the retail corporative 
movement is seeking to make itself more similar to those commercial companies which are 
deemed to have greater social legitimacy. The paper is well written and illustrated with 
appropriate examples from the two organizations studied. Its value to the non-Swedish 
reader is that it gives an insight to the behaviour of organizations different from the text- 
book profit-maximising firm. 

Environment Accounting: the Swedish Case: Fredrik Ljungdahl 

This paper presents the results of a survey of the environmental reporting practice of the 
62 largest quoted companies on the Stockholm stock exchange. The annual reports were 
examined to see if they contained the information recommended by the United Nations' 
ISAR working group. In fact only slightly over half of the annual reports contained any 
environmental information whatsoever and only 25 (40%) contained information recom- 
mended by the UN. Each of the 25 reports contained on average only 2.5 of the 14 different 
information elements recommended by the UN. No company reported on environmental 
contingent liabilities; the author speculates that this is due to the great difficulty of valuing 
this type of liability. The most commonly presented type of environmental information is 
that related to the company's products — which is not even mentioned in the UN's report. 
The paper is clearly written and provides both a useful (but in no way original) introduction 
to the whole subject and an analysis of the position in Sweden. However it is based on 
research undertaken in 1990/1, which presumably is now out of date. 

Audit Concentration in Sweden and Denmark: Anne Loft & Agneta Sjofors 

This paper analyses the increase in audit concentration in Sweden (between 1985 and 
1990) and in Denmark (between 1988 and 1991 ). The dates chosen are before and after the 
mergers that reduced the Big Eight to the Big Six. Not surprisingly the research reveals a 
significant increase in concentration. The authors use sophisticated mathematical tech- 
niques to prove what many observers would consider to be blindingly obvious; however it 
is good to be rigorous. In Sweden in 1990, three audit firms were responsible for auditing 
companies that represented 63% of the turnover of all quoted companies (in 1985 the same 
market share was held by seven audit firms). In Denmark in 1991 the top two audit firms 
audited 56% of quoted companies (by turnover). In both countries the Big Six became 
increasingly dominant, as is illustrated by certain very significant name-changes. The larg- 
est Danish audit firm changed its name from "C.Jespersen" to "KPMG C.Jespersen." In 
Sweden the second largest firm changed its name from "Bohlins" to "KPMG Bohlins," and 
the third largest from "Hagstrrm & Olsson" to "Ernst & Young." The authors ask some 
interesting questions as to the consequences of the increasing dominance of the multina- 



Book Review 289 

tional audit firms: for example what will happen to the nationally defined notion of "good 
auditing practice" which is embodied in the law of both Sweden and Denmark. The value 
of this paper is that it makes available to the English-speaking reader research on audit con- 
centration in Sweden. The Danish research is fully described in an article published in the 
European Accounting Review in 1992. 

Accounting for Goodwill: The Swedish Case: Sven-Arne Niisson 

The subject of this paper is the controversy over the accounting treatment of goodwill 
that arose in Sweden in the late 1980's. At this time a significant number of major Swedish 
companies accounted for goodwill in ways that were apparently contrary to the law and the 
standards set by the Swedish auditing profession. The law prescribed that goodwill should 
be amortised over not more than ten years. However beginning in 1986 an increasing num- 
ber of Swedish companies began to employ other methods, notably writing off directly to 
reserves (used by 26 companies in 1989) and amortising over more than ten years (used by 
20 companies in 1989). The impetus came from Swedish companies that were listed on for- 
eign stock exchanges (notably New York and London) which preferred to follow the 
foreign rules rather than the Swedish ones. Most Swedes were horrified by this flouting of 
the law. The Swedish government reacted by setting up the official Accounting Council as 
a standard setting body to supplement the auditing profession's private body, whose stan- 
dards had been ignored by so many Swedish companies. The first standard issued by the 
new body dealt with accounting for business combinations and adopted the lASC's 
approach. However the paper, which was apparently written in 1992, does not enlighten us 
as to whether the new body has succeeded in restoring order by successfully imposing its 
standard on Swedish companies. The value of this paper to the non-Swedish reader is that 
it demonstrates the difficulty that a small country may experience in attempting to maintain 
its own local accounting standards in the face of the increasing globalization of the world 
economy. Sweden is particularly vulnerable in that it has a remarkable number of multi- 
national companies that are quoted on foreign stock exchanges and which tend to resist the 
imposition of Swedish rules that conflict with American or British rules. 

The Historical Development of Company Law in Sweden: 
Sven-Arne Niisson & Martin Smiciklas 

This short paper gives in four pages a very brief summary of Swedish company law up 
to 1910. 

Accounting Systems in Their Context: Gert Paulsson 

This paper presents the results of a study of the accounting systems of a Swedish health 
care district carried out by the author in 1990. The study focussed on changes in the organ- 
isational structure of the district whereby departmental managers were given greater 
responsibility for the buying and selling of health services. This change led to new 
demands being placed on the accounting system, for example, for information that would 



290 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol, 33, No. 2, 1 998 

facilitate the pricing of the services that were bought and sold. The author considers that 
this analysis is consistent with the "orthodox" approach in which the aim of accounting is 
deemed to be the provision of information that helps to improve efficiency. However, there 
is also evidence of what is termed the "institutional" approach — that accounting is used as 
a means of enhancing the legitimacy of the manager and the organization. At the time of 
the research, public health care organisations were widely criticised as being hopelessly 
inefficient by comparison with private firms. The reform of the accounting system was a 
way of deflecting this criticism. The principal value of this paper is that, through the case 
study, it provides a valuable bridge between theory and practice. However, the paper is 
rather brief. Serious students would be advised to consult the author's book on the study, 
which is published (in English) by the Lund University Press. 

Investment Evaluations in Swedish Companies: Stefan Yard 

This paper reports on a 1986 study of the capital investment criteria used by Swedish 
companies. There are two striking results: that the most widely used method was pay-back, 
employed by 42% of responding companies; and that the pay-back method was preferred 
by companies with relatively low and relatively high profitability. Companies in the mid- 
dle (with average profitability) preferred methods that used discounting (NPV or IRR). The 
author attributes this preference to the flexibility offered by the pay-back method, in that it 
more easily allows the consideration of criteria other than cash flows. The second part of 
the paper describes the very complicated mathematical technique used by a large unnamed 
Swedish corporation in the 1980' s. This part is interesting, not so much for the details of 
the technique, but for the author's assessment that, over time, the technique became so 
complicated that the staff did not understand it and treated it as a "black-box." However, 
the technique was only changed when the corporation merged with another firm that used 
IRR, which evoked the author's dry comment "Corporation harmonization seems to be 
considered to be a more important factor when choosing evaluation methods than theoret- 
ical consistency or understandability by users." 

Accounting and Visibility: Anne Loft 

This paper examines the role of cost accounting as a means of increasing the power of 
managers to control the operations within factories, particularly the activities of workers. 
Reference is made to the work of the French thinker, Michel Foucault, particularly his 
analysis of the rise of the factory as a "disciplinary institution." But all the examples in the 
text are from Britain; the author, a part-time professor at Lund University, is of British ori- 
gin. The cost accounting system and management control regime at the Soho works in 
Birmingham are analysed in detail, as is the accounting system described in a British text- 
book of 1932. The paper is well-written and provides a useful introduction to the subject of 
alternative interpretations of the function of cost and management accounting of which 
there is a growing literature. However it has nothing to do with Lund. 

Finally I consider the editors' claim that the papers in the book are of particular interest 
because they reflect a peculiarly Swedish approach to accounting research. In my opinion 
this claim is rather exaggerated. In the case of only four papers (numbers 2,5,6 and 10) did 



Book Review 291 

I detect a specifically Swedish flavour in the research approach. They were also (perhaps 
coincidently) the best and the most interesting from the viewpoint of the non-Swedish 
reader. Most of the remaining papers are of interest in that they provide an insight into the 
position in Sweden, but there was nothing unusual or exceptional in the research approach 
or the research methods that they employed. The last paper is a straightforward piece of 
Anglo-Saxon research. In my opinion the value of this book is that it makes available for 
the English-speaking reader research that has previously been published only in Swedish. 
Lund University is to be congratulated in taking this initiative to bring its accounting 
research to a wider audience. 

Reviewed by John Flower 
Director, Centre for Research 
in European Accounting 
Brussels, Belgium 
Accepted by Belverd E. Needles, Jr. 



UCTIONS FOR AUTHORS 

JCOPE. The aims of The International Journal of Accounting are to advance the academic and profes- 

Titanding of accounting theory and practice from the international perspective and viewpoint. The Jour- 

;s that international accounting is influenced by a variety of forces, e.g., governmental, political and 

lal attempts to assist in the understanding of the present and potential ability of accounting to aid in 
^ and interpretation of international economic transactions. These transactions may be within a profit 
• environment. The Journal deliberately encourages a broad view of the origins and development of 
Jvith an emphasis on its functions in an increasingly interdependent global economy, and welcomes 
Ithat help explain current international accounting practices, with related theoretical justifications, and 
jcisms of current practice. Other than occasional commissioned papers or special issues, all the manu- 
fihed in the Journal are selected by the editors after the normal refereeing process. 

|:ripts should be submitted in triplicate to the Editor, Professor Andrew D. Bailey, Jr.. The Interna- 
\oumal of Accounting, University of Illinois, 320 Commerce West, 1206 S. Sixth Street, Champaign 
\IQ, U.S.A. ' 

luscripts must be typewritten or word processed, double spaced on one side only and numbered con- 
jly, including an abstract of approximately 100 words, and 6 key words for indexing. Papers must 
Se neither previously published nor submitted elsewhere simultaneously. Authors are responsible for 
'ig permission from the copyright owner (usually the publisher) to use any quotations, illustrations, or 
|rom another source. 

Lhor's full name, affiliation, and when applicable, e-mail address should appear on the title page, 
lies, figures and illustrations should accompany the manuscript on separate sheets. Captions should 
^identify all separate matter, and all figures must be submitted in camera ready copy, or electronic pro- 
jecifies files, such as EPS or Post Script. All should be called out in text and indication given as to loca- 
u example, 

TABLE 1 ABOUT HERE. 

Ices should be numbered consecutively throughout the manuscript with superscript Arabic numerals, 
^ould be collected in a separate file at the end of the text, 
lices should be cited in the text as follows: 

Peikart and O'Conner (1989) agree with this method. Other studies have found similar results 
Iveikart and O'Conner, 1989; Smith, 1991). 

Iparate Reference page(s), each citing should appear, double-spaced, in alphabetical order as follows: 
li Articles 

^ois, Catherine C. and Bodo B. Schlegelmilch. 1990. "Do Corporate Codes of Conduct Reflect 
National Character?" Journal of International Business Studies, (Fourth Quarter): 519-539 



pden-Turner Charles and Alfons Trompenaars. 1993. The Seven Cultures of Capitalism. New 
York: Doubleday. 

Icceptance the author is to submit one copy of the approved manuscript on a spellchecked IBM compati- 
fcgram specific disk to the editor. The accuracy of the disk and proofs is the responsibility of the author, 
losh submissions are limited to high density disks. 

'lEW SECTION. The book review section is interested in works published in any language, as long 

Comparative or international in character. The author or publisher of such works should furnish either 

editor with two (2) copies of the work, including information about its price and the address where 

write for copies. Reviews will be assigned by the book review editors. No unsolicited reviews will be 

liggestions of works that might be reviewed are welcomed. 

Stephen A. Zeff Rice University - MS 531, P. O. Box 1892, Houston. TX 77251-1892; Tel: +1-713- 
^ax: +1-713-285 5251; E-Mail: sa7eff@rice.edu; Dr. Dr. habil. Axel Haller, Universitat Augsburg, 
^.r Wirtschaftsprufung, 86135 Augsburg, Germany; Tel: +49 821 5984127; Fax: +49 821 5984224; E- 
iller@wiso.uni-augsburg.de. 



INSTRUCTIONS FOR AUTHORS 

AIMS and SCOPE. The aims of The International Journal of Accounting are to advance the academic and profes- 
sional understanding of accounting theory and practice from the international perspective and viewpoint. The Jour- 
nal recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and 
economic. 

The Journal attempts to assist in the understanding of the present and potential ability of accounting to aid in 
the recording and interpretation of international economic transactions. These transactions may be within a profit 
or nonprofit environment. The Journal deliberately encourages a broad view of the origins and development of 
accounting with an emphasis on its functions in an increasingly interdependent global economy, and welcomes 
manuscripts that help explain current international accounting practices, with related theoretical justifications, and 
identify criticisms of current practice. Other than occasional commissioned papers or special issues, all the manu- 
scripts published in the Journal are selected by the editors after the normal refereeing process. 

1. Manuscripts should be submitted in triplicate to the Editor, Professor Andrew D. Bailey, Jr., The Interna- 
tional Journal of Accounting, University of Illinois, 320 Commerce West, 1206 S. Sixth Street, Champaign, 
IL 61820, U.S.A. 

2. All manuscripts must be typewritten or word processed, double spaced on one side only and numbered con- 
secutively, including an abstract of approximately 100 words, and 6 key words for indexing. Papers must 
either be neither previously published nor submitted elsewhere simultaneously. Authors are responsible for 
obtaining permission from the copyright owner (usually the publisher) to use any quotations, illustrations, or 
tables from another source. 

3. The author's full name, affiliation, and when applicable, e-mail address should appear on the title page. 

4. All tables, figures and illustrations should accompany the manuscript on separate sheets. Captions should 
clearly identify all separate matter, and all figures must be submitted in camera ready copy, or electronic pro- 
gram specifies files, such as EPS or Post Script. All should be called out in text and indication given as to loca- 
tion. For example, 

TABLE 1 ABOUT HERE. 

5. Footnotes should be numbered consecutively throughout the manuscript with superscript Arabic numerals. 
They should be collected in a separate file at the end of the text. 

6. References should be cited in the text as follows: 

Schweikart and O'Conner (1989) agree with this method. Other studies have found similar results 
(Schweikart and O'Conner, 1989; Smith, 1991). 

On a separate Reference page(s), each citing should appear, double-spaced, in alphabetical order as follows: 

Journal Articles 

Langlois, Catherine C. and Bodo B. Schlegelmilch. 1990. "Do Corporate Codes of Conduct Reflect 
National Character?" Journal of International Business Studies, (Fourth Quarter): 519-539 

Books 

Hampden-Turner Charles and Alfons Trompenaars. 1993. The Seven Cultures of Capitalism. New 
York: Doubleday. 

7. Upon acceptance the author is to submit one copy of the approved manuscript on a spellchecked IBM compati- 
ble, program specific disk to the editor. The accuracy of the disk and proofs is the responsibility of the author. 
Macintosh submissions are limited to high density disks. 

BOOK REVIEW SECTION. The book review section is interested in works published in any language, as long 
as they are comparative or international in character. The author or publisher of such works should furnish either 
book review editor with two (2) copies of the work, including information about its price and the address where 
readers may write for copies. Reviews will be assigned by the book review editors. No unsolicited reviews will be 
accepted. Suggestions of works that might be reviewed are welcomed. 

Professor Stephen A. Zeff Rice University - MS 531, P. O. Box 1892, Houston, TX 77251-1892; Tel: +1-713- 
527 6066; Fax: +1-713-285 5251; E-Mail: sazeff@rice.edu; Dr. Dr. habil. Axel Haller, Universitat Augsburg, 
Lehrstuhl fur Wirtschaftsprufung, 86135 Augsburg, Germany; Tel: +49 821 5984127; Fax: +49 821 5984224; E- 
Mail: axel.haller@wiso.uni-augsburg.de. 



» o 



5. -o m 
o o c/) 

3 a 

ST "^ 

S.o-0 
w ■ 

0> GD 
L. o 
O) ^ 
^ -fc 
00 o> 
■>l 
00 



(D 
0) 
(0 

(/) 

2 
o 

(D 
JD 
C 
(D 
(A 



§ 



o 
o 

O 
I 
-J 

o 






0) 






■0 
m 


> 




c 


31 


Z 

z 




(/ 


H 


J> 


5 


c 


Z 


J3 











00 











) 


■(^ 


3} 




c 


03 






r 


OJ 


s 







s: 5 



COMMERCE ^ 
ptRIODICAL 




The 
International 
Journal of 

Accounting 



Editor 

Andrew D. Bailey, ^r7 

University of Illinois at 
Vrhana-C hampaign 

CO-EDITORS 
Arthur R. Wyatt 

University of Illinois at 
Urhana-(hampaign 

Yukio Fujita 

Aichi-Gakuin University, Tokyo 

R.S. Olusegun Wallace 

King Fahd University, Saudi Arabia 
Volume '^'^ • Numher '^ • 1008 



Stamford, Connecticut 



London. England 



;nter for International Education and Research in Accounting, 
liversity of Illinois at Urbana-Champaign 



Name of publication: THE INTERNATIONAL JOURNAL OF ACCOUNTING (ISSN:0020-7063) 

Issue: Volume 33/Number 3/1998 

Frequency: Published Quarterly 

Office of publication: 1 00 Prospect Street 

Stamford, Connecticut 06901-1640. 



Subscription rates (postage included): 

Institutions: United States S225.00 

Foreign Surface Mail S250.00 
Foreign Air Mail S275.00 



Individuals: United States $95.00 

Foreign Surface Mail SI 20.00 
Foreign Air Mail SI 45.00 

(Please remit by personal check or credit card) 



Please contact publisher for missing issues. 

All subscriptions must be prepaid and are for the 1999 calendar year only. 



POSTMASTER send address changes to: 

Subscription Dept.: 100 Prospect Street, Stamford, CT 06901-1640. 

(Europe and United Kingdom) 38 Tavistock Street, Covent Garden 
London WC2E 7PB, England 

Editorial Office: Center for International Education & Research in Accounting 

320 Commerce West Building 
Box 109, 1206 South Sixth Street 
Champaign, IL 61820 
217-333-4545; 217-244-6565(fax) 
E-Mail: gillham@uiuc .edu 



Editor: 



A.D. Bailey, Jr. 



Back Issues: Information about availability and prices of back issues starting with Volume 31, Number 1 
may be obtained from the publisher's order department (address above). Prior issues, please 
contact the editorial office. 



Claims: Claims for undelivered copies must be made no later than three months after publication. 

The publisher will supply missing copies when losses have been sustained in transit and 
when the reserve stock will permit. 

Copyright: © Board of Trustees of the University of Illinois. 



The 
International 
Journal of 

Accounting 



JUN 2 9 1998 

. ,K„VFRRITY OF ILLlNOlc 
^URBANA-CHAMPAIGN 



EDITOR 
Andrew D. Bailey, Jr. 

University of Illinois at 
Urbana-Champaign 

CO-EDITORS 
Arthur R. Wyatt 

University of Illinois at 
Urbana-Champaign 

Yukio Fujita 

Aichi-Gakuin University, Tokyo 

R.S. Olusegun Wallace 

King Fahd University, Saudi Arabia 
Volume 33 • Number 3 • 1998 



Stamford, Connecticut 



London, England 



Center for International Education and Research in Accounting, 
Jniversity of Illinois at Urbana-Champaign 



EDITOR 

Andrew D. Bailey, Jr. 

University of Illinois. Urbana-Champaign 

CO-EDITORS 

Arthur R. Wyatt. University of Illinois, Urbana-Champaign 

Yukio Fujila, Aichi Gakiiin University, Tokyo 

R. S. Olusegun Wallace, King Fahd University, Saudi Arabia 

BOOK REVIEW EDITORS 

Axel Haller. Universitat Augsburg, Augsburg 
Stephen A. Zeff. Rice University, Houston 

EDITORIAL POLICY BOARD 

Hans Havermann, KPMG Deutsche Treuhand-Gesellschaft, DUsseldorf 

H. Peter Holzer. Wirtschaftsuniversitdt, Vienna 

Toshio lino, Surugadai University, Japan 

Yu Xu-Ying, Xiamen University, People's Republic of China 

Stephen A. Zeff. Rice University, Houston 

EDITORIAL REVIEW BOARD 

Dhia AlHashim, California State University, Northridge 

Bhabatosh Banerjee, lAAER, India 

Barbro Back. Turun Kauppakorkeakouhi, Finland 

Pierre Bescos. ESCP, France 

A. Bose, Haidia Petrochemicals Limited India 

Enrique Ponte Bonson, University- of Huelva, Spain 

C. S. Agnes Cheng, University of Houston, Houston 

Joseph Cheung, Polytechnic University, Hong Kong 

Gilles Chevalier. Samson Belair/Deloitte-Touche, Quebec 

Ling-Tai Lyunete Chou, National Chengchi University, Taiwan 

David Cooper. University of Alberta, Canada 

Sejila Dizdarevic. Tucson, Arizona, U.S.A. 

Timothy S. Doupnik, University of South Carolina 

Peter Easton, Ohio State University, Columbus 

John W. Eichenseher, University of Wisconsin-Madison 

Kenneth Euske. Navel Postgraduate School, Monterey 

Shawki Farag, The American University, Cairo 



Ehsan H. Feroz. University of Minnesota, Duluth 

Cathy Finger, University of Illinois, Urhana-Champaign 

Carol Frost, Dartmouth College, Hanover 

Yukio Fujita, Aichi Gakuin University, Japan 

Sidney Gray, University of New South Wales, Australia 

James Ato B. Ghartey. Office of Controller & Accountant, Ghana 

Trevor Harris, Columbia University, New York 

Sergio de ludicibus, Universidade De Sao Paulo 

Chen-en Ko, National Taiwan University, Taiwan 

Chris Lefebvre, Kotholieke Universiteit Leuven, Belgium 

Joelle Le Vourc'h, ESC P. Paris 

Mei-Hwa Lin, National Chengdu University 

Thomas Linsmeier, University of Illinois, Urbana-Champaign 

Andrew Lymer, The University of Birmingham, UK 

M. R. Mathews, Massey University, New Zealand 

Gary Meek, Oklahoma State University, Stillwater 

Karen MoUoy, University of Illinois, Urbana-Champaign 

Ken Moores, Bond University, Australia 

Belverd Needles, DePaul University, Chicago 

Masayuki Nakagawa, Universiade De Sao Paulo 

Prawit Ninsuvannakul, Thailand 

B.O. Ogundele, University of Ilorin, Nigeria 

Soong Park, Presbyterian Church (USA) 

Grace Pownall, Emory University, Atlanta 

Reiner Quick, Universitat GH Essen, Essen 

Lee Radebaugh, Brigham Young University, Provo 

Sridhar Ramamoorti, University of Illinois, Urbana-Champaign 

Robert S. Roussey, University' of Southern California, Los Angeles 

T. Flemming Ruud, Universit}- of St. Gal I en, Switzerland 

Stephen B. Salter, University of Cincinnati 

Alan Sangster, Queen 's School of Management, Northern Ireland 

Shigeto Sasaki, Senshu University, Japan 

Michael Schadewald, University of Wisconsin-Milwaukee 

Hanns-Martin Schoenfeld, University of Illinois, Urbana-Champaign 

Daniel T. Simon, University of Notre Dame 

Herve Stolowy, HEC Group School of Mgt., France 

Gary L. Sundem, University of Washington, Seattle 

Jimmy Y. T. Tsay, National Taiwan University 

Judy S L Tsui, City University of Hong Kong 

M.A. van Hoepen, Erasmus University Rotterdam, Netherlands 

R. S. Olusegun Wallace, King Fahd University, Saudi Arabia 

David A. Ziebail, University of Illinois, Urbana-Champaign 



1997 Ad Hoc Reviewers 



Matt Anderson, Michigan State Universit}; East Lansing 
Barbro Back, Tiirun Kauppakorkeakoiilu. Finland 
Maureen Berry, University of Illinois, Urhana-Cluimpaign 
Pierre Bescos, ESCP, France 

A. Bose, Haidia Petrochemical Limited, India 

Robert Bricker, Case Western Resene University; Cleveland 

Dennis Chambers, University of Illinois, Urbana-Champaign 

John Chandler, University of Illinois, Urbana-Champaign 

Gilles Chevalier, Samson Belair/Deloitte & Touche, Quebec 

Frederick D. S. Choi, New York University, New York 

Eugene E. Coniiskey, Georgia Institute Tech, Atlanta 

Daniel Collins, University of Iowa, Iowa City 

Jeremy Cripps, Heidelberg College, Tiffin 

Naim Dahmash, University of Jordan, Amman 

Bala Dharan, Rice University, Houston 

Jon Davis, University of Illinois, Urbana-Champaign 

Richard J. Dietrich, University of Illinois, Urbana-Champaign 

Timothy S. Doupnik, Universit}' of South Carolina, Columbia 

Leslie Eldenburg, University of Arizona, Tucson 

Howard Engle, Arthur & Anderson, Chicago 

Merle Erickson, University of Chicago, Chicago 

Thomas G. Evans, University of Central Florida, Orlando 

Michael Favere, National Institute of Development Administration, Thailand 

Joseph Fisher, Indiana University, Bloomington 

Cheryl Fulkerson, University of Texas at San Antonio 

James Ato B. Garthey, Controller and Accountant, Republic of Ghana 

Julia Grant, Case Western Resene University, Cleveland 

Audrey Gramling, University of Illinois, Urbana-Champaign 

Mohamed Hussein, University of Connecticut, Storrs 

Frederick Jacobs, University of Minnesota, Minneapolis 

Sanjay Kallapur, University of Arizona, Tucson 

Robert Kirsch, Southetm Connecticut State University, New Haven 

John Kramer, University of Florida, Gainesville 

Chris Lefebvre, Katholieke Universiteit Lenven, Belgium 

Marian Lower, Security Control & Audit, United Kingdom 

Silvia Madeo, University of Missouri - St Louis 

Kenneth Merchant, University of Southern California, Los Angeles 

B. O. Ogundele, University of Ilorin, Nigeria 
Soong Park, Economics Institute, Boulder 

Kathy Petroni, Michigan State University, East Lansing 

Judy Rayburn, University of Minnesota, Minneapolis 

Hanno Roberts, Norwegian School of Management, Norway 

Robert Roussey, University of Southern California, Los Angeles 

Marjorie Shelley, University of Illinois, Urbana-Champaign 

Claude Simon, ESCP, France 

Daniel Smith, University of Georgia, Athens 

Theodore Sougiannis, University of Illinois, U rbana-Champaign 

Thomas Sternburg, University of Illinois, Urbana-Champaign 

Mark Tombley, University of Arizona, Tucson 

Shiing-Wu Wang, University of Southern California, Los Angeles 

Arnold Wright, Boston College, Chestnut 



THE INTERNATIONAL 
JOURNAL OF ACCOUNTING 



VOLUME 33 NUMBER 3 1998 



ARTICLES 

National Culture and Subordinates' Upward Communication of 
Private Information 

CHEE W. CHOW, RICHARD NEN-CHEN HWANG, 

WOODY LIAO AND ANNE WU 293 

Earnings Management in Japanese Companies 

MASAKO N. DARROUGH, HAMID POURJALALI AND 

SHAHROKH SAUDAGARAN 313 

Effect of the Inconsistency In Accounting Standards on the Choice 
of Financial Instruments: The case of Debt Issued with Stock 
Purchase Warrants and Convertible Debt by Japanese Companies 

AKIHIRONOGUCHI 335 

New Forms of Assurance Services for New Forms of Information: 
The Global Challenge for Accounting Educators 

GARY L HOLSTRUM AND JAMES E. HUNTON 347 

Accounting Income, Income Components and Market-to-Book 
Equity Ratios: Finnish Evidence 

JUHA-PEKKA KALLUNKI, MINNA MARTIKAINEN AND 

TEPPO MARTIKAINEN 359 

Equity Returns: Local GAAP versus U.S. GAAP for Foreign Issuers 
from Developing Countries 

NORLIN G. RUESCHHOFF AND C. DAVID STRUPECK 377 



BOOK REVIEWS 

International Financial Reporting and Analysis: A Casebook by 
Kenneth R. Ferris 

Reviewed by MARK LANG 391 

International Accounting and Finance Handbook by Frederick D.S. 
Choi 

Reviewed by ROLF RUNDFELT 392 



Accounting: An International Perspective by Gerhard G. Mueller, 
Helen Gernon and Gary K. Meek 

Reviewed by THOMAS H. BEECHY 394 

The Development of Accounting in an International Context: 
A Festschrift in honour of R. H. Par/cer edited by T.E. Cooke and 
C.W. Nobes 

Reviewed by RICHARD IVIACVE 396 



CAPSULE COMMENTARIES 401 



The International 
Journal of 
Accounting 



National Culture and Subordinates' Upward 
Communication of Private Information 

Chee W. Chow, Richard Nen-Chen Hwang, Woody Liao and Anne Wu 



Key Words: National culture; Management controls; Subordinate communication truthfulness 



Abstract: This study investigates the effects of national culture on the truthfulness with which sub- 
ordinates communicate upwards under alternate pay schemes. U.S. nationals and Chinese nation- 
als in Taiwan were used to represent members of fwo cultures that significantly diverge on three 
cultural dimensions postulated to be relevant to this behavior: Confucian dynamism, individual- 
ism/collectivism and a correlate of the latter: concern with "face. " 

The results of an experiment were consistent with the prediction that in the absence of face-to- 
face interactions with superiors, Chinese relative to U.S. nationals would make smaller misrepre- 
sentations of their private information. Also consistent with prediction based on concern with 
"face ", both national samples had lower levels of misrepresentations when there was face-to-face 
interaction between superior and subordinate. However, contrary to prediction, U.S. nationals 
reacted more to such interactions than did their Chinese counterparts. Taken as a whole, these 
findings support the importance of national culture and attributes of the control setting on subor- 
dinates' communication truthfulness. At the same time, they suggest that how these factors affect 
employee behavior is more complex than hypothesized. 



INTRODUCTION 

Resource allocations in decentralized firms often rely on information supplied by subordi- 
nate managers. If these managers are not properly motivated or controlled, then they may 
misrepresent their private information to further their self interests at the firm's expense 
(Dye, 1983; Penno, 1984; Radner, 1986). Analytical research has proposed pay schemes 
for motivating truthful subordinate reporting, and three experimental accounting studies — 
Waller and Bishop (1990), Chow et al. (1994a, 1995)— have tested the truth-inducing 
properties of some of these schemes. In particular, all three studies have compared subor- 



Direct all correspondence to: Chee W. Chow, Vem Odmark Professor of Accountancy, School of Accountancy, 
San Diego State University, San Diego, CA 92182-8221, USA E-Mail: cchow@sciences.sdsu.edu.; Richard Nen- 
Chen Hwang, Associate Professor of Accounting, California State University-San Marcos; Woody Liao, Profes- 
sor of Accounting, University of California-Riverside; Anne Wu, Professor of Accounting, National Chengchi 
University. 

The International Journal of Accounting, Vol. 33, No. 3, pp. 293-31 1 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright (£) 1998 University of Illinois 



294 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol, 33, No. 3, 1 998 

dinates' communication truthfulness under the reportedly common hnear profit sharing 
(LPS) scheme against one (Groves) that has received much attention in the analytical liter- 
ature (Groves, 1973, 1976; Green and Laffont, 1977; Groves and Loeb, 1979; Jennergren, 
1980). All found the Groves scheme to be more effective than the LPS scheme at sup- 
pressing subordinates' misrepresentations of private information, though it did not elimi- 
nate subordinate misrepresentations." 

While these prior studies have advanced understanding of how incentive schemes affect 
subordinates' communication truthfulness, their findings are limited by the narrow scope 
of the experiment. In particular, all three studies have focused on the analytical properties 
of the pay schemes tested, and suppressed personal interactions between superior and sub- 
ordinate. Yet both the organizational communication and accounting literatures have long 
identified face-to-face interactions between superiors and subordinates as an important 
form of management control (Lewis, 1980; Bimberg and Snodgrass, 1988; Merchant, 
1989). Thus, in his critique of accounting experimental studies on employment contracts. 
Waller (1994) stressed the need to go beyond the analytical properties of such contracts to 
systematically introduce "experimental treatments that represent behavioral as well as eco- 
nomic conditions," because they may reveal "empirical patterns that supplement the 
insights derivable from analytical methods" (p. 722). Along the same vein. Baker et al. 
(1988) have suggested that economic models of incentive schemes may need to be 
enriched by incorporating the insights of psychologists, behaviorists, human resource con- 
sultants and personnel executives for compensation practices. The current study is, in part, 
a response to these calls for change by introducing face-to-face interactions between supe- 
riors and subordinates. 

A related objective is to explore whether the effects of controls can be generalized across 
national boundaries. There is accumulating evidence that people from different nations dif- 
fer in their work-related values and how they react to management practices (Adler, 1996; 
Bimberg and Snodgrass, 1988; Chow et al., 1996; Hofstede, 1980, 1991; Kreder and 
Zeller, 1988; Vance et al., 1992; Vertinsky et al., 1990). For example. Chow et al. (1996) 
have found that relative to their U.S. counterparts facing the same tightness of controls, 
Japanese profit center managers were less inclined to engage in activities that were dys- 
functional to the company (e.g., myopic actions and data manipulations). Cultural differ- 
ences also have been suggested as potential explanatory factors for many U.S. companies' 
failed attempts to adopt Japanese management practices (Fucini and Fucini, 1990; Naj, 
1993; Young, 1992). Thus, there is reason to expect that both the mix of management prob- 
lems (e.g., the extent to which subordinates will engage in misrepresentations), and the 
most effective means of controlling them may differ cross-nationally. In the current study, 
national culture is hypothesized to affect subordinates' communication truthfulness under 
alternate performance-based pay schemes, and in the absence as opposed to the presence of 
face-to-face interactions with superiors. Beyond advancing understanding of the determi- 
nants of subordinate misrepresentations, the findings also can help the design of controls to 
curtail their occurrence in different national settings. 

National culture is tested in this study by comparing U.S. nationals and Chinese nation- 
als in Taiwan. The former are broadly representative of the Anglo-American cultural clus- 
ter (e.g., Australia, New Zealand, United Kingdom, United States), while the latter are part 
of the Chinese-based cluster (e.g.. Mainland China, Taiwan, Singapore) (Hairison et al., 
1994; Hofstede, 1980, 1991; O'Connor, 1995). Aside from being divergent from U.S. cul- 



National Culture and Private Information 295 

ture — thus enabling a more powerful test of culture's effects — Chinese-based culture is 
worthy of study because of the emergence of the People's Republic of China and the eco- 
nomic power of the overseas Chinese (Barnathan et al., 1993; Drucker, 1994; Kraar, 1993; 
Merchant et al., 1995). 

The remainder of this paper is organized as follows. The next section provides a review 
of the literature as the basis for developing two hypotheses. Then the research method and 
findings are presented. The final section provides a summary and discussion. 

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT 

National Culture and Subordinate Behavior 

Many alternative ways to operationalize the national culture construct have been pro- 
posed (Adler, 1996; Child, 1981; Hofstede, 1980, 1991; Schein, 1985; Schwartz, 1994; 
Smith et al., 1996; Triandis, 1984). Synthesizing these varied approaches is beyond the 
scope of this study, and we organize our discussion and analysis around Hofstede's (1980, 
1991) taxonomy in part because it is well supported empirically (e.g., Bochner (1994), Chi- 
nese Cultural Connection (1987), Hofstede and Bond (1984), Sondergaard (1994)), and in 
part because it is arguably the most widely cited and applied in management and account- 
ing research (e.g.. Chow et al., 1991, 1994b, 1996; Gudykunst and Ting-Toomey, 1988; 
Harrison, 1992, 1993; Harrison et al., 1994; O'Connor, 1995; Merchant et al., 1995; Soet- 
ers and Schreuder, 1988). 

Hofstede's ( 1980, 1991 ) taxonomy identifies five major components of national culture: 
individualism/collectivism, Confucian dynamism, masculinity/femininity, power distance, 
and uncertainty avoidance.' Of these, individualism/collectivism, Confucian dynamism, 
and a correlate of the former — concern for "face" — are especially relevant to the phenom- 
enon of interest in this study. 

Individualism/Collectivism 

Individualism and its opposite, collectivism, relate to the relative emphasis that individ- 
uals place on their self interests as opposed to those of the group (e.g., family, company). 
Students of culture have often cited this attribute as being a fundamental, or core, value that 
differs across nations, especially those from the East and West (Triandis, 1989; Lachman 
et al., 1994). According to Hofstede (1980, p. 166), employees from collectivist cultures 
tend to have an emotional dependence on, and a perceived moral involvement with, the 
company, and practices and behaviors are premised on a sense of loyalty and duty binding 
the individual to the organization, hi contrast, members of individualist cultures tend to be 
emotionally independent from the company, their involvement with the latter tends to be 
calculative, and work-related practices and behaviors tend to allow for individual initiative 
and expression. 

In the case of U.S. nationals and Chinese nationals in Taiwan, Hofstede ( 1 99 1 . p. 53) has 
reported individualism scores of 91 and 17. respectively. Consistent with Hofstede's 
numerical findings, students of Chinese-based culture have often cited collectivism as one 
of its main characteristics, noting especially its emphasis on subjugating one's own inter- 



296 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

ests to those of the collective (Bond et al., 1982; Bond and Hwang, 1986; Leung and Bond, 
1984; Redding, 1980). In contrast, the self-interest motive is often identified as the comer- 
stone of Anglo-American management theories and practices (Bellah et al., 1987; Earley, 
1993; Harris and Moran, 1987; Triandis et al., 1988). To the extent that Chinese nationals 
emphasize collective interests more so than U.S. nationals, they are less likely to seek per- 
sonal gain (such as through misrepresenting their private information) at the expense of the 
firm when facing the same pay scheme as the latter. 

Concern with "Face" 

A correlate of individualism/collectivism is concern with "face." "Face" represents the 
positive social value that a person claims for him/herself by the line that others assume he/ 
she has taken during a particular contact (Goffman, 1955), and would be lost if he/she fails 
to meet essential requirements placed upon him/her by virtue of the social position that he/ 
she occupies. In the case of subordinates reporting their private information to superiors, 
misrepresentations of such information would tend to reduce the effectiveness of resource 
allocations. Since such dysfunctional acts may be detected (e.g., when outcomes are com- 
pared to submitted projections), subordinates' concern for face in the social setting of an 
employment relationship can be expected to reduce their misrepresentation tendencies. 
Consistent with the view that interpersonal interactions can affect behavior, Young (1985), 
Young and Lewis (1995) and Waller ( 1994) have suggested that social pressure to refrain 
from opportunistic behavior can significantly affect managerial actions. However, 
accounting studies to date on subordinates' communication of private information have not 
directly examined this determinant of behavior.^ 

Redding and Wong (1986, p. 286) note that while concern with face is a human univer- 
sal, for the Chinese the degree of concern is particularly high. The reason for this, as 
explained by Ho (1976, p. 871), is that in the context of Chinese-based culture, "face is 
always attached to status. ..At stake is nothing less than the effective maintenance of one's 
standing in society." In contrast, Hofstede (1980) and Triandis (1989) observe that since 
members of an individualist culture are supposed to look after themselves, an individual's 
self respect can be preserved regardless of what other people think about him/her. Thus, 
while maintaining the respect of peers still is important in an individualist culture, it is less 
so than obtaining "inner-directed" satisfaction (Harrison, 1993). 

Confucian Dynamism 

According to Hofstede and Bond (1988), Chinese Cultural Connection (1987) and Hof- 
stede (1991), this cultural dimension relates to the extent to which people emphasize long- 
term over short-term goals and concerns. In the case of subordinates misrepresenting their 
private information to superiors for short-term gain, detection of such misrepresentations 
can damage their long-run standing and prospects. To the extent that member of a high 
Confucian dynamism culture are more concerned with their actions' long term conse- 
quences, they are more likely to refrain from such behavior. 

Hofstede (1991, p. 166) reports that the Confucian dynamism scores of U.S. nationals 
and Chinese nationals in Taiwan are 29 and 87, respectively. This directional difference 



National Culture and Private Information 297 

suggests that relative to their U.S. counterparts, Chinese nationals would be more con- 
cerned with long-term than short-term gains. 

HYPOTHESES 

Based on the directional differences between Chinese and U.S. nationals on individualism/ 
collectivism, concern for "face," and Confucian dynamism, we predict that they would 
react differently to the same pay scheme both in the presence and absence of face-to-face 
interactions with superiors. In the case of face-to-face interactions being absent, we expect 
misrepresentations of private information to be lower for Chinese relative to U.S. subordi- 
nates. First, the Chinese nationals' higher collectivism should make them more reluctant to 
seek private gain (via misrepresentations) at the expense of the organization. Second, since 
misrepresentations may be detected with the passage of time. Chinese nationals' greater 
concern for long-run consequences (via their higher Confucian dynamism) should further 
dampen their misrepresentation tendency. Hence: 

HI: In the absence of face-to-face interactions with superiors, Chinese nationals 
would misrepresent their private information to a more limited extent than 
would U.S. nationals working under the same pay schemes. 

When face-to-face interactions with superiors are present, issues of "face" become more 
salient. Since concern with "face" is universal, both Chinese and U.S. nationals are 
expected to have lower misrepresentations in the presence of such interactions. However, 
since Chinese relative to U.S. nationals have a greater concern for "face," the deterrent 
effect on them should be stronger. Thus: 

H2: Controlling for the type of pay scheme, face-to-face interactions with superiors 
reduce misrepresentations by Chinese nationals more than they do for U.S. 
nationals. 

METHOD 
Design 

The experiment had six cells derived from three between-subjects factors. Each factor 
had two levels. The first factor was national origin (U.S., Chinese). The second was pay 
scheme. The LPS and Groves schemes were selected because both have been included in 
all three related prior studies, such that their findings can potentially be related to the cur- 
rent study for additional insights. Because of resource considerations, the third between- 
subjects factor — presence vs. absence of face-to-face interactions between superior and 
subordinate — was crossed with only the LPS scheme. This choice was based on prior 
research having found the LPS scheme to induce high levels of subordinate misrepresenta- 
tions. If the presence vs. absence of face-to-face interactions does affect subordinate mis- 
representations, then this effect is more likely to be manifest under the LPS scheme. 



298 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Subjects 

The sample consisted of 144 volunteer subjects, half each from Taiwan and the U.S.. All 
were full time upper-division undergraduate business students at a major university in their 
respective countries. During recruitment, subjects were told that they would earn cash 
based on their performance in a management simulation, but neither the nature nor the 
objective of the experiment was revealed to them. To increase homogeneity of cultural val- 
ues within each national sample, all U.S. subjects were non-oriental while all Taiwanese 
subjects were of Chinese ethnicity and spoke Chinese as their first language. 

Task 

Consistent with the focus on allocating limited resources among alternate uses, the task 
involved pairs of division managers submitting competing project proposals to a central 
manager. In both national settings, each treatment was randomly assigned 24 subjects, who 
formed 12 pairs of division managers. The role of central manager for each pair was 
assumed by a research assistant to maintain consistency across pairs and treatments. ' 

In each of 20 experimental periods, each division manager first privately observed the 
expected ratio of output to input (the "/^ " ratio) for each of three projects. Then he/she sub- 
mitted (either truthfully or otherwise) to the central manager a p-ratio for each project. 
Each project required 100 units of resource and the central manager only had 300 units 
available. Hence, only half (three out of six) of each period's proposed projects could be 
selected. Similar to Waller and Bishop (1990) and Chow et al. (1994a, 1995), the central 
manager allocated the firm's limited resources to maximize the total expected output, and 
had to do so strictly based on the division managers' communicated /^-ratios for the period. 
This approach was known to all participants. They also knew that the central manager had 
no access to the true p-ratios before making the project funding decision, and that only the 
funded projects' true /^-ratios would become known at the end of the period. 

The use of 20 periods was aimed at overcoming the prior studies' potential lack of suffi- 
cient trials for subjects to understand the experimental setting and to develop their commu- 
nication strategies. The first 15 periods were designed for learning, and had their self- 
contained set of /^-ratios. Periods 16-19 had their own set of /^-ratios for hypothesis testing. 
Period 20 was dropped to control for end-period effects (e.g., a manager changing his/her 
communication strategy in the last period to take advantage of his/her paired manager's 
stable strategy).^ 

The subjects were paid cash based on their performance as computed under their 
assigned pay schemes. The translation rates between measured performance and cash were 
preset and known to each subject. These rates differed between the U.S. and Taiwanese 
subjects to allow for differences in local pay scales. For the U.S., the expected cash pay 
was $.75 per experimental period under truthful communications. 

Procedure 

Since running the experiment was highly labor intensive, only 4 or 6 subjects were 
scheduled for each time slot. In both countries, all subjects randomly scheduled for a given 



National Culture and Private Information 299 

time slot were assigned to the same treatment. The experiment took about three hours and 
contained the following three steps: 

Step One 

When the subjects arrived, they were randomly assigned to a division manager position 
and directed to a room dedicated to that position. To limit the potential for tacit collusion 
(e.g., subjects coordinating their communications to yield the highest combined pay for 
each period, and splitting the total pay later), no subject was allowed to know who he/she 
was paired with in the experiment. 

Upon arrival at the assigned room, each subject was given a packet containing the task 
instructions, a form that he/she could use to keep track of decisions and outcomes, and 20 
sealed envelopes, one for each experimental period. Each envelope contained a communi- 
cation form and the actual p-ratios for that period's three projects. The subjects were told 
not to open any of the materials until instructed to do so. 

Step Two 

The subjects read through the experimental instructions. These provided detailed expla- 
nations of the experimental task, the assigned pay scheme, and the order of events in each 
period. Then the subjects completed a set of numerical exercises to test their understanding 
of how alternate communication strategies may feed into the central manager's project 
selection decisions, and in turn how such decisions would affect their measured perfor- 
mance. Correct answers were provided at the end of each exercise. 

Step Three 

The subjects completed 20 experimental periods. Below, the procedure for the subjects 
assigned to the LPS scheme without face-to-face interactions (LPS) will first be explained. 
Then deviations for the subjects assigned to the Groves scheme and LPS with face-to-face 
interactions (LPS-FF) will be noted. 

1 . After privately observing his/her three actual /^-ratios, each division manager wrote 
on his/her communication form for that period a p-ratio for each project to be 
reported to the central manager. 

2. The central manager collected both division managers' communication forms and 
mechanistically selected the three projects (out of the combined six from both divi- 
sion managers) with the highest communicated /^-ratios. (The subjects were aware 
that ties would be broken by flipping a coin.) Then he/she marked on each division 
manager's communication form the latter' s project(s) selected for funding, and 
returned each form to the appropriate division manager. 

Subjects assigned to the Groves scheme also received, at the end of each period, the com- 
municated net output of their paired managers' funded project(s) for the period. This infor- 
mation was needed by each manager under the Groves scheme to compute his/her 
performance measure for the period. 



300 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

For subjects assigned to LPS-FF, an additional event occurred at the beginning of each 
period, starting with period 2. Prior to communicating that period's p-ratios to the central 
manager, each division manager was separately visited by the latter. At this meeting, the 
division manager had to reveal to the central manager the true p-ratios for those of his/her 
projects that had been funded in the prior period (much like a comparison of actual vs. bud- 
geted performance). Then the central manager made the following verbal statement. (The 
phrase in parentheses was included only if there was a deviation between a subject's actual 
and communicated /^-ratios.) 

Last period, you had proposed three projects for funding from the company's limited 
pool of funds. (Now. it appears that you had mis-communicated the /?-ratio(s) for the 
following funded project(s )....) It is important to note that I had relied on your projec- 
tions to select the projects for funding allocations so as to maximize the profit for the 
company. It is your responsibility as well as mine to make sure that we achieve the com- 
pany's financial goal. Now we are about to start the funding decisions for the next 
period. Please prepare your funding proposals so I can again allocate the company's 
limited funds between you and the other manager. 

Then the central manager left each division manager to fill in his/her communication 
form in private, and returned to collect it later. 

At the end of the 20th period, the subjects completed a post-experiment questionnaire 
which contained several manipulation check questions. They were paid later, after their 
earnings had been verified. 

RESULTS 

Manipulation Checl(s 

Responses to the exit questionnaire indicated that the subjects from both nations had 
high levels of task involvement and had correctly understood the information asymme- 
try between them and the central manager.^" To gain some assurance that the two 
national samples did differ on individualism/collectivism and Confucian dynamism as 
assumed, an additional questionnaire was administered to the LPS-FF subjects on these 
cultural dimensions. Based on Hofstede's Scoring Guide (1982), the Chinese subjects' 
individualism index was -7.25 vs. 46.42 for the U.S. subjects. This directional differ- 
ence is consistent with assumption. For Confucian dynamism, we selected six items 
from the Chinese Cultural Connection (1987) instrument which related to this cultural 
dimension: harmony with others, non-competitiveness, close friendships, solidarity with 
others, trustworthiness, and having a sense of shame (face saving). The 10-point 
response scale was anchored by 1 = "of no importance" and 10 = "of supreme impor- 
tance." The mean Chinese responses were higher for all six items, with four of these 
differences being significant at /? = .05. Specifically related to concern with face sav- 
ing, the mean U.S. response of 6.17 was statistically significantly lower than the Chi- 
nese mean of 7.17. 



National Culture and Private Information 



301 



w 



C\J 






ri — — 









o 


c. 




,^ 


u. 


c5 
00 




!/• 


u. 




E 




1) 


u. 






oj 


u. 


1 


00 


CO 

Q_ 


> 


a. 


c 


2 


> 

O 


^ 




in 


_) 


a 


_j 


_) 


O 


-J 




D 








O 









302 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1998 

DESCRIPTIVE STATISTICS 

The means (standard deviations) of the division managers' cash earnings were as follows 
for the U.S. subjects: LPS: $13.20 ($4.22), LPS-FF: $13.84 ($1.96), and Groves: $14.39 
($1.75). After adjusting for local pay scale differences, the corresponding numbers for the 
Chinese subjects were: LPS: $14.11 ($2.57), LPS-FF: $14.50 ($2.25), and Groves: $14.55 
($0.44). The mean pay for each treatment did not differ significantly between the two 
national groups, and also appeared to be adequate (though not generous) for the length of 
the experimental session. 

To as.sess whether 15 periods was sufficient for subject learning, each subject was asked 
to identify the period by which he/she had developed a consistent communication strategy. 
These self-reported data (Table 1) show that all manager pairs had developed a communi- 
cation strategy by period 16 — the start of our test periods. Table 1 also shows that while 
quite a few subject pairs reported having developed a stable communication strategy early 
in the experiment. 19 pairs did not attain this state until after period 10. While self-reported 
data like these admittedly are subject to error, they still provide some assurance that 
enough periods had been provided for subject learning. And although it was feasible to 
use data from each pair's steady state periods for hypothesis testing (e.g., the data for peri- 
ods 12-19 for a pair that had reached steady state in period 12), we elected to focus on peri- 
ods 16-19 for two main reasons. One was that this conservative approach provides some 
protection against subject error in judging when they had developed a consistent reporting 
strategy. More important, since all subject pairs had faced, by design, the same four sets of 
/?-ratio triads in periods 16-19 (cf fn. 9), their misrepresentations in these periods could be 
directly compared. Below, all of the statistics and test results are based on periods 16-19. 

Following the approach of Waller and Bishop (1990), we constructed two misrepresen- 
tation measures for each communicated /?-ratio. Absolute misrepresentation (AM) was the 
absolute value of the difference between the actual and communicated /^-ratios. Relative 
misrepresentation (RM) measured the extent of misrepresentation out of the total amount 
possible. For no misrepresentation, RM = 0; for an overstatement, RM = AM/(2.0 - actual 
/7-ratio); and for an understatement, RM = AM/( actual /?-ratio - 1.0). 

Table 2 presents selected distributional statistics for RM (Panel A) and AM (Panel B). 
Two patterns can be noted. First, for both national samples, the mean values of both AM 

Table 2. Distributional Statistics for P-Ratio Misrepresentations 









U.S. Sample 








Chinese Samph 


3 






LPS 


Groves 


LPS-FF 




LPS 


Groves 


LPS-FF 


Panel A: Relative 


Misrepresentations (RM) for Periods 16- 


19 








Mean 




.636 


.226 


.309 




.487 


.162 


.270 


Std. dev. 




.358 


.275 


.379 




.391 


.267 


.320 


Minimum 
























Maximum 




1 


1 


1 




1 


1 


1 


Panel B: Absolute M 


isrepresentations (AM) for Periods 16 


-19 








Mean 




.272 


.075 


.120 




.169 


.052 


.086 


Std. dev. 




.224 


.121 


.184 




.200 


.082 


.123 


Minimum 
























Maximum 




.89 


.89 


1 




.92 


.81 


.74 



National Culture and Private Information 303 

and RM are higher under LPS than LPS-FF, with those under Groves being lowest. Sec- 
ond, both mean RM and AM are lower for the Chinese sample than its U.S. counterpart 
under each pay scheme. And as might be expected based on these patterns. RM and AM 
are highly and positively correlated (Pearson r = .638, p<.000). Since the results were qual- 
itatively identical between RM and AM, only those based on RM are reported below. 

HYPOTHESES TESTS 

Test of H1 

HI stated the expectation that in the absence of face-to- face interactions with superiors, 
subordinate misrepresentations would be smaller for Chinese relative to U.S. nationals. 
This hypothesis was tested with an analysis of variance (ANOVA) using each national 
sample's data for the LPS and Groves cells. The dependent variable was RM, averaged 
over the three projects per period to yield four observations per manager.'"^ The indepen- 
dent variables were national origin (Chinese, U.S.), pay scheme (LPS, Groves) and their 
interaction. The overall model was highly significant (F = 53.14, p = .000), as were the 
main effects due to nation and pay scheme (respectively, F= 12.53. 143.79; p = .000. .000). 
The interaction between nation and pay scheme was only marginally significant {F - 3.10, 
p = .079). 

To further elucidate the nation main effect, t-tests for equality in means were conducted 
between nations for the same pay scheme. Consistent with H 1 , under both LPS and Groves, 
mean RM was significantly lower for the Chinese than for the U.S. sample (respectively, 
r = 23.40, 10.41; /? = .000. .000).''^ Thus. HI was supported. 

Test of H2 

H2 stated the expectation that Chinese subordinates would respond more than their U.S. 
counterparts to the presence of face-to-face interactions with superiors. The ANOVA to 
test this hypothesis used each national sample's data for the LPS and LPS-FF cells. RM 
was the dependent variable. The independent variables were national origin (Chinese, 
U.S.), face-to-face interaction (present, absent) and their interaction term.'^ 

The overall model was highly significant {F = 29.30, /; = .000). The main effects due to 
nation and face-to-face interaction were both highly significant (respectively, F = 9.53, 
74.54; p - .000, .000). And in apparent conformity to expectation, the interaction term 
between nation and face-to-face interaction also was statistically significant (F = 3.83, 
p=.05). 

Since H2 was predicated on concern with "face" having an impact on behavior, further 
analysis of this effect was conducted using the Chinese and U.S. subjects in the LPS-FF 
treatment. An ANOVA was performed using these subjects' RM as the dependent variable. 
The independent variables were national origin (Chinese. U.S.). these subjects' responses 
to the Chinese Cultural Connection ( 1987) item "having a sense of shame (face saving)," 
and their interaction. The model as a whole was significant (F = 2.75. p = .044). Neither the 
nation main effect nor its interaction with "face saving" was significant (respectively. 



304 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

F = .008, .385; p = .93, .54), but the main effect due to "face saving" was significant 
{F = 7.29, p = .008). Furthermore, the pattern of mean RMs was consistent with the 
hypothesized effect of concern with face. Using the median observed value (6.0) to dichot- 
omize each national sample into high vs. low concern for face, mean RM for the high-con- 
cern U.S. subjects was 0.21 vs. 0.36 for those with low concern. For the Chinese sample, 
mean RM for high-concern subjects was likewise lower than that for the low-concern sub- 
jects (0.23 vs. 0.33). 

The pattern of cell means for the interaction between nation and presence/absence of 
face-to-face interaction was, however, opposite to that predicted. Whereas mean RM under 
LPS (i.e., the absence of face-to-face interactions) was significantly higher for the U.S. 
than for the Chinese sample (from HI: r = 23.40, p = .000), the two national samples' mean 
RMs were not significantly different under LPS-FF, when such interactions were present {t 
= 1.33, p<.lS5). In other words, rather than diverging further in the presence of face-to- 
face interactions, the two national samples' misrepresentations became more equal. This 
outcome was due to the U.S. subjects having a bigger reduction in mean RM between LPS 
and LPS-FF (.636 vs. .309; / = 10.36, /7<.001) as compared to their Chinese counterparts 
(.487 vs. .270, r = 7.28, /7<.001). 

A possible explanation for the Chinese sample's smaller RM reduction is that it had a 
lower starting point (when face-to-face interactions were absent), such that it did not have 
as much misrepresentation to forego as its U.S. counterpart. To explore this possibility 
with the available (between-subjects) data, we deleted all foursomes of manager pairs (one 
pair from each of the four cells from crossing nation with LPS vs. LPS-FF) that had either 
zero, or the same low mean RM. Then we reran the tests for H2 using this truncated sam- 
ple, and obtained qualitatively equivalent results. As with the full sample, under LPS and 
the absence of face-to-face interactions, mean RM was significantly higher for the U.S. 
than for the Chinese nationals (.77 vs. .58; / = 4.33, p = .000). And under LPS-FF, mean 
RM remained statistically insignificantly different between them (.40 vs. .34; t = 1.26, 
p = .21). This similarity of results between the full and truncated samples fails to provide 
support for the "floor effect" explanation. 

SUMMARY AND DISCUSSION 

Consistent with predictions based on individualism/collectivism and Confucian dyna- 
mism, when face-to-face interactions with superiors were absent, Chinese subjects misrep- 
resented their private information to a smaller extent than U.S. subjects under the same pay 
scheme. Also consistent with concern for "face" affecting subordinate behavior, both U.S. 
and Chinese nationals had significantly lower levels of misrepresentations when such 
interactions were present. Within both national samples, the level of misrepresentation was 
negatively related to the degree of concern for face. 

The findings, however, were contrary to the expectation that Chinese nationals would 
respond more to the presence of face-to-face interactions. The decrease in mean misrepre- 
sentations between the absence vs. presence of face-to-face interactions was greater, rather 
than smaller, for U.S. than for Chinese nationals, with the mean misrepresentation levels 
being not significantly different between the two national samples when face-to-face inter- 
actions were present. An exploratory test did not indicate that this result was due to the Chi- 



National Culture and Private Intormation 305 

nese nationals having started from a lower level of misrepresentations when face-to-face 
interactions were absent. 

Overall, these experimental findings are consistent with national culture having an 
important effect on subordinates' communication truthfulness to superiors. They also 
reveal that the way effects arise is more complex than had been assumed. Specifically, the 
unexpected greater effect of face-to-face interactions on U.S. vs. Chinese nationals sug- 
gests the need to further understand the nature of concern for "face", as well as how "face"- 
related considerations arise in different national settings. More important, while this study 
has extended experimental research to a richer environment by incorporating interpersonal 
interactions and cross-cultural considerations, it still falls far short of capturing the com- 
plex setting in which superiors and subordinates interact. Given the importance of informa- 
tion sharing within organizations and the increasing globalization of economic activities, 
further work to validate and extend this study is highly desirable. In particular, this study 
has examined only two pay schemes and national cultures. And within each culture, the 
subjects had come from only one institution. Expanding each of these dimensions can shed 
light on the findings' robustness, as well as illuminate how components of each dimension 
independently and interactively affect subordinate communication behavior. For example, 
including students from other universities can help to assess whether the findings are insti- 
tution-specific, while engaging managers from real world organizations can shed light on 
the findings' generalizability to practice. Relating to individualism/collectivism and Con- 
fucian dynamism, since they were hypothesized to affect behavior in the same direction, it 
was not possible to differentiate between them or to assess the relative sizes of their 
impacts. By designing settings that implicate these (and other) cultural dimensions in dif- 
ferent directions, more insight can be obtained into how national culture affects people's 
behavior in employment settings. 

Beyond studying upward communications by subordinates, it is desirable to explore the 
determinants and effects of horizontal and downward communications within organiza- 
tions. Furthennore, organizations' concerns probably extend beyond communication truth- 
fulness to include such factors as employee work effort, learning and improvement, 
teamwork, risk taking, short vs. long term tradeoffs, satisfaction, and job stress. Thus, con- 
current with enriching the context being studied, there is room for considering a fuller set 
of factors in the objective function. 

Finally, this study has used a laboratory experiment. While this approach has areas of 
strength (e.g., control, internal validity, replicability), it also has weaknesses (e.g., potential 
lack of external validity) (Bimberg et al., 1990). Given the importance of the issues being 
considered here, expanding the scope of investigation to include multiple methods (e.g., 
surveys, field studies, archival analysis) would be very desirable. 

Acknowledgments: The authors are indebted to the anonymous reviewer for many constructive sug- 
gestions, and to the C. F. Koo Educational and Cultural Foundation for its tlnanciai support. 



NOTES 



Analytical research has suggested many truth-inducing pay schemes beyond that of Groves 
(e.g.. Banker & Datar, 1992; Kanodia. 1993; Osband & Reichelstein. 1985). However, none of 
these schemes has received nearly as much attention and empirical testing as the Groves 



306 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1998 



scheme. We limit our discussion to the latter because it has been tested by all three related prior 
studies. 

Under the Groves scheme, a manager's performance measure is a function of his/her actual out- 
put and other managers" projected output for the levels of resources provided to them. Groves 
and Loeb ( 1979) have analytically demonstrated that, in a one-period setting and without col- 
lusion among risk-neutral subordinates, the dominant strategy for each subordinate under the 
Groves scheme is to truthfully communicate his/her private information. In contrast. Waller 
and Bishop ( 1990) and Chow et al. ( 1994a) have shown that the LPS scheme motivates manag- 
ers to overstate their projects" expected profitability. 

2. In addition. Waller and Bishop (1990) found that an extreme form of '"unit-profit-plus-penalty" 
scheme — under which pay was reduced to zero for any deviation between actual performance 
and budget — also reduced subordinate misrepresentations. Chow et al. ( 1995) found that com- 
bining the LPS scheme with probabilistic audits was as effective as the Groves scheme at deter- 
ring subordinate misrepresentations. 

3. Since Hofstede's taxonomy has been so often used in accounting research, a detailed descrip- 
tion of the five cultural dimensions is omitted. Interested readers can obtain such descriptions 
from, for example, Haixison et al. ( 1994) and Merchant et al. (1995). 

4. To the extent that our study focuses on superior-subordinate relationships, a case can be made 
that the power distance cultural dimension also may be relevant. In an employment setting, this 
cultural dimension relates to the degree to which subordinates are willing to accept an inequal- 
ity of power between them and their superiors and to follow directives given to them by the lat- 
ter, including truthful reporting of their private information (Merchant et al., 1995). According 
to Hofstede ( 1980. 1991). Chinese nationals in Taiwan are higher in power distance than U.S. 
nationals (58 vs. 40). This relative placement of the two cultures is consistent with other studies 
of Chinese-based vs. Western cultures (e.g., Harrison, 1992, 1993: Harrison et al., 1994; 
0"Connor, 1995). However, Hofstede (1980) also has cautioned that based on the observed dis- 
tribution of the cultural dimensions across countries in his sample, only cross-national differ- 
ences of 20 points or more should be considered significant. Based on his admonition, and the 
fact that the superiors in our experiment had no direct authority over the subordinates beyond 
selecting projects for funding, we consider the role of power distance to be minimal in our 
study. We also omitted uncertainty avoidance and masculinity because our experimental task 
and design did not include manipulations (e.g,, the extensiveness of standardized operating pro- 
cedures and the degree of challenge in the performance standard) which implicated these cul- 
tural dimensions. 

5. The findings of Young's ( 1985) study did suggest that the subjects" misrepresentation behavior 
(creation of budgetary slack) was affected by social concerns. However, it did not directly test 
this effect as the nature of the superior-subordinate relationship was not varied across treatments. 

6. Both the experimental materials and the conduct of the experiment in Taiwan were in Chinese. 
The English materials were first translated into Chinese by one of the bilingual members of the 
research team. Then it was independently evaluated by another bilingual team member for 
adherence to the original. Only minor deviations had to be resolved through discussion. 

7. Two research assistants were used in each national setting. All were male graduate students. 
Each assistant was trained for up to two hours before assuming his role in the experiment. 

8. Waller and Bishop (1990) used a total of 10 experimental periods, while Chow et al. (1994a, 
1995) used nine periods. We used double the number of periods of Waller and Bishop because 
of their observation that the number of periods in their experiment may have been insufficient 
for subjects to fully understand the properties of their pay schemes for developing their com- 
munication strategies, especially under the Groves scheme. 

9. Separate sets of p-ratio triads were developed for periods 1-15 vs. 16-19 as follows. First, 60 
p-ratios were randomly generated using a uniform distribution with a range of 1 .0 to 2.0. Incre- 



National Culture and Private Information 307 



merits of .01 were used. These /7-ratios were randomly grouped into 20 sets of three. Then, a 
duplicate set of these 20 triads was created and randomly matched to the original set to yield 20 
pairs of /7-ratio triads. These 20 pairs were divided into three subsets with 15, four, and one 
member(s), respectively. The subset of 15 pairs was used in periods 1-15 in 12 random orders, 
one per manager pair. (Each manager got one of the two /7-ratio triads in each set.) The subset 
of four p-ratio triads was used in periods 16-19, and the final subset was used in period 20. 

10. Under the LPS and LPS-FF treatments, the translation rate for the U.S. subjects was $1 in cash 
for each 144 units of performance measure. The cash pay to the Chinese subjects was at 60 per- 
cent of this level to adjust for differences between accounting graduates' beginning salaries in 
the U.S. and Taiwan. Because of the way the performance measure is calculated under the 
Groves scheme (see Waller & Bishop, 1990; Chow et al.. 1994a), its scale was double that of 
the LPS scheme given the parameter values in our experiment. To preserve parity in expected 
cash pay across treatments, the translation rate between performance units and cash for the 
Groves subjects was 288 to $ 1 . We acknowledge that these different translation rates may bias 
the results (against the Groves scheme in our case). However, the alternative of using the same 
translation rate would create an opposite bias by making the cash gain per unit of misrepresen- 
tation higher under Groves than the LPS scheme. While the preceding caveat has to be borne in 
mind, note that despite the potential bias against the Groves scheme, misrepresentations still 
were lower under it than under LPS. 

1 1 . This added verbal exchange did not alter the arrangement that the central manager made each 
period's project selections strictly based on the two division managers" communicated p-ratios 
for the period. 

12. The question on task involvement was "To what extent did you make your decisions as if you 
were actually involved in a real business situation?" The information asymmetry question was 
"How much did the central manager know about your actual p-ratios right after sending your 
messages in each round?" The 10-point response scale for each question was anchored with 1 
- "not at all" and 10 = "totally." The mean responses from both national samples were substan- 
tially above and below the midpoint, respectively, for the two questions. 

13. The data in Table 1 suggest that if we had followed the approach of Waller and Bishop (1990) 
(which used all 10 periods' data) or Chow et al. (1994a, 1995) (which alternately allowed 3 or 
5 learning periods), then over half of the communicated /^-ratios used in the statistical analyses 
would not have reflected a steady state communication strategy. 

14. We did not treat each reported p-ratio as an independent observation because the managers' 
decisions regarding their numerical values are likely to be correlated. For example, if one 
project has a very high true /7-ratio, a manager probably would not overstate a less profitable 
project's /7-ratio to the extent of causing it to be funded over the former. We also performed the 
same set of analyses by aggregating each manager's relative misrepresentations over all four 
test periods to yield one observation per manager. The results were not qualitatively different. 

15. For all reported t-test results, the results of non-parametric Mann Whitney U-tests were quali- 
tatively identical. 

16. Note that our test focused on the levels of misrepresentations under LPS and LPS-FF, rather 
than the difference between them. This is because the face-to-face interaction treatment was 
between, not within, subjects. 

REFERENCES 

Adler. N. 1996. International Dimensions of Organizational Behavior. Cincinnati, Ohio: South- 
western College Publishing. 



308 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Baker. G.. M. Jensen, and K. Murphy. 1988. "Compensation and Incentives: Practice versus The- 
ory." Journal of Finance (July): 593-616. 

Banker, R. and S. Datar. 1992. "Optimal Transfer Pricing Under Postcontract Information." Contem- 
porary Accounting Research (Spring): 329-352. 

Bamathan. J., P. Engardio. L. Curry and B. Einhom. 1993. "China: The Emerging Economic Power- 
house of the 21st Century." Business Week (May 17): 55-68. 

Bellah. R.. R. Madsen. W. Sullivan. A. Swidler and S. Tipton. (Eds.) 1987. Individualism and Com- 
mitment in American Life. New York: Harper & Row. 

Birnberg, J. and C. Snodgrass. 1988. "Culture and Control: A Field Study,'' Accounting, Organiza- 
tions and Society: 447-464. 

Birnberg. J.. M. Shields and M. Young. 1990. "The Case for Multiple Methods in Empirical Manage- 
ment Accounting Research (With an Illustration from Budget Setting)," Journal of Manage- 
ment Accounting Research (Fall): 33-66. 

Bond, M. and K. Hwang. 1986. "The Social Psychology of Chinese People." In M. Bond (Ed.). The 
Psychology of the Chinese People: 213-266. Hong Kong: Oxford University Press. 

Bond, M., K. Leung and K. Wan. 1982. "How Does Cultural Collectivism Operate? The Impact of 
Task and Maintenance Contributions on Reward Distribution." Journal of Cross-Cultural 
Psychology: 186-200. 

Bochner, S. 1994. "Cross-Cultural Differences in the Self Concept: A Test of Hofstede's Individual- 
ism/Collectivism Distinction." Journal of Cross-Cultural Psychology: 273-283. 

Child, J. 1981. "Culture. Contingency and Capitalism in the Cross-National Study of Organizations." 
In L. Cummings & B. Staw (Eds.). Research in Organization Behavior 3: 143-164. Green- 
wich, Connecticut: JAI Press. 

Chinese Cultural Connection. 1987. "Chinese Values and the Search for Culture-Free Dimensions of 
Culture," Journal of Cross-Cultural Psychology (June): 143-164. 

Chow, C, M. Hirst and M. Shields. 1994a. "Motivating Truthful Subordinate Reporting: An Exper- 
imental Investigation in a Two-subordinate Context," Contemporary Accounting Research 
(Spring): 699-720. 

Chow, C, Y. Kato and M. Shields. 1994b. "National Culture and the Preference for Management 
Controls: An Exploratory Study of the Firm-Labor Market Interface." Accounting, Organiza- 
tions and Society (May/July): 381-400. 

Chow, C, M. Hirst and M. Shields. 1995. "The Effects of Pay Schemes and Probabilistic Manage- 
ment Audits on Subordinate Misrepresentation of Private Information: An Experimental 
Investigation in a Resource Allocation Context," Behavioral Research In Accounting 7: 1-16. 

Chow, C. Y. Kato and K. Merchant. 1996. "The Use of Organizational Controls and Their Effects 
on Data Manipulation and Management Myopia: A Japan vs. U.S. Comparison." Accounting, 
Organizations and Societ}' (February /April): 175-192. 

Chow, C. M. Shields and Y. Chan. 1991. "The Effects of Management Controls and National Cul- 
ture on Manufacturing Performance: An Experimental Investigahon," Accounting, Organiza- 
tions and Society: 209-226. 

Drucker, P. 1994. "The New Superpower: The Overseas Chinese." Wall Street Journal (December 
20): A20. 

Dye, R. 1983. "Communication and Post-Decision Information," Journal of Accounting Research 
(Autumn): 514-533. 

Eeirley, P. C. 1993. "East Meets West Meets Mideast: Further Explorations of Collectivist and Indi- 
vidualist Work Groups." Academy of Management Journal: 3 19-348. 

Fucini, J. and S. Fucini. 1 990. Working for the Japanese — Inside Mazda 's American Auto Plant. New 
York: Free Press. 

Goffman, E. 1955. "On Face-Work: An Analysis of Ritual Element in Social Interaction." Psychiatry 
18:213-231. 



National Culture and Private Information 309 



Green. J. and J. Laffont. 1977. "Characterization of Satistactor> Mechanisms for the Re\ elation of 

Preferences for Public Goods," Econormirica (March): 427—438. 
Groves, T. 1973. "Incentives in Teiuns," Econometricu (July): 617-633. 
Groves. T. 1976. "Incentive Compatible Control of Decentralized Organizations." In Y. Ho & S. 

Milters (Eds.), Directions in Lurge Scale Systems: Many Person Optimization ami Decentral- 
ized Control: 149-185. New York: Plenum. 
Groves. T. and M. Loeb. 1979. "incentises in a Divisionalized Finn," Management Science {March): 

221-230. 
Ciud\ kunst, W. and S. Ting-Toomey, S. 1988. Culture and Interpersonal Communication. New bur> 

Park: C.A: Sage Publishing. 
Harris, P. and R. Moran. 1987. Managing Cultural Difftrtrut-. Houston. Texas: Gulf F*ublishing. 
Harrison, G. 1992. "The Cross-CuUural Generalizability of the Relation Between Participation, Bud- 
get Emphasis and Job Related Attitudes," Accounting, Organizations and S(H-iety (Janu;uA ): 

1-15. 
Harrison, G. I'-^^V "Reliance on .Accounting Performance Mca.sure.s in Sup>erior Evaluation Style - 

The Influence of National Culture and Pcrsonalit\," Accounting. Organizations and SiK'iety 

(May): 319-339. 
Harrison, G.. J. McKinnon. S. Panchapakos.ui and M Icunc. I'-^'-M. "Fho Intlucnce of Culture on 

Organizational Design and Planning and Control in .Australia and the United Slates Compared 

\\ ith Singapore and Hong Kong," Journal of International Financial Manai^emenl and 

Accounting: 242-261. 
Ho, D. 1976. "On the Concept of Face." American Journal of Sociology: 867-884. 
Hofstede, G. H. 1980. Culture's Consequences: International Differences in Work-Related Values. 

Beverly Hills: Sage Publications. 
Hofstede, G. H. 1982. Scoring Guide for X'alue Suney Module. liiNtitute for Rese.uch on liuercuiiurai 

Cooperation. Maastricht, The Netherlands. 
Hofstede. G. H. 1984. "Cultural Dimension in Management and P\Mm\n§." Asian-Pacifw Jounuit <\f 

Management (January): 81-99. 
Hofstede. G. H. 1991. Cultures and Organizations: Software of the Mind. Berkshire, IK: McCuau- 

Hill. 
Hofstede, G. and M Bond l'-'S4 Hotsledc's Cultuial ninienNions An Independent N'alidation 

Using Rokeachs \ alue Sur\c\." Jounud tyf Cross-Cultural Psychology (Decembert: 417- 

433. 
Hofstede, G. and M. Bond. 1988. "The Confucian ConncctiiMi: Fioni Cultuial Roots to Fconomic 

Growth," Orgiiniziitiomd iy\namics: 5-2 1. 
Jennergren, L. 1980. "On the Design of Incentives in Business Firms-.A Sur\ey of Some Research." 

Management Science ( February ): 1 80-20 1 . 
Kanodia, C. 1993. "Participati\e Budgets as Cooidination .uid Moti\ation Hex ices," Journal of 

Accounting Research (Autumn): 172-189. 
Kraar, L. 1993. "Now Comes the Hard Part for China," Fcriunc tJul> 26): 130-134. 
Kreder. M. and M. Zeller. 1988. "Control in German and I'S Companies," Managenunl Intcnia- 

tiotutl Review: 58-66. 
Lachman. R.. A. Nedd and B. IluinigN. 19'-)4. "Anal) zing Cross-.National Management and Organi- 
zations: A Theoretical Framework." Management Science (Januar>): 40-55. 
Leung. K. and M. Bond. 1984. "The Impact of Cultural Collectivism on Reward Allocation." 7(>//r/;<i/ 

of Personality and Social Psychology: 793-804. 
Lewis. P.V. 1980. Organizational Communication: The Es.tence of Effective Management (Second 

Edition). Columbus. Ohio: Grid Publishing Inc. 
Merchant. K. 1989. Rewarding Results: Motivating Profit Center Managers. Boston. MA Har\aid 

Business School Press. 



310 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 



Merchant. K.. C. Chow and A. Wu. 1995. "Measurement. Evaluation and Reward of Profit Centre 
Managers: A Cross-Cultural Field Study " Accounting, Organizations and Society: 619-638. 

Naj. A. 1993. "Shifting Gears: Some Manufacturers Drop Efforts to Adopt Japanese Techniques," 
Wall Street Journal (May 7): 1 . 

O'Connor. N.G. 1995. "The Influence of Organizational Culture on the Usefulness of Budget Partic- 
ipation by Singaporean-Chinese Managers." Accounting, Organizations and Society: 383- 
403. 

Osband, K. and S. Reichelstein. 1985. "Information Eliciting Compensation Schemes." Journal of 
Public Economics 27: 107-1 15. 

Penno, M. 1984. "Asymmetry of Pre-decision Information and Managerial Accounting." Journal of 
Accounting Research (Spring): 177-191. 

Radner, R. 1986. "The Internal Economy of Large Firms." The Economic Journal: 1-20. 

Redding, G. 1980. "Cognition as an Aspect of Culture and its Relation to Management Process: An 
Exploratory View of the Chinese Case," Journal of Management Studies (May): 127-148. 

Redding, G. and G. Y. Y. Wong. 1986. "The Psychology of Chinese Organizational Behaviour." In 
Bond, M. (ed.). The Psychology of the Chinese People: 267-295. Hong Kong: Oxford Univer- 
sity Press. 

Schein, E. 1985. Organizational Culture and Leadership. New York: Harcourt Brace Jovanovich. 

Schwartz, S. 1994. "The Cultural Dimensions of Values: Toward an Understanding of National Dif- 
ferences." In U. Kim, H. Triandis. C. Kagitcibasi. S. Choi. & G. Yoon (Eds.). Individualism 
and Collectivism: Theory, Method, and Application: 85-1 19. Thousand Oaks, CA: Sage. 

Smith, P., S. Dugan and F. Trompenaars. 1996. "National Culture and the Values of Organizational 
Employees." Journal of Cross-Cultural Psychology: 231-264. 

Soeters, J. and H. Schreuder. 1988. "The Interaction Between National and Organizational Culture in 
Accounting Firms," Ac"COHrt///!g, Organizations and Society. 13: 75-85. 

Sondergaard. M. 1994. "Research Note: Hofstede's Consequences: A Study of Reviews, Citations 
and Replications," Organization Studies: 447-456. 

Triandis, H. 1984. "Toward a Psychological Theory of Economic Growth," International Journal of 
Psychology, 19: 79-95. 

Triandis, H., R. Bontempo. M. Villareal. M. Asai and N. Lucca. 1988. "Individualism and Collectiv- 
ism: Cross-cultural Perspective on Self-ingroup Relationships." Journal of Personality and 
Social Psychology (February): 323-338. 

Triandis, H. 1989. "The Self and Social Behavior in Differing Cultural Contexts," Psychological 
Review: 506-520. 

Vance, CM., S. R. McClaine, D. M. Boje and H. D. Stage. 1992. "An Examination of the Transfer- 
ability of Traditional Performance Appraisal Principles Across Cultural Boundaries." Man- 
agement International Review: 313-326. 

Vertinsky, I., D. K. Tse, D. A. Wehrung and K. H. Lee. 1990. "Organizational Design and Manage- 
ment Norms: A Comparative Study of Managers' Perceptions in the People's Republic of 
China. Hong Kong, and Canada. " Journal of Management: 853-867. 

Waller. W. and R. Bishop. 1990. "An Experimental Study of Incentive Pay Schemes, Communica- 
tion, and Intrafirm Resource Allocation," The Accounting Review (October): 812-836. 

Waller, W. 1994. "Discussion of 'Motivating Truthful Subordinate Reporting: An Experimental 
Investigation in a Two-Subordinate Context'," Contemporary Accounting Research (Spring): 
721-734. 

Young, S. M. 1985. "Participating Budgeting: The Effect of Risk Aversion and Asymmetric Infor- 
mation on Budgetary Slack," Journal of Accounting Research: 829-842. 

Young, S. M. 1992. "A Framework for Successful Adoption and Performance of Japanese Manufac- 
turing Practices in the United States." Academy of Management Review: 677-700. 



National Culture and Private Information 31 1 



Young, S. M. and B. Lewis. 1995. "Experimental Incentive Contracting Research in Management 
Accounting." In R. Ashton and A. Ashton (Eds.) Judgment and Decision Making Research in 
Accounting and Auditing: 55-75. Cambridge, England: Cambridge University Press. 



The International 
Journal of 
Accounting 



Earnings Management in Japanese Companies 

Masako N. Darrough, Hamid Pourjalali and Shahrokh Saudagaran 

University of California-Davis, University of Hawaii at IVIanoa and Santa Clara University 



Key Words: Earnings management; Cross-cultural; Japanese accounting; International 
accounting 



Abstract: This study examines choices of accounting accruals using a large sample of Japanese 
companies, which operate in an environment that is generally regarded as being rather different 
from the United States. We find that debt-to-equity and asset hypotheses hold in the Japanese envi- 
ronment only for the years after the market crash of 1 990. Prior to the crash, the number of 
employees seems to capture the political (or economic) pressure. Similar to their U.S. counter- 
parts, managers of Japanese companies chose income-increasing accounting accruals to increase 
their bonus and increase the amount of outside funding. The ownership effect was also observed 
on the choice of accounting accruals. Those companies that have higher degrees of ownerships by 
trust companies and stock brokers have incentives to choose income-increasing accruals to pro- 
vide a more positive picture of the firm. Since this incentive does not e.xistfor ownership by finan- 
cial institutions, the opposite effect was obserx'ed. The effect of ownership by individual investors, 
management, or corporations on the choice of income-increasing accruals was opposite to that 
hypothesized in 1989. These opposite-to-expected effects were not present after the Japanese mar- 
ket crash. The stock market crash of 1990 appears to have had a profound effect on the choices of 
accounting accruals. 



INTRODUCTION 

This study addresses the question of which factors influence the accounting accruals 
choices that firm managers make in Japan. Although Japan is the second largest economy 
in the world and Japanese firms operate in a global market, the Japanese socio/economic 
and institutional environments differ significantly in many aspects from those of the United 
States. On an a priori basis, it is not clear how well the contracting theory holds for Japa- 
nese firms. Various other forces might be at work to influence accounting accruals choices 
for Japanese firms. Based on empirical analysis of data for a large sample of Japanese com- 



Direct all correspondence to: Hamid Pourjalali, University of Hawaii at Manoa. Honolulu. HI 96822, E-Mail: 
hamid@hawaii.edu; Masako N. Darrough, University of California-Davis, Davis, California 95616-8609, E- 
Mail: mndarrough@ucdavis.edu; Shahrokh Saudagaran, Santa Clara University, Santa Clara, CA 95053, E-Mail: 
ssaudagaran@mailer.scu.edu. 

The International Journal of Accounting, Vol. 33, No. 3, pp. 313-334 ISSN: 0020-7063. 

All rights of reproduction in any form re.served. Copyright © 1998 University of Illinois 



314 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1998 

panics, we provide evidence that some explanatory variables affect choices of accounting 
accruals differently as compared to the findings from research on U.S. companies. 

Our results indicate that on average, the debt hypothesis does not hold in the Japanese 
environment. On the other hand, the political cost hypothesis holds when total assets or the 
number of employees is used as the proxy for firm size. Similar to their U.S. counterparts, 
managers of Japanese companies chose income-increasing accounting accruals to increase 
their bonuses and to increase the amount of outside funding. Income-increasing choices 
were positively associated with the ownership of individual investors and trust companies, 
but negatively associated with the ownership by other corporations and financial institu- 
tions. The Market crash of 1990, which resulted in changes in economic factors, had an 
identifiable effect on the choices of accounting accruals. 

The paper is organized as follows. The paper first provides a brief review of the eco- 
nomic environment in Japan that pertains to the choice of accounting methods. This is fol- 
lowed by a description of the variables and the empirical models that are used to test the 
theory. Sample selection, data sources, and empirical results are presented in order and fol- 
lowed by concluding remarks. 

ECONOMIC ENVIRONMENT IN JAPAN 

In this section, we discuss briefly two major aspects of the economic environment that are 
unique to Japan and pertinent to our discussion: (1) the Japanese accounting framework 
and (2) the institution of industrial groups (or keiretsii). Interestingly, both aspects work in 
the same direction with respect to managerial incentives to increase reported earnings 
either by increasing the cost of or by decreasing the benefit from income-increasing earn- 
ings management. In particular, accounting requirements increase the cost of reporting a 
higher income, whereas the practice of industrial groupings reduces the need for managers 
to increase reported earnings. The close relationship between firms and banks allows man- 
agers to take a long-term perspective without worrying about short-term corporate perfor- 
mance. This situation does not imply, however, that Japanese managers have no incentive 
or desire to look more profitable. Clearly, ceteris paribus, managers look more competent 
with a higher reported income. 

Japanese Accounting 

Japanese accounting practices are influenced by two tracks. In the first track, all joint 
stock corporations are subject to the accounting and financial reporting requirements of the 
Japanese Commercial Code, which is based on the German code. The second track is cov- 
ered by the Securities and Exchange Law, which is based on that of the United States. 
While most accounting policies are similar, one important difference is the much larger 
role played by the tax laws in Japan as compared to the U.S. (Choi and Hiramatsu, 1987). 

Corporation Tax Law and its related regulations specify the methods to be used in 
recording various expenses and allowances in order for them to be tax deductible. Given 
that the marginal tax rate can exceed 50 percent for many large corporations, tax consider- 
ations are likely to be important in accounting choice. For example, companies tend to fol- 
low maximum depreciation schedules for both financial and tax purposes. In the U.S. on 



Earnings Management 315 

the other hand, temporary differences between the tax-related statements and other external 
reports are permitted. In addition, there are also various requirements and allowances for 
reserves in Japan. The financial reporting is not, however, exactly similar to tax reports. 
While the allowances and reserves must be accounted for in the financial statements to be 
allowed as tax deductions, there are a number of items that reflect permanent or temporary 
differences between taxable and pretax income shown in the financial statements. For 
example, entertainment expenses and the bonuses paid to directors, in most cases, are not 
tax deductible in Japan (Price Waterhouse. 1993, p. 99). 

In sum, although there might be incentives for Japanese managers to manipulate reported 
earnings to appear more profitable, the cost of the manipulation is much higher for Japa- 
nese managers due to a high level of conformity between financial reporting and tax report- 
ing. To the extent that tax accounting and financial reporting have greater differences in the 
U.S., managers are subject to smaller opportunity costs. 

Industrial Groups 

An important feature of the Japanese industrial structure is the existence of keiretsu 
(industrial groups). It is estimated that as much as 25 percent of the Japanese GNP is pro- 
duced by the firms that belong to the six largest keiretsu groups (Mitsui, Mitsubishi, Sum- 
itomo, Fuji, Sanwa, and Dai-ichi Kangyo). These six, as well as other keiretsu groups, are 
loosely connected through a main bank (or main banks) referred to as the main hank sys- 
tem. Typically, large firms in each group own shares of other firms in the group. Cross- 
share holding is in part an anti-takeover device, but also represents shares that are not 
bought and sold for short-term capital gains, but rather for long-term business relationships 
(Phan and Yoshikawa, 1996). 

Close relationships among firms and banks within a keiretsu group result in better infor- 
mation sharing within each group. For example, the bank's intimate involvement in the 
strategic and financial planning activities of the firm confers a unique access to critical 
information that other investors do not have (Sohn, 1994). In addition, information gather- 
ing is also facilitated by such keiretsu-affiliated networks as interlocking directorates 
(Gerlach, 1992) and regular meetings of presidents. In one study, almost 70 percent of the 
'outside' directors of the 100 Japanese companies sampled were from other companies 
within the keiretsu (McKinnon, 1984). These networks allow the bank, as a governance 
institution, to screen and monitor management in the same way that credit-rating or secu- 
rities analysis agencies do under the U.S. capital market system and to proactively respond 
rather than react to managerial investment decisions. Kaplan and Minton (1994) found that 
Japanese banks tend to send their directors to help companies with financial and earnings 
problems. 

The much more active role played by banks in the Japanese capital market, coupled with 
the significant number of shares owned by cross-share holders, is expected to reduce the 
need for disclosure of financial information to the equity market. For example, individual 
investors hold 49 percent of total outstanding shares in the United States, but they hold 
only 24 percent in Japan. Banks, other financial institutions, and non-financial firms hold 
47 percent of total outstanding shares in Japan. Thus, roughly half of the outstanding shares 
might be held by the so called stable shareholders. 



316 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Traditionally, Japanese firms relied heavily on debt rather than equity as the major 
source of capital. The typical debt-ratio in Japanese firms has been in excess of 80 percent 
(McKinnon, 1984). Coupled with the fact that a significant portion of shares are owned by 
banks and other affiliate corporations, the resulting ownership structure is more concen- 
trated than that in the U.S. and other equity-oriented countries. Thus, the financial account- 
ing information is oriented toward the needs of other corporations, financial institutions, 
and the government rather than the individual stockholder (Evans, Taylor and Holzmann, 
1994; Mueller, Gernon and Meek, 1994). 

Furthermore, since Japanese corporations obtain substantial funds from their main bank 
and other affiliate banks, the level of competition for resources in the capital market is less 
for large Japanese companies. In sum, the institution of industrial groups allows the man- 
agement of member firms to take long-term perspectives (due to cross-share holding), pro- 
vides opportunities for private information sharing with important financial investors 
(banks and other coiporations), and reduces the need to disclose information to the inves- 
tors that are more short-term oriented. 

A discussion of two more features that are specific to Japan is in order: ( 1 ) corporate 
governance practice and (2) the role of unions. Until the most recent revision of the Com- 
mercial Code in 1993, Japanese boards rarely paid much attention to their fiduciary duties 
simply because shareholders were not very active. Pre- 1993 board structures emphasized 
stakeholder participation, which meant that boards with outsiders (excluding bank execu- 
tives) were uncommon. With no competitive market for outside directors, board members 
were usually selected from the ranks of employees. This virtual merging of management 
and board also meant that boards were seldom independent entities and thus often served 
at the behest of management." Due to the pattern of institutional cross equity holdings and 
an insider board structure, the market for corporate control is undeveloped in Japan. Take- 
overs (as a means of corporate control) are actively resisted because they are considered a 
form of robbery in the Japanese culture. Stock price is rarely an efficient indicator of Jap- 
anese corporate performance since the cross holding of equity is meant to stabilize trading 
relationships and therefore a relatively low volume of stocks is actually traded. The unreli- 
ability of stock prices as an information source reduces the ability of an acquirer to evaluate 
potential targets (Phan and Yoshikawa, 1996). In terms of accounting method choice, this 
factor is expected to put less pressure on managers to use income-increasing accruals. 

Finally, we note that there might be a strong rationale for Japanese management to 
appear less profitable when negotiating with labor unions. Typically, labor unions are orga- 
nized within each company, with possible affiliation with national unions. Each enterprise 
union negotiates with its employer. Both the management and the union are usually aware 
of the fact they are in the same boat. However, labor negotiations can be quite antagonistic 
and confrontational. In such situations, the management would find it easier to extract con- 
cessions from unions if the company had lower reported earnings. 

VARIABLES AND MODEL SPECIFICATION 

Dependent Variable Specification: Measuring Discretionary Accruals 

Most of the effort in testing earnings management behavior has focused on explaining 
accounting choices by examining the relationship between an accounting choice variable 



Earnings Management 317 

and a number of explanatory variables. In defining the accounting choice variable, three 
different approaches ha\e been most w idely used: ( I ) single procedure (e.g.. Hagerman 
and Zmijewski. 1979). (2) sets of procedures (e.g.. Zmijewski and Hagerman. 1981: Press 
and Weintrop. 1990. Inoue and Thomas. 1996). (3) and net accruals (e.g.. Healy. 1985; 
DeAngelo. 1988). All three definitions of accounting choice ha\e been criticized as being 
poorly specified, and consequently, they may ha\e contributed to the low power of the tests 
(Watts and Zimmerman, 1990). 

Jones ( 1 99 1 ) developed a model to capture the discretionary component of total accruals. 
Jones defines the total accruals as "the change in noncash working capital before income 
taxes payable less total depreciation expense" (page 207). To relax the assumption that the 
changes in total accruals are due solely to changes in discretionary accruals, she uses an 
expectation model for total accruals to control for changes in the economic circumstances 
of each firm. This expectation model uses an estimation period for each firm that ranges 
between 14 and 32 years. Dechow. Sloan, and Sweeney ( 1995) assess the relative perfor- 
mance of fi\e alternati\e discretionan,' accrual models (Healy: DeAngelo: Jones: modified 
Jones: and industry ) at detecting earnings management. They conclude, based on four sets 
of power tests, that a modified \ersion of the Jones ( 1991 ) model pro\ ides the most pow- 
erful tests of earnings management. Unfortunateh . the long historical data necessary to 
establish the expectation model is not available in our data base and we could not use the 
Jones model. Pourjalali and Hansen (1996) developed a model that measures the amount 
of manipulation in the discretionary accruals. Because this model is not directly related to 
a specific set of acceptable accounting methods and the expected values could be calcu- 
lated using the items that are available in the NIKKEI data base, we used a modified ver- 
sion of this model to measure the manipulated amount of accruals. The modified model and 
its assumptions are discussed below . 

The Discretionary Amount of Accrual Model 

The accounting choice variable should measure the income effect of all discretionary 
choices made by a manager for a gi\ en period. Let A, be the total income effect of the dis- 
cretionarv choices for period t. Since discretionary choices can affect revenues, variable 
expenses, and fixed expenses, A^ can be expressed as the sum of three discretionarv sub- 
components: 

where 
Ai-f = the discretionary revenue effect 
A^., = the discretionary variable accrual effect 
Afj = the discretionary fixed accrual effect 

Assessing each sub-component effect provides a measure for the total discretionary 
effect. The following assumptions are needed to build the desired measurement 

model: 



31 8 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

1. Receivables Assumption. The ratio of true accounts receivables to true sales reve- 
nues can be measured using the average of prior period balances for these accounts. 
"True" is defined as the amount that would be reported without manipulation.. 

2. Cost Behavior Assumption. Cost behavior can be described as a linear function of 
reported revenues. This function can be measured using the average of prior period 
balances for costs (operating expenses) and sales revenues. 

3. Fi.xed E.xpense Assumption. The only significant fixed expenses are depreciation and 
amortization. Any changes in assessing these expenses and their effects on income 
must be disclosed. 

Following the first assumption, the true ratio for accounts receivables to revenue pro- 
duces the expected amount of non-manipulated revenue for the period. The difference 
between the expected and the reported amount of revenue is the discretionary revenue 
effect (A,-, ) on reported income for period t. Details for this calculation are provided in 
Appendix A. The second assumption and the expected amount of non-manipulated revenue 
(see above) can be used to estimate expected variable accrued expenses. The difference 
between the expected and the reported amounts of variable accrued expenses is the discre- 
tionary variable expenses effect (Aj,,) on the reported income for period t. Details for this 
calculation are also provided in Appendix A. Adding A,., , Aj., and Aa provides total income 
effect of discretionary choices for period t (A,); this is the dependent variable used in this 
study. 

Specification of Explanatory Variables 

A frequent problem with international accounting research is data availability and com- 
parability. Although prior US-based research has identified a large set of variables that 
influence accounting method choices, this study is limited to the variables whose disclo- 
sure is required in Japan (e.g., total compensation data for directors are not required, 
although total bonuses are) and available through the NIKKEI data base. An important set 
of missing variables in this study is the one related to management compensation plans. 
This limitation can reduce the power of the bonus hypothesis test. The explanatory vari- 
ables considered in this study are categorized as follows: 

1 . Debt Covenants 

2. Political Cost/Public Exposure Variables 

3. Bonus Variable 

4. Internal/External Financing 

5. Ownership 

6. Effect of the 1990s Stock Market Crash 

Debt Covenants 

Most accounting-choice research has used the debt-to-equity ratio as a surrogate for a 
firm's closeness to debt covenant violations and found that the higher the debt-to-equity 
ratio, the more income-increasing accounting methods managers choose. Results of Duke 



Earnings Management 319 

and Hunt (1990) suggest that the debt-to-equity ratio is a good surrogate for the closeness 
to or existence of debt covenant restrictions for over 60 percent of restrictions that relate to 
retained earnings, working capital, and net tangible assets (p. 56). Thus, as the debt-to- 
equity ratio increases, income-increasing activity is expected; that is, a positive association 
is predicted. 

Even though the debt ratio may be a good proxy for measuring closeness to debt cove- 
nants, there is no compelling reason to believe that the closeness to debt covenants will 
influence the managers in Japan to choose to increase accruals. As discussed earlier, one 
difference between debt in the U.S. and in Japan is the source. Most large U.S. corporations 
borrow through the issuance of long-term bonds, while most Japanese corporations borrow 
money from banks. On average, Japanese companies have a higher debt-to-equity ratio 
than the U.S. companies. This higher rate does not necessarily mean that the firm is close 
to debt covenant violations. In Japan, the majority of debt and equity holders function as 
the governance institution for client firms (Phan and Yoshikawa, 1996). In times of finan- 
cial distress, Japanese banks and other members of keiretsu provide additional support or 
send their directors to oversee operations instead of pushing the firms into bankruptcy 
(Hoshi et al., 1991). The presence of a main bank within the keiretsu and stable sharehold- 
ers are usually attributed as one of the important reasons why Japanese managers can 
afford to take a long-term perspective without worrying about short-term corporate perfor- 
mance. Given this situation, the debt covenant hypothesis may not hold the same explana- 
tory power for Japanese companies' accounting choices. The following hypothesis is 
suggested with the expectation that it might not hold for Japanese companies to the same 
extent as for American companies: 

HI: The larger the Japanese firm's debt/equity ratio, the more the manager is 
expected to choose income-increasing accruals. 

Political Cost/Public Exposure Variables 

Past studies often used size (measured by total assets) as a proxy for political sensitivity. 
We do not expect the same relation to hold in Japan. The Japanese economic climate is 
friendlier to large businesses than that in the United States. The Japanese government has 
not been as concerned with anti-trust regulation as has the United States. One possible rea- 
son for this difference in attitudes is that the Japanese government focuses on the compet- 
itiveness of Japanese companies in the global market, while U.S. authorities have largely 
focused on the domestic market when measuring market dominance. Moreover, the size 
variable may be a proxy for effects other than political sensitivity. For example, the oper- 
ating characteristics of smaller firms may be significantly different from those of larger 
firms (e.g., greater default risk). Thus, it seems possible that accounting accrual behavior 
may differ based on the size of the firm because of factors other than political sensitivity. 

In addition to size, therefore, a more direct measure of political sensitivity is needed. One 
possible proxy for political sensitivity is the number of employees, since they are one of the 
political groups for each company (i.e., the enteiprise union). Given the well-known Japa- 
nese emphasis on collective and group achievement, one may suggest that employees do 
not have the same incentives to impose political pressure on their companies as do employ- 
ees of U.S. firms. Moreover, since the collective bargaining takes place at the enterprise 



320 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

level and workers are typically paid a bonus based on the performance of the company, the 
management of Japanese companies may have incentives to reduce reported income by 
choosing income-decreasing accruals to weaken the bargaining position of their unions. 
The following hypotheses are suggested here to capture the effect of size and number of 
employees on the choice of accounting accruals. We do not expect that the size hypothesis 
will be supported in Japan. 

H2: The larger the Japanese company, the more likely managers are to choose 
income-decreasing accruals. 

H3: The more employees that a Japanese company has, the more managers are 
expected to choose income-decreasing accruals. 

Because conformity between financial reporting and tax reporting is required in the Jap- 
anese environment, management may change accounting accruals to minimize the com- 
pany's taxes. As mentioned previously, since the same depreciation methods are required 
for tax and financial purposes, depreciation expense cannot be manipulated for tax pur- 
poses only. The influence of tax on other choices of accounting accruals can be related to 
the income tax rates. The higher the rate, the more beneficial income-decreasing deprecia- 
tion methods would be. Since it is not possible to determine the "true" marginal tax rate 
(i.e., the marginal tax rate without earnings management), we use an average effective tax 
rate based on actual tax liability and income. To adjust for the benefit from depreciation 
expenses, we calculated the effective tax rate as the ratio of "tax paid and accrued" to the 
income before taxes and depreciation. The test of this argument about depreciation as well 
as any other accruals is incoiporated in the following hypothesis: 

H4: The higher the tax rates, the more Japanese managers are expected to choose 
income-decreasing accruals. 

Bonus Variable 

To test the bonus hypothesis, most studies have used a zero-one bonus effect variable. 
This simplistic approach ignores the details of bonus plans as well as the effect of total 
compensation on accounting choice. Healy (1985), for example, has shown that the details 
of bonus plans are significant. While the details of the compensation plans in Japan are not 
readily available, current literature suggests that the bonuses are based on operating 
income, ordinary income, or the differences between actual and budgeted items (Inoue 
and Thomas, 1996). Since the budgeted items are not disclosed, we can only look at the 
income variables. Thus, we expect to find a direct relationship between the management 
bonus and choices of income-increasing accruals. Mangers would choose increase- 
increasing accruals in an expectation of increasing their bonus. The following hypothesis 
will be tested: 

H5: The higher the amount of management bonus for the period, the more likely 
Japanese management is to have chosen income-increasing accruals. 



Earnings Management 321 

Since the only information on the management bonus plans is the total amount of bonus 
paid, this amount will be used to test this hypothesis. 

Internal/External Financing 

In addition to the high degree of reserves that Japanese corporations are legally required 
to maintain, most companies are able to appropriate a considerable amount of their retained 
earnings to reduce the earnings available for dividend payments, hence to generate internal 
financing. This practice is easily implemented in the Japanese environment since compa- 
nies are heavily owned by other corporations and financial institutions that are interested in 
long-term rather than short-term returns. Although the debt covenant variable (debt-to- 
equity ratio) captures the effect of the financial dependency on outside sources, this vari- 
able ignores an internal source of financing: the appropriation of retained earnings. Once 
appropriated, the retained earnings cannot be used for dividend payments. Similar to the 
debt covenant hypothesis, managers of firnis that need external financing are more likely 
to use discretionary accounting accruals to present a better picture of the firm. The follow- 
ing hypothesis is tested: 

H6: The more a Japanese firm needs external financing, the more managers are 
expected to select income-increasing accruals. 

The high degree of appropriations of earnings (as compared to total net assets) signals 
that the firm has high internal financing or low external financing. Clearly, a negative rela- 
tionship exists between the internal and external financing. Since data are available to cal- 
culate internal financing (ratio of Appropriated Retained Earnings to Net Assets), we will 
use this ratio to test the above hypothesis with an expectation that there will be a negative 
relationship between internal financing and income-increasing choices of accounting 
accruals (opposite to the hypothesized sign in the case of external financing). 

Ownership 

As previously mentioned, the ownership structure of Japanese companies is different 
from that of their counterparts in the U.S. A larger portion of the equity of companies in 
Japan is held by financial institutions, securities brokers, other corporations, and invest- 
ment trusts. We develop four hypotheses to examine the effect on earnings management 
from ownership by ( 1) individual investors, (2) the management, (3) securities brokers and 
investment trusts, (4) other corporations, and (5) other financial institutions. Although all 
these investors are "owners" of companies, the horizon over which these investors hold 
their share ownership might vary significantly. In general, individual investors, securities 
brokers, and investment trusts are expected to have a shorter horizon than management, 
financial institutions, and corporate cross-share holders. 

Ownership by Individual Investors 

U.S. companies are expected to have strong incentives to provide a more positive picture 
of the firm to their most important source of capital, individual investors; therefore they 



322 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No, 3. 1 998 

choose accruals to either smooth or increase income. Individual investors hold on average 
49 percent of total outstanding shares in the United States, whereas they hold only 24 per- 
cent in Japan. Since individual investors play a less significant role. Japanese companies, 
on average, might not have the same incentive to paint a more positive picture of the com- 
pany. Nevertheless, at the margin, as individual ownership increases, Japanese companies 
are expected to try to provide a better picture. The following states this hypothesis. 

H7: The higher the degree of individual investors in the ownership, the more Japa- 
nese managers are expected to choose income-increasing accruals. 

Ownership by the Management 

Research has revealed that manager-controlled firms and owner-controlled firms have 
different goals. One way these differences manifest themselves is through the choice of 
accounting methods (e.g., Hunt, 1985 and Dhaliwal et al., 1982). Thus, we hypothesize that 
the degree of managerial control affects accounting choices. 

One possible measure of managerial control is the percentage ownership of shares by the 
management. As ownership by management increases, managerial control increases. In the 
U.S. environment, management has at least two incentives to choose income-increasing 
accruals. First, income-increasing methods present a more favorable financial picture and 
may help prevent a takeover. Managers' resistance to takeovers is explained by the fact that 
they often lose their jobs or perquisites (Azariadis and Stiglitz. 1983). Second, accounting- 
based bonus schemes are more likely to be found in manager-controlled firms. In the U.S. 
environment, Pourjalali and Hansen (1996) provide evidence that as managerial control 
increases (ownership by management decreases), income-increasing activities increase. 

While Japanese managers are rarely worried about take-overs, their bonus is based on 
only current income or some items derived using current income. Thus, we suggest that 
while managers in Japan would choose income-increasing accounting accruals to increase 
their bonuses, the choice is affected by their degree of ownership in the company. The 
managers of Japanese firms that have a lower degree of ownership in their companies 
might choose income-increasing accruals to increase their wealth through accounting num- 
bers more than those managers who have a higher degree of ownership in their companies. 
The following hypothesis tests this conjecture: 

H8: The lower the degree of ownership by the management, the more the Japanese 
managers are expected to choose income-increasing accruals. 

Ownership by Securities Brokers and Investment Trusts 

The final ownership hypothesis is related to the effect of the investment by securities 
brokers and investment trusts. Both these groups have a short-term return perspective (ver- 
sus investments by other corporations and financial institutions). As a result, we expect a 
positive relationship between the choice of income-increasing accounting accruals and the 
degree of ownership of these groups of investors. The following hypothesis is tested: 



Earnings Management 323 

H9: The higher the degree of ownership by securities brokers and investment 
trusts, the more the Japanese managers are expected to choose income-increas- 
ing accruals. 

Ownership by Other Corporations and Financial Institutions 

Relative to the U.S., the environment in Japan is characterized by very large banks that 
provide a significant amount of the capital necessary for the coiporations. Moreover, many 
firms are owned jointly and mutually by other firms and organized into keiretsu. Since 
these organizations are more interested in long-term benefits from their investments, the 
Japanese companies do not have strong incentives to increase their income by choosing 
income-increasing accruals (Phan and Yoshikawa, 1996). On the contrary, they have 
incentives to choose income-decreasing accruals in an attempt to provide long-term bene- 
fits such as minimization of tax payments. The following hypothesis tests this theory: 

HIO: The higher the degree of ownership by other corporations and financial institu- 
tions, the more the Japanese managers are expected to choose income-decreas- 
ing accruals. 

The 1990 Stock Market Crash 

After the Plaza Accord of 1985, the government of Japan let the value of the yen rise. 
While this action resulted in a decrease in exports (and an increase in imports), it also 
resulted in an increase in new investment and an increase in Japan's stock prices. The mar- 
ket capitalization of stocks on the Tokyo Stock Exchange in 1990 was 4.5 times the value 
in 1986. In 1989, the government, noticing stock price increases and problems in the 
financial system, launched various new policy measures to rectify the situation. For exam- 
ple, during the first week of 1990, the government increased interest rates. This action, 
among other factors, triggered the market crash of 1990, which resulted in a 5 1 % reduction 
in stock prices (Scott and Wellons, 1996). The government intervened by actions such as: 

• Pouring pension funds cash into the market 

• Creating a Securities and Exchange Surveillance Commission-SESC (1992) 

• Creating a Cooperative Credit Purchasing Company (1992) 

• Accepting interest lost as a deductible tax item 

• Advising no rapid write-off for bad debt 

• Not requiring companies to mark to market Fixed Assets, Investment in Stocks 
(although the market values depreciated after the market crash). 

Since the economic environment has undergone a major change, we must consider the 
possibility that the managers of Japanese companies had different incentives for earnings 
management in years prior to 1991 (before the stock market crash) from the incentives fol- 
lowing 1990. For this reason, the test results are provided for both before and after the Jap- 
anese market crash. 



324 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Table 1. Sample sizes used in the study 













1989-1992 




1989 


1990 


1991 


1992 


(Company-Year) 


Sample size before deletion of 


1440 


1440 


1440 


1440 


5760 


tho.se with missing data 












Companies with missing data 


874 


803 


785 


845 


3307 


Remaining companies 


566 


637 


655 


595 


2453 



SAMPLE AND DATA 

The population includes 1440 companies for which data were available through the 
NIKKEI Databank Bureau. The data we use are based on parent-only rather than on con- 
solidated financial statements. More detailed data are available on a parent-only basis (e.g., 
the composition of ownership), and parent-only financial statements are traditionally con- 
sidered the primary financial statements in Japan (Lowe 1990). In particular, tax liability is 
calculated according to parent-only financial results. All firms for which we could get data 
on the necessary variables for the years 1989, 1990, 1991, or 1992 were included in the 
sample. Depending on the year , different numbers of companies were deleted because of 
missing variables. Table 1 provides a summary of the sample of companies in each of the 
four years. 

RESULTS OF THE STUDY 

Table 2 provides the descriptive statistics for all the variables included in the study. As this 
table indicates, the mean for most of the variables did not substantially change during the 
four-year period under study; however, it should be noted that the percentage of shares held 
by securities brokers steadily decreased, while the percentage of shares held by individual 
investors increased in 1991 and 1992. On average, companies continued to grow with their 
average total assets increasing almost 18% during the four year period. The average tax 
rate was the lowest in 1991, the year following the stock market crash, and internal financ- 
ing (FIN) increased by almost 20% from 1989 to 1992. 

Each hypothesis was tested in two different ways: by company-year (pooled) and by cal- 
endar years. The ordinary least squares (OLS) analysis was used. 

Company-Year Results 

Table 3 reports the results for the company-year (the entire period) analysis. As this table 
indicates, all of the significant variables, except the individual and corporate ownership 
variables, had the signs suggested by the hypotheses. One of the interesting findings is that, 
as expected, the debt-to-equity variable is not significant, although this variable has con- 
stantly been used to explain income-increasing accounting accrual choices in the United 
States. We used total assets and the number of employees as alternative measures of polit- 
ical cost and found negative associations for both variables. The total assets variable is sig- 
nificant despite the expectation that it would not be important in the Japanese environment. 



Earnings Management 



325 



Table 2. Descriptive Statistics for Variables that were Included in the Model 







Mean (Std Dev) 




Variable 


1989 


1990 


1991 


1992 


DTOE 


2.711084 


2.748266 


2.767377 


2.652559 




(3.861) 


(4.67) 


(7.63) 


(4.758) 


ASSET 


74672 


82210 


86708 


88002 




(112796) 


(125808) 


(132540) 


(135003) 


EMPLOY 


1420.581 


1472.349 


1520.100 


1548.240 




(1970.87) 


(2062.93) 


(2172.67) 


(2262.86) 


TXRT 


0.257029 


0.234328 


0.211928 


0.231747 




(0.369) 


(0.125) 


(0.352) 


(0.268) 


BONUS 


43.10466 


45.90403 


46.64750 


46.24334 




(32.16) 


(34.11) 


(35.28) 


(35.38) 


FIN 


0.136601 


0.140102 


0.150026 


0.163227 




(0.105) 


(0.106) 


(0.110) 


(0.117) 


IND-SHR** 


0.254750 


0.251532 


0.255739 


0.271542 




(0.107) 


(0.107) 


(0.108) 


(0.114) 


FIN-SHR** 


0.347522 


0.345666 


0.342452 


0.335785 




(0.148) 


(0.145) 


(0.145) 


(0.144) 


CORP-SHR** 


0.297982 


0.308533 


0.310752 


0.308005 




(0.173) 


(0.175) 


(0.174) 


(0.172) 


dir-shr" 


0.036970 


0.034392 


0.033865 


0.032665 




(0.055) 


(0.052) 


(0.052) 


(0.049) 


TRST-SHR** 


0.040028 


0.042344 


0.040971 


0.040859 




(0.037) 


(0.038) 


(0.037) 


(0.038) 


BROK-SHR** 


0.022747 


0.017532 


0.016220 


0.011144 




(0.023) 


(0.021) 


(0.021) 


(0.012) 



Notes: DTOE = Debt to Equity Ratio 

ASSET = Total Assets 

EMPLOY = Number of Employees 

TXRT = Enteqjrise Tax Paid and AccruedACurrent income + Depreciation) 

BONUS = Officers Bonus 

FIN = Appropriated Retained Earnings/Total Assets 

IND-SHR = Shares Held by Individuals 
DIR-SHR = Shares Held by Directors 
CORP-SHR = Shares Held by Other Corporations 
RN-SHR = Shares Held by Financial Institutions 
TRST-SHR = Shares Held by Investment Trusts 
BROK-SHR = Shares Held by Securities Brokers 
**Since the total number of shares was unavailable, these numbers were calculated by dividing the 

number of shares for the mentioned variable by the total number of shares for all groups whose data 

was available. 



This suggests that even in Japan, the larger companies could be subject to more political 
pressure than the smaller companies. The negative relationship lor the number of employ- 
ees, however, might be due to firms' attempts to reduce wage bills (economic motivation 
rather than political). A significant result for the effect of the corporate tax rate (TXRT) 
was not found. ^ This might be due to the lack of data on the fixed accrual effect through 
depreciation. The result for the individual ownership variable, which is much smaller in 
Japan relative to the U.S., shows that the Japanese managers have opposite incentives to 
their U.S. counterparts for choosing income-decreasing accounting accruals. 



326 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol, 33, No. 3, 1 998 



Table 3. Manipulation in Accounting Numbers for Years 1989-1992 





Expected 


Parameter 


Standard 


T for HO: 




Variable 


Sign 


Estimate 


Error 


Pramater = 


Prob> ITI 


INTERCEPT 


None 


340.40 


230.54 


1.476 


0.1399 


DTOE 


+ 


+50.58 


39.410 


1.283 


0.1994 


ASSET 




-0.004* 


0.0007 


-5.979 


0.0001 


EMPLOY 




-0.08* 


0.0289 


-2.975 


0.0030 


TXRT 




-204.48 


619.90 


-0.330 


0.7415 


BONUS 


+ 


+ 11.15* 


2.2355 


4.989 


0.0001 


FIN 




-3914.11* 


666.25 


-5.875 


0.0001 


IND-SHR 


+ 


-0.018* 


0.0032 


-5.670 


0.0001 


FIN-SHR 




+0.093* 


0.0186 


4.999 


0.0001 


CORP-SHR 




+0.005 


0.0030 


1.902 


0.0573 


DIR-SHR 


+ 


-0.009* 


0.0021 


-4.321 


0.0001 


TRST-SHR 


+ 


+0.106* 


0.0132 


8.052 


0.0001 


BROK-SHR 


+ 


+0.173* 


0.0257 


6.748 


0.0001 


DUMMY 


+ 


+343.14* 


139.58 


2.458 


0.0140 



Sores: DTOE = Debt to Equity Ratio 

ASSET = Total Assets 

EMPLOY = Number of Employees 

TXRT = Enterprise Tax Paid and Accrued/( Current income + Depreciation) 

BONUS = Officers Bonus 

FIN = Appropriated Retained Earnings/Total Assets 

IND-SHR = Shares Held by Individuals 

DIR-SHR = Shares Held by Directors 

CORP-SHR = Shares Held by Other Corporations 

FIN-SHR = Shares Held by Financial Institutions 

TRST-SHR = Shares Held by Investment Trusts 
BROK-SHR = Shares Held by Securities Brokers 

DUMMY = Dummy variable ( Dummy =1 for 1991 and 1992 otherwise zero) 
*Significant at .05 level; Number of observations (company-year): 2454; F Value: 40.8 1 8, Prob>f : 
0.0001 ; ^-square 0. 1 786, Adj /?-sq 0. 1 742. 



Another noteworthy finding in Table 3 is that the dummy variable for the 1990 stock 
market crash is significant. This variable takes a value of one for years 1991 and 1992 and 
a value of zero for years of 1989 and 1990. Given the direction of the dummy variable, the 
finding suggests that managers of Japanese companies chose income-increasing account- 
ing accruals for years after the market-crash of 1990. The income-increasing-accruals may 
have been chosen to provide a better picture of companies in the troubled economy of years 
after 1990 or in an effort to keep companies' stock value high. Consequently, there is evi- 
dence that the choices of accounting accruals were influenced by the market crash. 

Calendar-Year Results 



To see if managers reacted differently pre (1989 and 1990) and post (1991 and 1992) 
stock market crash, we ran a regression analysis for each of the four years: 1989, 1990. 
1991, and 1992. Table 4 compares the results among different years and those of pre- and 
post-market crash. Results for these years are both similar and as strong as those in Table 
3. The only significant variables that are contrary to our hypotheses are the ones mentioned 
in Table 3 (individual and corporate ownership, and total assets). Interestingly, these 



Earnings Management 327 



Table 4. Comparative Results of Regression Analysis for Years 1989-1992 

(only signs for significant vanables are included) 













Market Crash" 


1989-1992 


Year" 


1989 


1990 


1991 


1992 


pre 


Post 


Table (3) 


Number of obsen ations 


566 


637 


655 


595 


1203 


1250 


2453 


(AdjR-) 


(.21) 


(33') 


(.19) 


(.32) 


(.21) 


(.24) 


(.17) 


DTOE 






+ 


+ 




+ 




ASSET 


+* 




- 


- 




- 


- 


EMPLOY 


- 








- 




- 


TXRT 
















BONUS 




+ 


+ 


+ 


+ 


+ 


+ 


FIN 


- 


- 


- 




- 


- 


- 


IND-SHR 


.* 








_* 




_* 


FIN-SHR 




- 


- 


- 


- 


- 


- 


CORP-SHR 


+* 








+* 




+* 


DIR-SHR 


+* 








+* 




+* 


TRST-SHR 


+ 


+ 


+ 




+ 


+ 


+ 


BROK-SHR 


+ 


+ 


+ 


+ 


+ 


+ 


+ 


Dummv Var 


N/A 


N/A 


N/A 


N/A 


N/A 


N/A 


+ 



Notes: The \ ariable is significant with opposite to hypothesized sign. 

TTie detailed analysis for each year is available upon request from the corresponding author. 
N/A Not applicable. For definition of variables see Table 3 above. 

All significant variables (but three in 1989). were in the same direction as predicted in this study's 
hypotheses. These variables are: DTOE. .ASSET. Employ. BONUS. HN. RN-SHR. TRST-SHR, and 
BROK-SHR. The direction of Dummy Variable suggest income-increasing behavior for years after 
market crash of 1990. 



results are present onh in 1989. the year before the stock market crash. We attribute this to 
the bubble economy of the pre-stock market crash period. 

Although the results show that the debt-to-equity variable for the entire four year period 
was not significant (see Table 3 above), it was significant after the crash (1991 and 1992). 
It appears that under a tighter market economic condition, the managers of Japanese com- 
panies either encountered greater pressure from the debt-holders to provide a more positive 
picture, or the> needed to pro\ ide a more positi\ e picture to obtain outside financing. The 
increase in the amount of internal financing during the years after the crash supports the 
second e.xplanation (see Table 2 above). The results for >ears 1989 and 1990 are in accord 
with our expectation and this \ ariable does not significantly affect the amount of manipu- 
lation in the accruals. These results ma\ also indicate that the debt and equit\ en\ ironment 
in Japan is moving closer to that of the U.S.^ 

The second hypothesis addressed political cost and suggested that larger firms would 
choose income-decreasing behavior. We expected that this hypothesis would not hold. As 
Table 4 indicates, the ASSET variable is significant for years after the crash (1991 and 
1992) in the direction suggested by the hypothesis. This variable is significant in 1989 with 
an opposite sign to what was hypothesized. Again, these results could be related to market 
pressure that resulted from the market crash. This result shown in Table 3 (income-decreas- 
ing effect of size variable) is driven by the years 1991 and 1992. The effect of the number 
of employees (as a measure of political costs) is significant and negative as hypothesized 
onh in one \ ear (i.e.. 1989). 



328 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

The coq)orate tax rates also did not significantly affect the choices in accounting accru- 
als in any of the years under study. The management bonus continued to provide incentives 
for the firms to choose income-increasing accruals in all years except for 1989. When this 
variable was standardized by the total assets, however, the significant effect disappeared 
completely. This suggests that managers of larger companies receive higher bonuses (as is 
expected in any environment) and they do not use accounting accruals to increase the 
amount of their bonuses. The results found for FIN strongly support hypothesis 6. The sig- 
nificant negative coefficient suggests that firms requiring more external financing chose 
more income-increasing accounting accruals. Even in 1992, this variable is significant at 
.09 level and carries the expected sign. 

The results indicate that the ownership variables are mostly consistent with the suggested 
hypotheses w ith three exceptions. First, not every variable was consistently significant across 
time. For example, the management ownership ( DIR-SHR) was significant for only one year, 
1989. Second, three (out of six) ownership variables had opposite to predicted signs: indi- 
vidual, management, and corporate ownership (IND-SHR, DIR-SHR, and CORP-SHR), 
again in 1989. As argued earlier, these results could be related to the market crash of 1990. 

SUMMARY AND CONCLUSION 

This study addressed the question of how Japanese managers make decisions on accounting 
choice. Using the data available for a large sample of Japanese companies, the study presented 
evidence supporting most of the hypotheses as developed. Since the business and accounting 
environment in Japan is different from that in the U.S.. it is quite likely that the incentives 
to manipulate accounting numbers in Japan are different from those in the U.S . The dependent 
variable in this study is a discretionary accrual variable. This amount is calculated using a 
model that incorporates any changes in the discretionary accounting accruals without employ- 
ing the accounting methods directly. We found that some explanatory variables affect choices 
of accounting accruals differently in Japan as compared to prior tests for U.S. companies. 

Our results indicate that, on average, the debt hypothesis does not hold in the Japanese 
environment. Total assets and the number of employees appear to provide significant expla- 
nation either as political pressure variables or as proxy of labor costs. Similar to their U.S. 
counterparts, managers of Japanese companies choose income-increasing accounting accru- 
als to increase the amount of outside funding. The ownership effect was also observed on 
the choices of accounting accruals. Those companies having higher degrees of ownership 
by trust companies chose income-increasing accruals to provide a more positive picture of 
the firm. The opposite effect was observed for the ownership by financial institutions. Con- 
trary to our expectations, three ownership variables (individual investors, managers, and 
corporations) had wrong signs only in 1989. The stock market crash of 1990 had a definite 
effect on earnings management behavior and seems to have signaled a major regime change. 

Although this study has data limitations, the results contribute to the existing literature 
regarding the choices of accounting accruals in other countries. For example, the model 
used in this study can be easily applied in other countries. Furthermore, we have shown that 
the traditional way of explaining accounting accrual choices in the U.S. may not be appro- 
priate in other countries and additional (and in some cases, different) variables need to be 
employed for explaining accounting accrual choices. 



Earnings Management 329 

This study can be extended to include additional detailed information for ownership 
(such as foreign investors), and management bonus plans. Furthermore, future researchers 
should consider the effect of the changing environment in Japan for the years after 1992. 
For example, the Japanese government revised the Commercial Code in 1993. The revised 
Code provides more incentives for Japanese corporate boards to pay closer attention to 
their fiduciary duties because of the possibility of shareholder activism. Similarly, in 1997, 
the Japanese government lifted the ban on holding companies (zaibatsus) that had been in 
place since the end of the Second World War. In due course, this action could drastically 
affect the Japanese business environment. Our results suggest that financial statement users 
must consider financial statements from countries other than their own within the context 
of the business and cultural environment of the country where they originate. Financial 
statements from different countries cannot be treated as identical even though they may 
ostensibly be prepared using identical accounting standards such as those of the Interna- 
tional Accounting Standards Committee (lASC). 

Acknowledgments: We wish to thank Jacob Thomas, Somnath Das. Russell Taussig and partici- 
pants at the Oklahoma State University research colloquium and the 1997 Annual Meeting of the 
American Accounting Association's International Accounting Section, and an anonymous reviewer 
for the International Journal of Accounting for their helpful comments and suggestions. 

APPENDIX A 

Assessing the discretionary revenue effect 

The receivables assumption suggests that a true ratio for accounts receivables to reve- 
nues exists. Then this ratio can be found using the following: 

K = A/?^,.„ to M ) / ^{t-n to M ) = ^^Tl / ^Tt ' 

where 
K is the firm's normal (true) accounts receivable to revenues ratio (averaged 

from n to t-1, where t is the year under study). 
^{t-n to r-1 ) *^ ^^^ firm's total revenue from t-n to t-1, where t is the year under study. 
^^{t-)not-\) is ^he firm's total accounts receivable from t-n to t-1, where t is the year 

under study. 
ARjj is the true accounts receivable in year t. 

Rjj is the true total revenue in year t. 

An important assumption we make about sales revenue manipulation is that managers 
can only manipulate the amount of credit sales (not cash-sales) through accounts receiv- 
ables. Assuming that management has manipulated the revenue in period t, the accounts 
receivable (ARj) to sales revenues (/?,) ratio for t is not equal to K. Defining ARj, = /?j, to 
be the manipulated amount, we have the following relation: 

K = ARj/Rj, = (AR, - ARj,)/(R, - /?j,). 

Substituting the equality ARj, = R^j, and solving for /?j,, we get 



330 



THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 



Rj, = (AR,-K*R,m-K). 

Assessing the Variable Accrual Effect 

By the Cost Behavior assumption, the average variable accrued cost ratio of periods (t-n 
to /-I) can serve as the benchmark for assessing period r's discretionary changes in variable 
accrued expenses. Essentially, the change in the average variable accrued expense ratio for 
periods (t-n to r-1 ) to period / signals a discretionary change that belongs only to period /. 
Thus, the income effect is simply the change in ratio multiplied by the true revenues of 
period t. The total variable cost ratio is the difference between the total expenses and fixed 
expenses (i.e.. the depreciation and amortization expenses), divided by reported revenues: 

where 
Ef is total reported operating expenses 
F^ is Depreciation + Amortization (by the fixed expense assumption) 

The income effect of manipulating variable accrued expenses is computed as follows: 



^vt ~ '^(t-n ' 



)^Tt 



b,R, 



Even if management manipulates the amount of income for one period by adjusting 
accounts receivables and revenues, the effect has to be reversed in the near future. Using 
the average of six years (n - 7) should delete the manipulation effect for individual periods. 

APPENDIX B 



Dependent Variable Specification: Measuring Discretionary Accruals 

ACCOUNTING NUMBERS WITHOUT MANIPULATION 





"t-1" 


T 


"t+1" 


Sales (.8 cash) 


400 


500 


300 


Cash exp (.5 sales) 


(200) 


(250) 


(150) 




200 


250 


150 


Accrued expenses: 








Dep. Ex. 


50 


50 


50 


Bad debt (.1 sales) 


40 


50 


30 


Other accruals(.2 sales) 


80 


100 


60. 


Total accruals 


(170) 


(200) 


(140) 


Net Income 


30 


50 


10 


Account Receivable(.2 sale) 


80 


100 


60 



Assume that the manager manipulates the amount of sales, bad debts expense, and the 
depreciation expense for the period '7." The manager may decide to decrease or increase 
the net income of the period, depending on the firm's contracting situation. Also, assume 



Earnings Management 331 

that the changes in the depreciation expense are disclosed in the financial statements as 
"cumulative effect of the changes in accounting methods." As a result, it is not necessary 
that the researcher calculate the effect of the depreciation manipulation on the period's net 
income. The direction of the manipulation in net income can be predicted by the direction 
of the "cumulative effect of the changes in accounting methods" (or by that of the effect of 
the manipulation of the variable accrued expenses) on net income. The following situation 
is a case of income-increasing behavior for period "r" 

MANAGER CHOOSES TO INCREASE THE NET INCOME FOR "t:" 
Assume that the result of the manipulation is as follows: 







"t-1" 


"t" 


"t+1" 


Sales (.8 cash) 




350 


550 


300 


Cash exp (.5 sales) 




075) 


(275) 


(150) 






175 


275 


150 


Accrued expenses: 










Dep. Ex. 




50 


30 


70 


Bad debt (.1 sales) 




35 


27.5 


57.5 


Other accruals(.2 sales) 


70 


110 


60. 


Total accruals 




(155) 


(167.5) 


(187.5) 


Net Income 


.2 sale) 


20 

30 


107.5 


37.5 


Account Recei\able( 


100 


60 



The dependent variable for the test of theory consists of three components: 

where 
A,.f = the discretionary revenue effect 
A^., = the discretionary variable accrual effect 
Ajj = the discretionary fixed accrual effect 

The following steps should be taken to calculate the dependent variable: 
Step one: Calculate A^^ (assume R, and /?,^| are reported revenues for the two periods / and 
t+l and AR stands for accounts receivable): 

A,,,,, /R,,,=K,,,=K = 60/300 = . 2 

Rj; = AR/K = 100/.2 = 500 = expected revenue for /. 

A,.f =(Rf- Rj,)i 1 -/?), where h is the total variable cost ratio. 

h = [(275/550) + ((27.5+1 10)/550)] = .75 

A„ = {R, - Rjf)il-b) = (550 - 500}{l-J5) = 12.5 

Step two: Calculate A,,,: 

^vt ~ ^at ' ^ at 



332 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

where: 

E^j = total accrued expenses 

F^i, = fixed accrued expenses 

£",,, = variable accrued expenses 

Vi_, = £,„.///?M = (d 55-50)7350) = .3 

V, =£,//?, = ((167. 5-30)7550) = .25 

DV =V,.i- V,= 3- .25 = +.05 

A^., =DV* Rj, = .05 * 500 = 25 

Step three: Find the disclosed amount oi Af,: 

This amount should have been disclosed in the financial statement, and for this case, it is 
assumed that the effect of change in the depreciation expense has been disclosed as $20. 
Then, A^ is "+20." 

Test of calculation 

A, =A,, + A,, + Af, 

Aj =12.5 + 25 + 20 = 57.5 

Reported net income - True net income = Manipulated amount 

107.5-50 = 57.5 

As a consequence, given the assumptions constructed for the model, the model can capture 
100% of the manipulation for period "/." If we had used DeAngelo's 1988 random walk 
model instead, that would have resulted in $27.5 for the manipulation in the net income in 
period /. As is shown, the model of this study outperforms the random walk model. 

NOTES 

1 . OECD. Financial Market Trend, 1 995 

2. McKinnon (1984) showed that less than 9 percent of directors of Japanese firms were indepen- 
dent in that they were from non-banking companies which did not belong to the keiretsu of the 
firm whose board they were serving on. 

3. Other studies (e.g., Shivakumar, 1996) have also tried to address the problems with currenUy 
used models to estimate the manipulation in the accounting accmals. However, most of these 
models require detailed data items. 

4. According to U.S. Generally Accepted Accounting Principles, the current (or catch-up) approach 
should be employed to account for changes in accounting principles. The cumulative effect of 
the adjustment should be reported in the income statement between the captions "extraordinary 
items" and "net income" (Accounting Changes, Opinions of the Accounting Principles Board 
No. 20, New York: AICPA, 1971). This measure is not available for Japanese companies. 

5. Since the effect of these changes was not available in the Japanese data base, this item is not 
included in our calculation of the manipulation in the accounting accruals. Even for U.S. compa- 
nies. Pourjalali and Hansen did not find many companies that chose to change from an accepted 
accounting principles to another accepted accoundng principle in any given period. 

6. From various issues of the Tokyo Stock Exchange Fact Book. 



Earnings Management 333 



7. Even for individual years, the tax-rate variable continued to be insignificant. Inoue and Thomas 
(1996) found that this variable is significant for companies with year end during October 1990 
and September 1991. 

8. The increase in the percentage of the individual investors' ownership in Japanese firms may also 
indicate a shift in the equity structure. 

9. Our results of 1992 are consistent with those reported by Inoue and Thomas (1996) and Aono 
and Eakin (1996). 

REFERENCES 

Aono. J. Y. and C. F. Eakin, 1996. "Tax Conformity and Accounting Choice: Evidence from Japa- 
nese Firms." Working paper, University of Hawaii at Manoa. 

Azariadis, C. and J. E. Stiglitz, 1983. "Implicit Contracts and Fixed Price Equilibria," Quarterly 
Journal of Economics, 98: 1-22 (supplement). 

Choi. F. D. S. and K. Hiramatsu. 1987. Accounting and Financial Reporting in Japan. Van Nostrand 
Reinhold. Berkshire, England. 

DeAngelo. L. E.. 1988. "Managerial Competition, Information Costs, and Corporate Governance: 
The Use of Accounting Performance Measures in Proxy Contests," Journal of Accounting & 
Economics, 10: 3-36. 

Dechow, P., R. Sloan and A. Sweeney. 1995. "Detecting Earnings Management," Accounting 
Review, 193-225. 

Dhaliwal. D.. G. Salamon. and E. Smith, 1982. "The Effect of Owner Versus Management Control 
on the Choices of Accounting Methods." Journal of Accounting and Economics, 4: 41-53. 

Duke. J., and H. Hunt. 1990. "An Experimental Examination of Debt Covenant Restrictions and 
Accounting-related Debt Proxies," Journal of Accounting & Economics, 12: 45-63. 

Evans, T. G.. M. E. Taylor and O. J. Holzmann. 1994. International Accounting and Reporting, Sec- 
ond Edition. South-Western Publishing Co.. Cincinnati. Ohio. 

Gerlach, M. L., 1992. Alliance Capitalism: The Social Organizations of Japanese Business. Berke- 
ley, CA: University of California Press. 

Hagerman, R., and M. Zmijewski, 1979. "Some Economic Determinants of Accounting Policy 
Choice." Journal of Accounting & Economics, 2: 142-161. 

Healy. P. M.. 1985. "The Effect of Bonus Schemes on Accounting Decisions," Journal of Account- 
ing & Economics, 7: 85-107. 

Hoshi, Takeo. Kashyap. Anil, and Scharfstein. 1991. "Corporate Structure. Liquidity, and Invest- 
ment: Evidence from Japanese Industrial Groups." Quarterly Journal of Economics, 33-60. 

Hunt, H. G. III. 1985. "Potential Determinants of Corporate Inventory Accounting Decisions." Jour- 
nal of Accounting Research, 23: 448-467. 

Inoue, T. and W. Thomas, 1996. "The Choice of Accounting Policy in Japan." Journal of Interna- 
tional Financial Management and Accounting, (Spring) 1-23. 

Jones. J.. 1991. "Earnings Management during Import Relief Investigations." Journal of Accounting 
Research, 193-228. 

Kaplan. S.. and B. Minton. 1994. "Appointments of Outsiders to Japanese Boards: Determinants and 
Implications for Managers." Journal of Financial Economics, 225-258. 

Lowe. H. D. 1990. "Shortcomings of Japanese Consolidated Financial Statements." Accounting 
Horizon, 4(3): 1-9. 

McKinnon. J. L.. 1984. "Application of Anglo-American Principles of Consolidation to Corporate 
Financial Disclosure in Japan." /4/7c/(7<,v, 20(1): 16-33. 

Mueller, G.. H. Gemon. and G. Meek. 1994. Accounting: An International Perspective, Third Edi- 
tion. Irwin. Burr Ridge. Illinois. 



334 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 



Phan, P.. and T. Yoshikawa. 1996. "Agency Theory and Japanese Corporate Governance: A Test of 
the Convergence Hypothesis." York University, Working Paper. 

Pourjalali, H. and D. Hansen, 1996. "Accounting Choice: Evidence on the Effects of Discretionary 
Accrual Measurement, Prior-Period Values, and Omitted Variables." Oklahoma State, Work- 
ing paper. 

Press, E. G.. and J. B. Weintrop. 1990. "Accounting-based Constraints in Public and Private Debt 
Agreements." Journal of Accounting and Economics, 13: 65-95. 

Price Waterhouse, 1993. Doing Business in Japan. Price Waterhouse, New York. 

Scott. H. and P. Wellons, 1996. International Finance, Transactions, Policy, and Regulation, Third 
Edition. Foundation Press, Westbury, New York. 

Shivakumar, L.. 1996. "Estimating Abnormal Accruals for Detection of Earning Management." 
Working Paper. 

Sohn, J.. 1994. "Social Knowledge as a Control System: A Proposition and Evidence from the Japa- 
nese FDI Behavior," Journal of International Business Studies, 295-324. 

Watts, R. L., and J. L. Zimmerman, 1990. "Positive Accounting Theory: A Ten Year Perspective," 
The Accounting Review, 65: 131-156. 

Zmijewski, M., and R. Hagerman. 1981. "An Income Strategy Approach to the Positive Theory of 
Accounting Standard Setting/Choice," Journal of Accounting and Economics, 4: 129-149. 



The International 
Journal of 
Accounting 



Effect of the Inconsistency in Accounting Standards on 
the Choice of Financial Instruments: The Case of Debt 
Issued with Stock Purchase Warrants and Convertible 
Debt by Japanese Companies 

Aklhiro Noguchi 

Nagoya University 



Key Words: Convertible debt; Covered warrants; Debt issued with stock purchase warrants; 
Japan; Substance over form 



Abstract: Accounting treatment for debt issued with stock purchase warrants in Japan was 
changed to record consideration for warrants and consideration for debt separately. As a result, 
accounting for convertible debts and debt with warrants became inconsistent, and the choice of 
financial instrument seems to be affected by that inconsistency. Some Japanese companies began 
to use covered warrants in the Euro market to repackage their convertible debt into debt with war- 
rants. This paper provides evidence which shows the necessity of consistent treatment for call 
options in convertibles and warrants. 



In 1994, the Japanese Institute of Certified Public Accountants (JICPA) issued a report 
entitled "Accounting for debt issued with stock purchase warrants by the issuing compa- 
nies," which changed the accounting treatment for debt issued with stock purchase war- 
rants (WB) in Japan. Before that report, Japanese companies were not required to 
distinguish between the consideration for debt and the consideration for warrants. As a 
result, in the extreme case, some companies could even increase their net income directly 
by issuing debt, because the consideration for warrants was greater than the total interest 
expense over the term of that debt, and the premium was, in fact, treated as revenue or a 
deduction of expense. 

After the adoption of the new accounting treatment, there were two significant changes 
in the behavior of Japanese companies. (1) The number of WBs by Japanese companies 
dramatically decreased. (2) Japanese companies which issued the convertible debt (CB) 



Direct all correspondence to: Akihiro Noguchi, School of Economics, Nagoya University, Furocho, Chikusa 464- 
8601 Japan; E-Mail: dnogutiO@eds.ecip.nogaya-u.ac.jp 

The International Journal of Accounting, Vol. 33, No. 3, pp. 335-345 ISSN: 0020-7063. 

All rights of reproduction in any form re.served. Copyright © 1998 University of Illinois 



336 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

began lo use covered warrants in the Euro market. This paper explains the cause of those 
resuhs and seeks a solution to niake the accounting standards in Japan consistent. 

The problem addressed in this paper is not unique to Japan. Although IAvS32 requires 
split accounting for both convertible debt and debt issued with stock purchase warrants, the 
accounting standards in the USA and in the UK do not permit separate recognition of the 
conversion privilege. FRS4 does not permit split accounting for convertible debt because 
of the complexity and subjectivity involved. APB 14 denies recognition of conversion priv- 
ilege separately because of the inseparability, however, according to paragraph 18, when 
the convertible debt is issued with a substantial premium, that part will be treated as paid 
in capital. And actually, in the case of Adjustable Rate Convertible Notes, paragraph 18 has 
been applied, and the conversion privilege has been recogni/ed separately (King and Orte- 
gren, 1988). In the USA, inconsistencies in accounting treatment can be found, not only 
between convertible debt and debt issued with stock purchase warrants, but also among 
different forms of con\ertible debt. 

If there is something different in legal form, but the same in substance, the same account- 
ing treatment should be applied. If an accounting treatment is applied based on form 
instead of substance, it will provide opportunity for earnings management or creative 
accounting. 

HOW THE REPORT CHANGED THE ACCOUNTING FOR WB 

Before the JICPA report was issued, Japanese companies did not distinguish between the 
consideration for warrants and the consideration for debt. As a result, some companies 
could increase their net income by simply issuing debt. For example, one company issued 
WB at (fp 101 .60 yen. The interest rate was only 0. 1 % per year. As that debt was a four year 
bond, the total interest expense until maturity was only @0.40 yen, and the premium was 
@1.60 yen which was treated as revenue. Thus, net income was increased by the net of 
@ 1.20 yen. 

This strange result was caused by mixing the interest expense and the consideration for 
warrants. By distinguishing the consideration for warrants from the consideration for debt, 
it became possible to present the interest expense fairly. 

If a WB for ten billion yen were issued at par (consideration for debt equal to eight bil- 
lion yen and consideration for warrants equal to two billion yen), before the change in 
accounting treatment, the entry for that transaction would be as follows; 
Dr. Cash 10,000,000,000 

Cr. Debt issued with stock purchase warrants l(),0()(),()()().000 

As the interest rate of WB is set lower than that of debt issued without stock purchase 
warrants, the cost of debt will not be presented fairly. 

The Report changed the accounting treatment to distinguish the consideration for war- 
rants from the ccmsideration for debt. As a result, the above entry changed as follows; 
Dr. Cash 2,000,00(),()0() 

Cr. Stock purchase warrants outstanding 2,000,000,000 

Dr. Cash 8,000,000,000 

Debt discount 2,000,000,000 

Cr. Debt 10,000,000,000 



Effect of the Inconsistency in Accounting Standards 



337 



The stock purchase warrants outstanding account will appear in the current liability sec- 
tion of the balance sheet. This is because paid in capital is defined as consideration for cap- 
ital stock, and the consideration for stock purchase warrants cannot be said to be 
consideration for capital stock before the warrants are exercised. When the warrants are 
exercised the balance of that account will be transferred to the Capital reserve account. If 
the warrants expire, the balance will be transferred to revenue. 

The change in accounting for WB has the two following aspects; 

1. It reduces net income. 

The debt discount must be charged to expense immediately or deferred and amor- 
tized until the maturity of the debt, which will reduce the net income. 

2. It reduces corporation taxes. 

The above mentioned charge for the debt discount is tax deductible, and therefore 
will reduce the corporation tax. 



CB by Japanese Companies 




CM 



CO 



0> O) 



in 
en 



<£> 

at 



WB by Japanese Companies 



5000 




O '- "^ r^ o ■^ 

'"CO "" Tt 

C3> 0> 

Figure 1. CB and WB by Japanese Companies. 









in 



(£3 



338 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Actually after the adoption of the new accounting treatment, the number of WB 
decreased from one hundred eighty eight in fiscal year 1993 to thirty six in fiscal year 1994. 
The amount decreased from two trillion one hundred eleven billion yen to two hundred 
fifty billion yen. As for CB, the number increased from one hundred ninety three to one 
hundred ninety four, and the amount from two trillion six hundred seven billion yen to two 
trillion eight hundred ninety eight billion yen {Bond Review No. 464, The Bond Underwrit- 
ers Association of Japan). These figures seem to show that there might be a change in 
choice of financial instruments caused by the change in accounting treatment. 

Figure 1 shows the financial activity by Japanese companies in CB and WB based on the 
data from Bond Review (Nos. 440, 452, 464, 476). As for WB, a cliff can be seen between 
March and April in 1994, when the accounting treatment was changed. 

EFFECTS ON THE CHOICE OF CB AND WB 

CB and WB are both debt issued with call options for the stock of the issuing company. 
Therefore, they are alternatives for each other to some extent. However, if the conversion 
privilege is exercised, debt will disappear, but if the warrant is exercised debt will remain 
and at maturity, it has to be redeemed. The exercise of the conversion privilege will not 
provide a cash inflow, but the exercise of the warrant will provide a cash inflow. So CB and 
WB are not exactly the same but can be considered as alternatives to a certain extent. 

As for accounting treatment, because the accounting for WB was changed, the account- 
ing now for warrants and the conversion privilege are completely different. The conversion 
privilege is not recognized separately, as the warrants were before the change in accounting 
treatment. Now, the warrants are accounted for separately, but the conversion privilege is 
not. 

It can be assumed that companies with a larger net income may prefer WB because they 
care more about reducing taxes, but companies with a smaller net income care more about 
their net income than reducing taxes. 

In order to test this hypothesis, companies that issued CB and/or WB between April 1992 
and March 1996 were identified from Japan Company Handbook on Convertible Debt and 
Debt Issued with Stock Purchase Warrants, Toyokeizai, May 1996 (in Japanese). The 
results are shown in Table 1 . 

Table 1 . Number of Japanese Companies Issued CB and/or WB from April 1 992 to March 1 996 

AFTER NONE only CB only WB BOTH 

BEFORE 

NONE 

only CB 

only WB 

BOTH 

Noie: "BEFORE" means the period from April 1992 to March 1994. and "AFTER" means the period from April 1994 
to March 1996. "NONE" means the companies which issued neither CB nor WB dunng that period, "only CB" 
means the companies which issued CB but did not issue WB during that period, "only WB" means the compa- 
nies which issued WB bud did not issue CB during that period, and "BOTH" means the companies which issued 
both CB and WB during that period. 





160 


48 


14 


114 


35 


4 


3 


146 


26 


17 


7 


32 


9 


6 


6 



Effect of the Inconsistency in Accounting Standards 



339 



Comparison of EPS index 



Comparison of N«t Income Index 




BEFORE AFTER 

Figure 2. Comparison of EPS and Net Income Indexes 




Table 1 shows how the companies made their choice between CB and WB. before and 
after the change in accounting treatment for WB. 

Figure 2 shows the comparison of the difference in the average of the index of EPS and 
the index of net income between the companies that issued CB and companies that issued 
WB, before and after the change in the accounting treatment. The EPS and net income fig- 
ures for each company were gathered from the data available in Nikkei Corporation Infor- 
mation, Nihon Keizai Shinbun, (Summer 1996) and (Fall 1997) (in Japanese). Index of 
EPS was calculated by dividing the EPS of the period in which the company issued CB or 
WB by the EPS of the previous period, and the resulting number was then multiplied by 
one hundred. The index of net income was calculated in the same manner. The companies 
that reported a net loss during either of those periods were excluded because the figures 
would be negative. The OTC companies which issued CB before January 1996 were 
excluded because they were not allowed to issued WB, so they did not have a choice. The 
companies that issued both CB and WB during the same period were excluded because 
their preference were not clear. The companies that changed their accounting period were 
also excluded. 

The average of the increase in EPS of the companies that issued WB was larger than that 
of the companies that issued CB, and the difference increased after the change in the 
accounting treatment. However, the t values in both cases were small, and the difference 
between the index of net income did not increase after the change in the accounting treat- 
ment. 

Convertible securities can be thought of as securities with non-detachable warrants 
(Jensen and Meckling, 1976, 354, Finnerty, 1986, 82). However, when the warrants are 
detachable, the tax effects, capital structure changes, and cash flows may differ (Phelps, 
Moore, and Roenfeldt, 1990, 101). There are also differences in issuing costs (Long and 
Sefcik, 1990, 34). So the differences in accounting treatment are not the only reason that 
companies make this decision. 

For example, there were one hundred and sixty companies which issued only CB after 
the change, whose decision might be based on a nonaccounting factor. The same thing can 
be said for forty eight companies which issued only WB after the change. Although, there 
were one hundred and forty six companies which issued only WB before the change and 
did not issued WB after the change, that does not necessarily mean that those companies 



340 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

Table 2. Comparison of the Trends in Earnings 





Number 
of Data 


EPS (Yen) Index of EPS 
(Average) (Average) 


Index of Net Income 
(Average) 


CB to WB 
WB to CB 

t value 


4 
25 


32.4 127.9327 

24.824 99.4723 

0.5526 1.0005 


127.9251 

106.5967 

0.7453 


Table 3. Comparison 


of the Trends in Expected Earnings and the Total Assets 




Number 
of Data 


Index of Net Income Total Assets in Million 
(Average) Yen (Average) 


CB to WB 
WBtoCB 

! value 


4 
27 


164.5982 
105.1915 

2.7176 


52000 
153666.7 

2.3428 



moved away from issuing WB. If there were no necessity for financing, those companies 
would not issue WB regardless of the accounting treatment. The same thing can be said for 
one hundred and fourteen companies which issued only CB. So it is necessary to focus on 
that data whose preference for CB or WB is most likely to be affected by the change in 
accounting treatment. 

Table 2 shows the comparison of the EPS, trends in the EPS, and trends in the net income 
of the companies that changed their choice of financial instruments absolutely. "CB to 
WB" companies are defined as companies which issued CB but did not issue WB for two 
years before the change in accounting treatment for WB, and issued WB but did not issue 
CB for two years after the change. "WB to CB" companies are defined as companies which 
issued WB but did not issue CB before the change in accounting treatment, and issued CB 
but did not issued WB after the change. There were four "CB to WB" companies, and 
twenty six "WB to CB" companies (see Table 1). Two "WB to CB" companies were 
excluded from Table 2 because they suffered extraordinary losses caused by the earthquake 
after issuing CB. One "WB to CB" company is included twice in that data because that 
company issued CB in two different periods. Therefore the number of the data is not same 
as the number of the companies shown in Table 1 . 

Table 2 shows that the average EPS for "CB to WB" companies was larger than that of 
"WB to CB" companies, as expected. The indexes are calculated by dividing data of the 
current period by that of the previous period and multiplying by one hundred. "CB to WB" 
companies increased their EPS and net income more than "WB to CB" companies. But the 
number of data was small, and t values were too small even at the ten percent level. 

The choice between CB and WB is made before the end of the accounting period. There- 
fore, the management's decision must be made based on their forecast for earnings at that 
time. Table 3 is prepared based on the expected earnings instead of the actual results. 
Expected net income figures were gathered from Nikkei Corporation Information, Nihon 
Keizai Shinbun, (Summer 1994 to Spring 1996). Although these figures might not be the 
exact figures that the management had in mind, they are the best estimates available. 

Two "WB to CB" companies that suffered extraordinary losses due to the earthquake are 
included in Table 3, so the number of data is different from Table 2. 



Effect of the Inconsistency in Accounting Standards 341 

The difference between the average of the expected net income indexes was significant 
at the five percent level. However, the size of the companies measured by total assets were 
also different (significant at the five percent level), and the number of data was small as 
stated before. 

The change in accounting for WB made the accounting for CB and WB inconsistent. As 
a result, the choice of the financial instruments to be used seems to have been affected by 
that inconsistency.The next section presents a piece of evidence which proves this point. 

THE USE OF COVERED WARRANTS BY JAPANESE COMPANIES IN THE EURO 
MARKET 

Covered warrants of Japanese companies issued by financial institutions are not new. The 
covered warrant market began to emerge in the late 1980s, because there was a substantial 
demand for Japanese warrants denominated in Swiss francs (Redmayne, 1995, 157-158). 
However, the usage of covered wanants under the control of the company which issues CB 
in new. According to Dictiomuy of New Economic Terms. Nihon Keizai Shinbun Inc., 
1995, (in Japanese), this new scheme can be summarized as follows. 

A financial institution which is the lead underwriter for a company establishes a special 
purpose company. That special purpose company will purchase all of the CB issued by a 
company and repackage the securities into WB, and then sell this new package of securities 
to investors. When the warrants are exercised concurrently by the investors, the special 
purpose company will exercise the conversion privilege to receive the shares of the issuing 
company. The cash paid in for the exercise of the warrants will be retained by the special 
purpose company and used for the redemption of the debt. If the warrants are not exercised, 
the special purpose company will simply receive cash from the redemption of the CB and 
redeem the debt on its own. 

This scheme has the effect of circumventing the new accounting treatment for WB. The 
company issuing CB does not separate the consideration for conversion privilege from the 
consideration for debt when they make an entry in their books. However the investor can 
invest in the wanants of that company by investing in the covered warrants issued by the 
special purpose company. The special purpose company is not a subsidiary of the issuing 
company, for that special purpose company is established by the arrangement of the finan- 
cial institution. So the consolidated financial statements cannot tell the full story. 

According to Ariga (1995), it was better for the company to issue CB in the Euro market 
than in the domestic market. The sudden decrease in the number of warrants issued by Jap- 
anese companies made it advantageous to sell covered warrants in the Euro market. If that 
is the main reason for the usage of the scheme, it must be more beneficial for the companies 
to sell WB without using a special purpose company. It can be said that the inconsistency 
in accounting treatment between CB and WB made companies use covered warrants in 
Euro market. 

One more problem exists here. The consolidated financial statements failed to reveal the 
reality of the situation because the special purpose company used to repackage CB into 
WB was not a subsidiary. The consolidation policy should be reconsidered to include con- 
solidation of such kind of special purpose companies. Considering substance over fomi, 
such special purpose companies should be treated as subsidiaries. 



342 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

CONSISTENT ACCOUNTING FOR CB AND WB 

If the accounting for CB was changed in Japan and the consideration for conversion 
privilege were to be separately recognized from the consideration for debt, the inconsis- 
tency will disappear for the accounting treatment when the debt is issued. However, 
because of the unique feature of the Japanese Commercial Code, another problem might 
arise. 

According to the Japanese Commercial Code, articles 341-7 and 222-3. the amount of 
the consideration for the stock issued by conversion is the amount of the consideration 
received for the CB when it was issued (Nakamura. 1996. 193). As long as CB is issued at 
par. there will be no problem in the application of this provision. 

When CB are issued at a premium or a discount, there will be a problem. The existence 
of a premium or discount makes the book value and the original value of the convertible 
debt different. If the conversion privileges are exercised, the difference will be treated as a 
lost or a gain on conversion (Nakamura, 1971, 24-25). Example 1 explains this point. 

Example 1 

CB of ten billion yen was issued at eight billion yen. 
Dr. Cash 8.000,000.000 

Debt discount 2,000,000,000 

Cr. Convertible debt 10,000,000,000 

The conversion privilege was exercised \\ hen the balance of the debt discount was one 
billion yen. 

Dr. Convertible debt 10,000,000,000 

Cr. Capital stock 8,000.000,000 

Gain on conversion 2,000,000,000 

Dr. Interest Expense 1,000,000,000 

Cr. Debt discount 1,000,000,000 

Japanese companies rarely issue CB at a premium or discount. They simply issue at par 
to avoid the above mentioned gain or loss on conversion. So without amending those arti- 
cles of the Japanese Commercial Code, and assuming the current tendency to issue CB at 
par continues, the situation in Example 2 will be brought about. 

Example 2 

CB of ten billion yen was issued at par (two billion yen for conversion privilege and 
eight billion yen for debt). 
Dr. Cash 2,000,000.000 

Cr. Conversion privilege outstanding 2.000.000.000 

Dr. Cash 8,000,000,000 

Debt discount 2,000,000,000 

Cr. Debt 10.000.000.000 

The conversion privilege is exercised when the balance of the debt discount account was 
one billion ven. 



Effect of the Inconsistency in Accounting Standards 343 

Dr. Debt 10,000,000,000 

Cr. Capital stock 8,000,000,000 

Gain from conversion 2,000,000,000 

Dr. Interest Expense 1,000,000,000 

Cr. Debt discount 1,000,000,000 

Dr. Conversion privilege outstanding 2,000,000,000 

Cr. Capital reserve 2,000,000,000 

However, if the companies' attitude is to avoid gain or loss on conversion, they can do 
so by issuing CB with a premium exactly equal to the value of conversion privilege. Exam- 
ple 3 explains this point. 

Example 3 

CB of ten billion yen was issued at twelve billion yen (two billion yen for conversion 
privilege and ten billion yen for debt). 
Dr. Cash 2,000,000,000 

Cr. Conversion privilege outstanding 2,000,000,000 

Dr. Cash 10,000,000,000 

Cr. Debt 10,000,000,000 

Conversion privilege is exercised. 
Dr. Debt 10,000,000,000 

Cr. Capital stock 10,000,000,000 

Dr. Conversion privilege outstanding 2,000,000,000 

Cr. Capital reserve 2,000,000,000 

In this case, no gain or loss on conversion will be reported. If the main reason for Japa- 
nese companies issuing CB at par is to avoid a gain or loss on conversion, the term of the 
CB will be like this. 

However issuing debt with a high premium is not popular in Japan. It is hard to say for 
certain that a situation like Example 3 would take place. Moreover, companies can report 
a gain or loss on conversion if they issue CB at a premium or discount. So the articles in 
the Japanese Commercial Code should be amended so that book value of the CB can be 
transferred to the capital stock account. 

SUMMARY 

The change in accounting treatment for WB caused two effects. One is the sudden decrease 
in number of WB issued, and the other is the use of covered warrants. 

To some extent, CB can be a substitute for WB because they are both debt issued with 
call options. However, besides the difference in the pattern of their cash flows, there is a 
significant difference in the accounting treatment, which results in a difference in net 
income and coiporation taxes. It can be assumed that companies with enough income will 
care more about taxes and choose WB, and that companies with less income will care less 
about taxes and choose CB. However, the results of the survey on this point were not clear. 

More interesting was the use of covered wanants to repackage CB into WB in the Euro 
market. By using this scheme, companies could circumvent the new accounting treatment. 



344 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

This fact proves that the inconsistency in the accounting treatment for CB and WB affected 
their choice of financial instruments. 

In order to make the accounting standard neutral, the consideration for conversion priv- 
ilege and the consideration for debt have to be accounted for separately. In addition, the 
unique feature in Japanese Commercial Code which requires that the value of the stock 
issued on conversion be equal to the original value of the convertible debt has to be 
amended. 



NOTE 

1. It was reported by the Nikkei Newspaper on July 10, 1996 that the Ministry of Finance of the 
Japanese Government would reconsider the accounting for convertible debt. In June 1997, Issues 
Paper on Accounting Standard for Financial Instruments was issued from the advisory council to 
the Ministry of Finance of Japan (Business Accounting Deliberation Council: BADC, 1997). 
BADC plans to finalize the opinion on accounting for financial instruments in the summer of 
1998. 

Acknowledgments: Helpful comments were received from Vernon K. Zimmerman, Andrew D. 
Bailey, Jr., J. Richard Dietrich, Sridhar Ramamoorti, Hanns-Martin Schoenfeld, Theodore Sougian- 
nis, Arthur Wyatt, during my stay from August 1996 to April 1997 as a visiting scholar at the Center 
for International Education and Research in Accounting of the University of Illinois at Urbana- 
Champaign, and from two anonymous reviewers. Financial support from the Shikishima Foundation 
is gratefully acknowledged. 

REFERENCES 

Ariga, Atsuhiko. 1995. "Rapid Increase in Repackaging Bonds" Nikkei Financial Daily, (October 

17): 2 (in Japanese). 
Accounting Principles Board. 1969. Opinion No. 14, "Accounting for Convertible Debt and Debt 

Issued with Stock Purchase Warrants." 
Accounting Standards Board. 1993. Financial Reporting Standard 4, "Capital Instruments," Central 

Milton Keynes: ASB. 
The Bond Underwriters Association of Japan. 1996. "Bond Review, No. 476." (May). 

. 1995. "Bond Review, No. 464", (April). 

. 1994. "Bond Review, No. 452", (April). 

. 1993. "Bond Review. No. 440", (April). 

Business Accounting Deliberation Council (BADC). 1997. "Issue Paper on Accounting-Standards 

for Financial Instruments." Keieizaimu, (Jun. 23); 24-28 (in Japanese). 
Finnerty, John D. 1986. "The Case for Issuing Synthetic Convertible Bonds." Midland Corporate 

Finance Journal. (Fall): 73-82. 
International Accounting Standards Committee. 1995. International Accounting Standards IAS 32, 

"Financial Instruments: Disclosure and Presentation." London: lASC. 
Japanese Institute of Certified Public Accountants. 1994. "Accounting for Debt Issued with Stock 

Purchase Warrants by the Issuing Companies." Tokyo: JICPA (in Japanese). 
Jensen, Michael C. and William H. Meckling. 1976. "Theory of the Firm: Managerial Behavior 

Agency Costs and Ownership Structure." Journal of Financial Economics. (October): 305- 

360. 



Effect of the Inconsistency in Accounting Standards 345 



King, Thomas E. and Alan K. Ortegren. 1988. "Accounting for Hybrid Securities: The Case of 
Adjustable Rate Convertible Notes." The Accounting Review, (July): 522-535. 

Long, Michael S. and Stephan E. Sefcik. 1990. "Participation Financing: A Comparison of the Char- 
acteristics of Convertible Debt and Straight Bonds Issued in Conjunction with Warrants." 
Financial Management, (Autumn): 23-34. 

Nakamura, Tadashi. 1996. The Fundamentals of Corporation Accounting. Tokyo: Hakutoshobo (in 
Japanese). 

. 1971. "Accounting for Convertible Debt." Zeikeitsushin, (February): 23-29 (in Japanese). 

Nihon Keizai Shinbun. Inc. 1997. Nikkei Corporation Information, (Fall), (in Japanese). 

. 1996. Nikkei Corporation Information. (New Year, Spring and Summer), (in Japanese). 

. 1996. "Accounting for Convertible Debt." Nikkei Newspaper (July 10). (in Japanese). 

. 1995. Dictionary of New Economic Terms. Tokyo (in Japanese). 

. 1995. Nikkei Corporation Information, (New Year, Spring, Summer, Fall), (in Japanese). 

. 1994. Nikkei Corporation Information, (Summer and Fall), (in Japanese). 

Phelps, Katherine L., William T. Moore and Rodney L. Roenfeldt. 1991. "Equity Valuation Effects 
of Warrant-Debt Financing," The Journal of Financial Research, (Summer): 93-103. 

Redmayne, Julian. 1995. Equity Warrants, London: Euromoney Books. 

Toyokeizai, Inc. 1996. Japan Company Handbook on Convertible Debt and Debt Issued with Stock 
Purchase Warrants, (May), (in Japanese) 



The International 
Journal of 
Accounting 



New Forms of Assurance Services for New Forms of 
Information: Tlie Global Challenge for Accounting 
Educators 

Gary L. Holstrum and James E. Hunton 



Key Words: Assurance services; Information technology; Virtual reality; Accounting education; 
International; Global 



Abstract: This paper explores recent initiatives to develop new assurance services that are being 
demanded for new types of information in the marketplace and the resulting global challenge to 
accounting educators. The paper develops a realistic scenario for new assurance services, identi- 
fies critical business performance areas for which new assurance services are demanded, dis- 
cusses the work of the AlCPA Special Committee on Assurance Services (Elliott Committee, 1994) 
and related international groups, and makes recommendations for actions by accounting educa- 
tors. These recommendations parallel and enhance those of the American Accounting Associa- 
tion's Task Force on Future Audit, Attestation, and Assurance Services. 



Philippe Mercier, a venture capitalist located in Paris just read a business plan submitted 
by Sally Reid, who owns and operates an upscale, unique clothing store located in New 
York City. Sally's store is called CADCAM Clothing, Inc., hereafter referred to as CCC, 
and she deals exclusively with men's and women's business suits. Customers of CCC use 
a sophisticated computer program to shop for business apparel. 

Customers first walk through a scanning device that looks much like a metal detector 
used in airports, and the computer records a host of physical attributes, such as height, 
weight, and body measurements. From this scan, the computer digitally reproduces the 
customers' human form. Next, customers use the computer to view business suits offered 
through CCC's electronic catalog and pick one or more they like. The computer shows cus- 
tomers how they would look in their chosen suits in full-size, three-dimensional, holo- 
graphic images. Suits can be further adapted to the customers' personal tastes by viewing 
a variety of cloth types, material patterns, and custom alterations. Once a customer decides 
to purchase a suit, a CADCAM system, in conjunction with robotic cutting and sewing 

Direct all correspondence to: Gary L. Holstrum, School of Accountancy, University of South Florida, 4202 E. 
Fowler Ave., BSN 3403, Tampa, FL 33620-5500; Tel: 813-974-6507; Fax: 813-974-6528; E-Mail: 
gholstru@bsn01 .bsn.usf.edu. 

The International Journal of Accounting, Vol. 33, No. 3, pp. 347-358 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright ® 1998 University of Illinois 



348 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

machines, creates the suit to exact specifications. The suit is completed and delivered in 
about one-hour. 

Sally's business plan proposes to expand this concept, on a franchise basis, throughout 
the world. The advantages to franchisees are: (a) they join a network of franchisees where 
the business suit lines of all participating clothing stores form a virtual showroom of suits 
and (b) CCC will supply the software, hardware, equipment, and training to franchisees. As 
a result, for example, a customer in Frankfurt may choose a suit offered by a store in Lon- 
don. If the selected material is available in Frankfurt, the customer can walk out with the 
suit in about an hour. However, if the material is not available in Frankfurt, the computer 
will search the inventory of all franchisees, find the nearest location having the material, 
produce the suit at that remote location, and ship the suit to the requesting store or directly 
to the customer using priority mail. The business plan calls for an alliance with a Hong 
Kong company to establish a purchasing program to conduct real-time searches of the glo- 
bal marketplace for high quality fabrics at the most competitive prices and with the best 
quality controls and the most reliable delivery times. The objective is to have any suit 
delivered to any customer anywhere within three working days. Sally needs $30 million in 
start-up capital, and Philippe is interested. 

The first trip Philippe makes is to visit Sally's existing store. He meets with Sally and 
her 25 workers, tours the physical plant, and performs an analysis of CCC s financial posi- 
tion by querying CCC's financial database. Philippe next visits three clothing store chains, 
which are very interested in purchasing franchises. The potential franchisees are located in 
Madrid, Spain; Tokyo. Japan; and Sydney. Australia. At each location. Philippe visits with 
owners and discusses their expectations, views the business suit lines, analyzes historical 
financial statements, examines plans for the franchise, meets with local marketing analysts 
to obtain an independent assessment of market potential, and tours production facilities of 
local cloth suppliers. The next stop on Philippe's journey is the plant location for the devel- 
opers of the C ADC AM system and related production equipment in the California's Sili- 
con Valley. Philippe visits with owners and management, examines patents awarded to the 
unique and novel CADCAM system, reviews past financial performance by querying their 
financial database, observes production processes, inspects final products, and learns how 
the CADCAM system works. Next Philippe meets w ith the management of the fabric-sup- 
ply alliance firm in Hong Kong, performs a review of their fabric-procurement process 
conducted jointly with CCC, and analyzes the controls that the vendors have in place to 
provide reasonable assurance of complying with the quality control standards of ISO 9000. 
Finally. Philippe travels to the office of a marketing analyst in Milan. Italy, who is a lead- 
ing international expert in clothing and business suit lines. After reviewing Sally's business 
plan, the marketing analyst determines that the assumptions and projections made in 
CCC's business plan are reasonable. 

Immediately after talking with the marketing analyst. Philippe takes off his virtual reality 
headset, bodysuit, and gloves, stares out the window of his 40th story office in La Defense 
looking in the distance at the Arc de Triomphe and Avenue des Champs-Elysees, and 
reflects on his recent experiences. 

The fictitious scenario just presented takes place in the not-too-distant future when a 
large portion of worldwide business travel occurs in virtual reality. Philippe completed all 
of his journeys in the comfort of his office. In just two working days, he has sufficient 
information to make a $30 million investment decision. His costs for reviewing and ana- 



Assurance Services: Global Challenge to Educators 349 

lyzing all of the information that is relevant to the business plan are nominal, and they fall 
into two general categories. First, there is an hourly rate charged by his virtual reality pro- 
vider to fly around the virtual world created in cyberspace. Second, Philippe pays fees to a 
variety of CPA fiims and other entities along the way who provide desired degrees of 
assurance that the virtual world fairly represents its physical counteipart. 

The broad array of information used in making business decisions has expanded rapidly 
and extensively, creating a strong demand for new types of assurance services. Indeed, 
Elliott (1994) argues that unless auditors dramatically refocus the scope of their assurance 
services to address these new types of information, the very survival of the profession is at 
risk. In this paper, we identify the vital role accounting educators will play in shaping 
future assurance services, such as our virtual reality example. We explore the global chal- 
lenge facing accounting educators as they struggle to develop relevant curricula, create 
new technology-based methods of educational delivery, and design meaningful research 
projects for such assurance services. But first, we explain the necessity to expand assurance 
functions and describe current efforts by several groups to lead the profession in meeting 
the demand for assurance services moving into the 21^* century. 

CRITICAL PERFORMANCE AREAS AND THE NEED FOR FUTURE ASSURANCE 
SERVICES 

To evaluate the overall performance of a business entity, it is essential to evaluate not only 
the items that are included in present financial statements prepared in accordance with gen- 
erally accepted accounting principles, but rather all four of the critical performance areas 
shown in Figure 1. In this figure, financial performance evaluation addresses items typi- 
cally included in current-day financial statements. Process performance evaluation 
addresses how the entity manages internal processes designed to produce its products or 



Financial 
Resources 



-^$^- 



Nonfmancial 
Resources 



Figure 1. Critical Entity Performance Area 



350 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

services. Nonfinancial resource performance evaluation addresses how the entity manages 
critical resources that are largely ignored by current-day financial statements, such as intel- 
lectual capital, human resources, and information. Market performance evaluation 
addresses the market for the entity's products or services and how the entity manages its 
marketing efforts. 

The current practice of financial accounting, business reporting, and auditing ignores 
most of the critical information in all but the financial performance area. Yet, relevant mea- 
sures of economic performance and value in today's global market are largely contained 
within the other three areas — processes, markets, and nonfinancial resources. Indeed, much 
of the growth in value in the economy is associated with up-start or relatively young entities 
that capitalize on information technology, intellectual resources, and innovative processes 
designed to meet specified marketplace demands efficiently and effectively. Some rela- 
tively new companies (such as Netscape Communications Corporation and Amazon.com) 
have modest financial statements relative to their market value, but they possess excellent 
intellectual resources, efficient processes, and outstanding potential in exploding markets. 
These entrepreneurial companies have been able to amass astounding amounts of capital 
through initial public offerings of their stock or through venture capitalists. 

The Wall Street Journal (May 16, 1996) described a relatively new company with a very 
small amount of financial statement assets, Amazon.com, that was able to raise significant 
venture capital because of its business plan to use its Internet web site to tap into a global 
marketplace. Customers of Amazon.com can access a million-book database, view news- 
group commentaries by authors and readers, and purchase any database book at a signifi- 
cant discount and with quick delivery. The novel aspect of Amazon.com is that it has cre- 
ated a virtual storefront on the Internet. With minimal physical assets and inventory, 
Amazon.com has created significant value from intellectual capital and technological inno- 
vation. 

With Netscape, Amazon.com, and other highly valued entities with excellent growth 
potential, neither the economic substance of the entity nor its economic performance is 
adequately captured by current financial statements or auditing services. Such statements 
and services are limited in that they focus on only financial performance measurements, 
while ignoring performance indicators related to other equally critical success areas, i.e., 
processes, nonfinancial resources, and markets. The real assets of these entities are in the 
intellectual capabilities of human resources, the efficient and effective business processes 
centered around information technology, and the ability to gain a significant portion of 
healthy, growing markets. 

A strong and expanding demand exists for a comprehensive set of business performance 
measurements and for professional services that will provide assurance regarding informa- 
tion quality in all four critical performance areas. Investors, managers, customers, and 
other users of business information are increasingly demanding high quality information 
that is relevant, reliable, timely, and in an appropriate mode and format. 

ASSURANCE SERVICE INITIATIVES 

In the United States, four professional groups have recently addressed the issues related to 
meeting this demand for assurance services. These groups include: 



Assurance Services: Global Challenge to Educators 351 

• The American Institute of Certified Public Accountants (AICPA) Special Committee 
on Financial Reporting (Jenkins Committee. 1991-93), 

• The Sante Fe Assurance Visioning Conference (1993), 

• The AICPA Special Committee on Assurance Services (Elliott Committee, 1994- 
97), and 

• The American Accounting Association's Future Audit. Attest, and Assurance Ser- 
vices Task Force ( 1994-97). 

Much of the impetus for assurance services originated in the work of the AICPA Special 
Committee on Financial Reporting, chaired by Ed Jenkins. The AICPA formed the Jenkins 
Committee in 1991 to address concerns about the relevance and usefulness of business 
reporting. Among its recommendations was a suggestion that auditors should play an 
enhanced assurance role regarding the overall quality of business reporting (AICPA 1994). 
As a follow-up to the Jenkins Committee recommendation and other demands for an 
enhanced auditor role, a round-table "visioning" conference was held in Sante Fe, New 
Mexico in 1993 with a goal of developing a vision of future assurance services. The com- 
pleted "vision" from the Sante Fe Conference was presented to the AICPA Board of Direc- 
tors, which generally embraced the vision and appointed the Special Committee on 
Assurance Services, chaired by Robert Elliott (AICPA, 1994). The Auditing Section of the 
AAA appointed the Future Audit, Attest, and Assurance Services Task Force in 1994 to 
review the work and recommendations of the Elliott Committee and to focus on the educa- 
tional, research, and professional implications of future assurance services. 

Of the four U.S. professional groups, the Elliott Committee has had the most significant 
impact on the nature of future assurance services to be offered by the accounting profes- 
sion. The AICPA assurance services initiative, led by the Elliott Committee, is divided into 
three phases. Phase I focused on research concerning user needs for information and assur- 
ance on that information and is discussed in the Committee's brief interim report (AICPA 
1995). 

Phase II focused on the development of scenarios for ( 1 ) the future of current services, 
(2) extensions of current lines, and (3) completely new lines of service. The scenarios for 
future audits illustrate a dramatic shift from an old paradigm in which a set of yearly finan- 
cial statements is accompanied by an annual audit report to a new paradigm in which a set 
of real time financial and nonfinancial information is accompanied by continuous assur- 
ance. The scenarios for extensions of current lines include assurance services related to 
comprehensive risk assessments, databases, comprehensive business performance mea- 
surements, Internet web sites, and ISO 9000 or ISO 14000 information. Scenarios for com- 
pletely new lines include assurance services for electronic commerce, elder care, and 
health care performance measurement. The AICPA Internet home page, www.aicpa.org, 
contains information about the first two phases of the Elliott Committee work, completed 
in early 1997 (AICPA, 1997). 

Currently, Phase III of the AICPA assurance services initiative focuses on implementing 
the services proposed by the Elliott Committee. Implementation efforts are directed at 
overcoming barriers to change, improving attitudes and competencies of assurance provid- 
ers, and changing certain ethical rules, such as tho.se concerning the definition of indepen- 
dence for assurance service. The AICPA has established implementation committees for 
each of the three proposed new assurance lines — electronic commerce, elder care, and 



352 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

health care performance measurement — in addition to a senior-level Assurance Services 
Committee to provide overall guidelines for new assurance services. 

INTERNATIONAL INITIATIVES 

Accounting groups in other parts of the world are also developing plans for expanding 
assurance services to meet new information technology needs. For example, the Canadian 
Institute of Chartered Accountants (CICA) has a project that addresses issues similar to 
those addressed by the Elliott Committee, and the accounting profession in the United 
Kingdom is developing an Audit Agenda that explores the extension of the audit function 
into selected new assurance service areas. 

IFAC's International Auditing Practices Committee (lAPC) has recently explored the 
global extension of assurance services and has recently issued an exposure draft of a pro- 
posed International Auditing Standard, Reporting on the Credihility of Information (1997). 
This can be accessed through the IFAC Internet home page www.ifac.com. 

WEBTRUSTSM— A NEW ASSURANCE SERVICE FOR INTERNET WEB SITES 

An excellent example of a new assurance service with tremendous market potential is the 
new WebTrust program that has recently been developed by the AICPA and the CICA. 
This program allows U.S. Certified Public Accountants or Canadian Chartered Accoun- 
tants, with specific training and licensing in web site security, to review client web site 
security and issue assurance to electronic commerce customers regarding the security of 
related web site transactions. The WebTrust program requires the practitioner to review 
and test the client's electronic commerce systems and evaluate them with respect to criteria 
concerning three broad categories: business practice disclosures, transaction integrity, and 
information protection. The WebTrust seal was developed in conjunction with VeriSign, a 
well-respected global provider of digital authentication services. Further information about 
this program is available through the WebTrust button on the AICPA web home page, 
www.aicpa.org. 

THE CHALLENGE TO ACCOUNTING EDUCATION 

The new assurance services present some significant challenges for accounting and audit- 
ing education. 

1. Accounting educators and their students must develop high levels of information- 
technology competence or risk becoming functionally obsolete. The IFAC Educa- 
tion Committee's International Education Cjuideline No. I 1, Information Technol- 
ogy in the Accounting Curricuhim (1995), provides very helpful guidance for 
meeting this aspect of the challenge. 

2. The so-called "silo-effect" of functionally separated departments is perhaps more 
firmly ingrained in academia than in contemporary businesses and must give way to 



Assurance Services: Global Challenge to Educators 353 

interdisciplinan. teams that focus on the goal of a ful]\ integrated, technologically 
sophisticated, educational proce>s. 

3. The discipline of auditing \\\U likel} he subsumed intn a broader, more technologi- 
cally adaptable discipline of information assurance, with less emphasis on rules pro- 
mulgated by a single authoritati\ e body and greater emphasis on adapting to broader 
standards issued by an array of international groups o\ er a diverse range of informa- 
tion domains. 

4. As with auditing, the discipline of accounting will also likel> be >ub>umed into a 
broader, more technological!) adaptable discipline of information for business deci- 
sions, with emphasis on both internal and external decision-makers. As with audit- 
ing, there will be much less emphasis on rules promulgated by a single authoritati\e 
body and greater emphasis on adapting to broader standards issued by a wider array 
of international groups o\ er a di\ erse range of information dorTiains. 

The AAA Auditing Section Task Force on Future .Audit. .Aitcst. and .Assurance Services 
has been reviewing the work of the Elliott Committee on an ongoing basis and is address- 
ing the challenge to accounting educators h\ de\ eloping a set of responses in three areas. 
The first response area addresses the impact that emerging assurance services will ha\e on 
the accounting and auditing curriculum and educational deli\cr\ methods. These are dis- 
cussed in a Task Force uorking paper h\ Holder and Pincus i 1997j. 

The second response area addresses research issues and opportunities presented b> new 
assurance services. In a Task Force working paper b\ Carcelli). .Messier, and Ricchiute 
M997). significant research opportunities related to future assurance ser\ices ha\e been 
identified in five related areas: markets, litigation, communication, independence, and 
measurement. 

The third response area addresses professional issues presented b\ the mo\e to pro\ ide 
future assurance services. Although many of the proposed new assurance ser\ices tit 
within the current audit/attest model, others ha\ e characteristics that are quite different and 
that w ould therefore require major changes in accounting and auditing education. Some of 
these unique characteristics ha\e been described in a Task Force \\orking paper by Jaen- 
icke and Whittington (1997. p. 2) as follows: 

1. The ser\ice ma_\ be purchased b) the users rather than the pro\iders of ihe informa- 
tion. 

2. Performance may require specialized knowledge that trai.litionall\ has not been part 
of the training and education of the CPA. 

3. Assurance may be pro\ided about the relevance of information in addition to its reli- 
ability, 

4. The service may involve maintaining controls or sensory monitors. 

5. The output of the service ma\ include data analysis or interpretation, and 

6. The assertion ma> he made b) the practitioner rather than the pro\ ider of the infor- 
mation. 

7. The Task Force is in the process of developing its report on the educational, 
research, and practice implications of future assurance services and is scheduled to 
complete its work by late 1997. 



354 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

GLOBAL ISSUES FOR ASSURANCE SERVICES 

Providing future assurance services in an increasingly global marketplace creates addi- 
tional challenges for assurance providers and accounting educators. In the current account- 
ing and financial reporting environment, significant differences between countries with 
respect to generally accepted accounting principles create barriers to raising capital across 
international boundaries. Arnold Schilder (1996, 102) provides a clear illustration of sub- 
stantial differences between U.S. GAAP and GAAP in various countries in the European 
Union as follows: 

For example, in contrast to a reported profit of DM 615 million per German GAAP for 
fiscal 1993, Daimler-Benz reported a 1993 loss of DM 1,819 million per U.S. GAAP. 
On the other hand, the Swedish group Volvo reported a loss of SEK 3.466 million under 
Swedish GAAP but a profit of SEK 1,938 under U.S. GAAP. 

If these kinds of international differences exist with respect to current GAAP for financial 
resources, what kinds of global differences might we expect to standards of measurement 
for the vastly broader array of information to be covered by future assurance services? In 
many respects, assurance service issues are more international and global than either 
accounting or auditing issues. Unlike accounting and auditing standards that historically 
have developed quite unique national characteristics, many assurance services, especially 
those related to the Internet and information technology, appear to be quite global and inde- 
pendent of national boundaries. 

The global challenge for information providers, users, assurance providers, and educa- 
tors is to curtail the tendency for each country or region to develop its own idiosyncratic 
standards for each type of information and assurance service. Instead, all of these groups 
should strive to replace such a potential patchwork mosaic of standards with an interna- 
tional cooperative effort to develop preemptive global standards for information quality, 
measurement, and assurance in areas that are crucial to world commerce. At a minimum, 
accounting educators need to revise our curricula and educational delivery methods to 
make students aware of existing international differences, of the need to reconcile these 
differences, and of the importance of developing global standards for the broad array of 
information and assurance services demanded by contemporary users. 

THE NEXT LEVEL OF ASSURANCE SERVICES 

The virtual reality example presented at the beginning of this article provides a futuristic 
setting whereby we can begin to envision how future assurance services could be provided. 
Philippe Mercier, the venture capitalist referred to previously, examined financial 
resources, markets, processes, and non-financial resources surrounding CCC's business 
plan without leaving his office. This scenario, while technically not feasible at present 
time, may be the preferred mode of business travel in the future. In order for Philippe to 
make an informed decision, he chose to investigate all four critical entity performance 
areas presented earlier. 

Figure 2 graphically depicts Philippe's cyberspace journey. Philippe queried CCC's 
financial database, as well as the databases of potential franchisees and the CADCAM 



Assurance Services: Global Challenge to Educators 



355 



Financial Resources 





■ 






1 1 ,-t 











Control Boundary 



Markets 



Processes 




Non-FinanCiaFResources 




Figure 2. User View of Sensing the Real World 



developers, to evaluate prior financial performance. He visited local marketing analysts in 
various worldwide locations and a leading expert in clothing and business suit lines to gain 
an understanding of potential markets. Philippe examined the production processes of 
CCC, potential franchisees, the Hong Kong fabric-procurement alliance, various fabric 
suppliers, and the CADCAM developers to assess process quality. Finally, in order to eval- 
uate non-financial resources, he met with Sally (the owner of CCC) and her employees. 



356 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

owners of potential franchisees, and developers of the CADCAM equipment; additionally, 
he toured plants and observed equipment. Philippe is contemplating a $30 million invest- 
ment based on what he experienced in virtual reality, and he paid CPA firms and other enti- 
ties to provide a level of assurance that what he experienced in his virtual-world fairly 
represents the real-world. 

Future auditors can become intricately involved in providing desired assurance services 
by establishing and monitoring a boundary of controls between the virtual-world and real- 
world (see Figure 2). The foundation for developing such a control boundary is already laid 
in the COBIT (Control Objectives for Information and Related Technology) framework 
(COBIT 1994). The COBIT framework is the result of an international collaborative effort 
to establish global standards and objectives for enacting and monitoring control procedures 
over infonnation and technology. COBIT was sponsored by the Information Systems 
Audit and Control Foundation. COBIT defines control as "The policies, procedures, prac- 
tices, and organisational structures, designed to provide reasonable assurance that business 
objectives will be achieved and that undesired events will be prevented or detected and cor- 
rected" (COBIT 1994, pg. 9). In our example, users who conduct business in virtual reality 
want independent, reasonable assurance that the virtual-world is fairly representative of the 
real world in all material respects. 

COBIT delineates the following four domains: planning and organization, acquisition 
and implementation, delivery and support, and monitoring. All four domains can include 
and support the assurance services envisioned in the virtual reality scenario. For example, 
future auditors can work with virtual reality providers to communicate the needs and con- 
cerns of users and to assess possible risks (planning and organization). Future auditors 
might provide delivery and support services to providers, such as ensuring systems secu- 
rity, assisting and advising customers, defining service levels, and managing problems and 
incidents. Within the acquisition and implementation domain, future auditors can help to 
develop and maintain virtual reality procedures, install and accredit systems, and manage 
system changes. Finally, future auditors can continuously monitor virtual reality control 
processes and, periodically, perform substantive type testing to determine the extent to 
which virtual images map to real objects. 

Given the current state of information technology and extant business practices, the vir- 
tual reality scenario described in this article may seem inconceivable to some accountants 
and auditors. However, conducting commerce over the Internet and coping with related 
control issues may have appeared just as implausible a mere 10 years ago. Future auditors, 
as compared to their today's counterparts, will likely approach these forward-looking sce- 
narios with more of an open mind, since future auditors will be in a better position to under- 
stand the vast untapped potential of information technology. The COBIT framework, 
coupled with the work of the AICPA Special Committee on Assurance Services, provides 
a significant leap forward in guiding the accounting profession to the next level of assur- 
ance services. 

SUMMARY 

The assurance service initiatives described in this paper are designed to guide the account- 
ing profession into the next century. It seems clear that, in order to survive and prosper, the 



Assurance Services: Global Challenge to Educators 357 

profession must adapt to rapidly changing business conditions and competitive environ- 
ments. Information technology is the enabling force behind such radical organizational and 
market transformations. One important survival strategy is to expand our concept of finan- 
cial accounting, business reporting, and assurance services beyond the traditional financial 
arena, by including other critical entity performance areas, such as, markets, processes, and 
nonfinancial resources. 

In this article, we take a futuristic look at assurance services that auditors might provide 
to users who conduct business in virtual reality. Upon close examination of the possible 
risks involved in this setting, the fundamental issue is that of control over information and 
related technology. Cyberspace users will want reasonable assurance that their virtual- 
world fairly represents its real-world counterpart. 

An analogy to piloting an airplane seems appropriate. When flying an airplane, it is pos- 
sible to slow the aircraft to a minimal, critical airspeed where a stall becomes imminent. At 
this point, a pilot attempts to increase airspeed by applying full power and lowering the 
nose of the plane. However, under certain circumstances, particularly when there is insuf- 
ficient remaining altitude, there is not enough power to pull the aiiplane out of the stall sit- 
uation. As a result, the plane can catapult into the ground. This phenomenon is called 
"getting behind the power curve." 

At times, it seems as though accounting practitioners and educators often find them- 
selves behind the power curve, particularly in the domain of information technology. That 
is, a new technology, such as Internet commerce, blossoms into practice and then account- 
ing professionals and educators begin worrying about how to apply appropriate controls in 
this new environment. It would behoove educators to envision potential information tech- 
nology applications and assurance services, such as virtual reality, before they are inte- 
grated into business practice. This would provide a degree of lead-time during which 
educators and accounting professionals can act proactively to assess potential risks and 
design appropriate control procedures. 

This is clearly a global challenge to accounting educators, as the influence of informa- 
tion technology penetrates ever so deeply into international business practice. In this 
regard, let us not find ourselves behind the information technology power curve, for the 
very survival of accounting education and of the accounting profession may well rest on 
the ability to envision the future and adapt to the demands of the global marketplace. 

NOTE 

Adapted from a paper presented at The Eighth World Congress of Accounting Educators 
and the International Association of Accounting Educators and Researchers (lAAER), 
Paris, France, October 23-25, 1997. Please do not quote without permission. 

REFERENCES 

AICPA. 1994. Special Committee on Financial Reporting. Improving Business Reporting — A Cus- 
tomer Focus. New York: AICPA. 
AICPA. 1995. Interim Report of the Special Committee on Assurance Services. New York: AICPA. 
AICPA. 1997. Special Committee on Assurance Services. Web site: www.aicpa.org. 



358 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 



Carcello, J., W. Messier, and D. Ricchiute. 1997. Research Opportunities in Assurance Services. 
Working paper prepared for the AAA Auditing Section Task Force on Future Audit, Attest, 
and Assurance Services. (Available through the authors of this paper). 

Elliott, R. 1994. Confronting the Future: Choices for the Attest Function. Accounting Horizons 8:3 
(September) 106-124. 

COB IT. 1996. Control Objectives for Information and Related Technology, COBIT Steering Com- 
mittee, Information Systems and Control foundation Research Board and Information systems 
Audit and Control Foundation Standards Board, Rolling Meadows, IL. 

International Auditing Practices Committee (lAPC). 1997. Exposure draft of a proposed Interna- 
tional Auditing Standard, Reporting on the Credibility of Information. 

International Federation of Accountants (IFAC) Education Committee. 1995. International Educa- 
tion Guideline No. 1 1 , Information Technology in the Accounting Curriculum. 

Holder, W. and K. Pincus. 1997. The Impact of Future Assurance Services on Accounting and Audit- 
ing Education. Working paper prepared for the AAA Auditing Section Task Force on Future 
Audit, Attest, and Assurance Services. (Available through the authors of this paper). 

Jaenicke, H. R., and R. Whittington. 1997. Expansion of Assurance Services — Implications for the 
Profession. Working paper prepared for the AAA Auditing Section Task Force on Future 
Audit, Attest, and Assurance Services. (Available through the authors of this paper). 

Schilder, A. 1996. Research Opportunities in Auditing in the European Union. Accounting Horizons. 
10(4) (December): 98-108. 

Wall Street Journal. How Wall Street Whiz Found a Niche Selling Books on the Internet. (May 
16.1996). 



The International 
Journal of 
Accounting 



Accounting Income, Income Components and 
Market-to-Book Equity Ratios: Finnisli Evidence 

Juha-Pekka Kallunki, Minna Martikainen and Teppo Martikainen 



Key Words: Accounting income; Income components; Market-to-book equity ratios; Finland 



Abstract: This study provides new evidence on the relationship between various income-to-hook 
and market-to-hook equity ratios using Finnish data. Because of extremely wide earnings manage- 
ment possibilities that are tractable from published financial statements, Finland provides a 
unique environment to test the importance of income management in creating investors' cashflow 
expectations. The findings suggest that income statement items other than "bottom-line " earnings 
contain useful information when investors are creating cashflow expectations for Finnish firms. 
This holds especially for income components that can be regarded permanent. It also appears that 
the income management component of earnings has low value-relevance. This is the case also for 
extraordinaiy income/expenses, which can be regarded as transitory by nature. The findings of the 
study further suggest that in none of the various income levels investigated is negative accounting 
income significantly positively related to the market-to-book equity ratios. If income is positive, 
however, the positive relationship exists. These findings support the hypothesis that investors 
regard accounting losses as temporary, not reflecting future cash flow expectations. In general, 
the results of the study indicate that investors split accounting earnings into components and eval- 
uate the value-relevancy of income statement items when creating cash flaw expectations for 
firms. 



ACCOUNTING INCOME, INCOME COMPONENTS AND MARKET-TO-BOOK EQUITY 
RATIOS: FINNISH EVIDENCE 

In recent years empirical studies relating stock prices and returns to accounting earnings 
have increasingly suggested that accounting earnings should he split into components to 
better understand how the stock market uses the information content in income statements 
(see e.g., Lipe, 1986; Livnat & Zarowin, 1990; Ohlson & Penman. 1992: Ramakrishnan & 
Thomas, 1995). Following these lines, this study aims to ascertain which income levels and 
components are related to market-to-book equity (MTB) ratios. These relationships are of 
importance from the accounting perspective, because the MTB ratio can theoretically be 



Direct all correspondence to: Teppo Martikainen, University of Vaasa. PO Box 700, FIN-65101. Vaasa, Finland; 
E-Mail: tlm@uwasa.fi; Fax: +358 6 3248 344. 

The International Journal of Accounting, Vol. 33, No. 3, pp. 359-375 ISSN: 0020-7063. 

All rights of reproduction in any form reserved. Copyright © 1998 University of Illinois 



360 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33. No. 3. 1 998 

shown to measure investors" growth expectations and to be positively related to persistent 
accounting earnings (see Fama & French. I'^Q.^). Therefore. b\ in\estigating the relation- 
ship between the MTB ratio and accounting income and itv components, it is possible to 
study how investors exploit accounting data \\ hen the\ are forming cash tlow expectations 
for t~irms. Moreo\er. for instance. Fama and French ( 1992. 1993. 1996) suggest that the 
MTB ratio capture^ much of the cross-section of a\erage stock returns. As a consequence, 
the MTB ratio may be useful for creating profitable trading strategies in stock markets. 
Therefore, the economic fundamentals of the MTB ratio ai"e obviously of great interest 
among the investment community . 

This stud\ addresses three closel> related research questions: 

1 . Do income le\ els other than the "bottom-line" earmngs contain \ alue-rele\ ant infor- 
mation in Finland '.^ 

2. When disaggregating net mcome into indixidual income statement items, which of 
these items are most important and do these item^ contain incremental intormation 
to each other ? 

3. .Are accounting losses and profits \ alued differenth in the Fiinnsh stock market'.^ 

The current paper contributes to the existing literature in tl\e main respects. First. pre\i- 
ous evidence regarding the relationships between the MTB ratios and accounting income 
or its components is limited. Fama and French ( 1995) measure the relationship between 
MTB and income-to-book 1 1TB ) equitx ratios b\ using a sample of fimis listed on the New 
York Stock Exchange." The income le\el used to measure the 1TB ratios is primar\' annual 
earnings before extraordmar\ items. Then" empirical anahsis stud_\ing the profitabilit\ of 
six portfolios based on the MTB ratios indicates that high MTB stocks appear more profit- 
able than low MTB stocks for four \ears before and at least fi\e >ears after ranking dates. 
These results are recentl) confirmed b_\ Martikainen i 19'-)8ai in different size and financial 
leverage portfolios. While Fama and French i 1905 i use onl_\ one income le\ el. i.e. primar\ 
annual earnings before extraordinaiA items, this paper calculates the ITB ratios b_\ usuig 
six alternative income le\ els to determine the numerator of the ratio. The results suggest 
that \ arious income le\ eU are important in generating in\estors" cash flow expectations in 
Finland. Moreo\er. it appears that the different income le\"els ha\'e incremental informa- 
tion content in combination with one another. The results are in accordance with earlier 
studies investigating the relationship betw een stock returns and earnings in \ aiious mai'- 
kets. suggesting that several income le\ els ma> be important to in\estors (see. for instance. 
U.S. by Livnat & Zarowin. 1990: U.K. b\ .-\li ^: Pope. 1995: and Finland b\ Booth. Kal- 
lunki & Martikainen. 1997). 

Second, this study investigates the importance of different income statement items in 
creating income levels and forming cash flow expectations for firms. The breakdow n of 
accounting income into components indicates that various components of accounting 
income are important in creating investors" cash flow expectations. This again suggests 
that income statements contain several relevant figures to investors, rather than onh the 
"bottom-line"" figure. The results also indicate that the income management component of 
accounting earnings is not significanth reflected in the MTB ratio. This is in accordance 
with the notion by Ramakrishnan and Thomas i lQ'-)5 i. among others, that the existence of 
income management ma_\ lead to \alue-irrele\ant components of earnings. Moreo\er. 



Market-to-Book Equity Ratios 361 

extraordinan' income and expenses are not found to be related to the MTB ratios in Fin- 
land, obviously because of their temporan, nature. 

The third contribution of the cuirent paper is that it extends the ^tud\ b\ Fama and 
French (1995). who do not pa\ attention to the phenomenon that negati\e earnings ma_\ 
be more temporary than positive earnings and consequently ha\e less effect on MTB 
ratios. The current study delineates between profits and losses, because Ha\n ( 1995i and 
Martikainen (1997) suggest that accounting losses, i.e. negative earnings, can be 
regarded as transitor}^ by nature.' This is because shareholders have a liquidation iput) 
option on the future cash flows of the firm. i.e. they ha\e the opportunitx to sell their 
shares at a price equal to the net asset assets of the firm. We find no positive relationship 
between the MTB and ITB ratios if earnings are negati\e. Therefore, the results support 
the hypothesis that accounting losses are temporary and are not reflected in cash flow 
expectations. 

Fourth, the empirical results by Hayn (1995) and Martikainen (1997) give support to the 
temporary nature of accounting losses, in the context of earnings response coefficients 
(ERCs), when primary annual earnings before extraordinary items are used to measure 
income. The current in\estigation contributes to their studies by adding fi\ e more income 
levels to the analysis of the transitor\ nature of losses. It appears that, while losses are tem- 
porary in all income levels, there are also significant differences across different income 
levels in this respect. ob\iousl\' because the temporar\- nature of different income compo- 
nents varies. 

Fifth, while Fama and French ( 1995 ) and Martikainen ( 1997) use U.S. data in their anal- 
ysis, this paper exploits Finnish data. This makes it possible to investigate whether the rela- 
tionship between MTB and ITB ratios is an international phenomenon rather than 
idiosyncratic to the U.S. Our findings suggest that even in Finland, where accounting rules 
are very different from major countries and stock markets are relati\el_N unde\eloped. 
investors exploit accounting data to fomi cash flow expectations for Finnish finns. More- 
over, in this process. in\estors seem to split accounting earnings into components b\ taking 
into account the \ alue-rele\ anc> of \ arious income statement items. 

The remainder of this article is organized as follows. The next section pro\ides the the- 
oretical background for the paper. The paper then proceeds by providing descriptions of 
the Finnish accounting system and income components used in the study. The next section 
of the paper describes the data. The fifth section offers the empirical results on \ arious 
income levels and their components as determinants of the MTB ratios. Finally, conclu- 
sions and implications of the paper are provided in Section VI. 

HYPOTHESIS DEVELOPMENT 

To explain the relationship between the MTB ratio, growth expectations and accounting 
income, we apply the notations of Fama and French (1995). For the sake of simplicity, let 
us assume an all equity-firm that finances its in\ estments soleh' with retained earnings. In 
this case dividends for year r, Dj, are 

D, = EI, + DP, - 1,. 



362 THE INTERNATIONAL JOURNAL OF ACCOUNTING Vol. 33, No. 3, 1 998 

where EIj equals equity income, depreciation is noted with DP,, and investment outlays 
with /,. Let us further assume that at time t expected depreciation and investment for any 
year t+i are proportional to expected future equity income, that is, 

Ep,^, = E, [EI,^i + DP,^, - I,^i\ = E, EI,^i ( 1 + A- , -k.Y (2) 

where k\ and A^ are the proportionality factors. If the discount rate, /% is constant, the mar- 
ket value of equity for year t. ME,, equals 

°° p pj 

ME, = (l+A-i-A.)^ ' '\' . (3) 



1 (/+'•) 



Consequently, the MTB ratio, ME, I BE,, is 



°° E.EL^/BE 

MTB, = (l+Aj-A,) X — -'• (4) 

" /= 1 (/+ '-)' 

Equation 4 shows that the MTB ratio can be interpreted as a measure of the market's 
expectations of growth opportunities. This is because the MTB ratio increases with the 
expectations on equity income (see also Collins & Kothari, 1989). 

To better understand the link between stock prices and accounting earnings, the recent 
accounting literature splits earnings figures into various components. For instance, 
Ramakrishnan and Thomas (1995) suggest that earnings consist of permanent, transitory 
and price-irrelevant components. Permanent shocks are shocks that continue into the 
future and, therefore, have a large price effect. Transitory (temporary) shocks do not persist 
beyond this period, leading to a lower price reaction. The price-irrelevant components of 
earnings are defined as the difference between the reported earnings and price-relevant 
earnings. For price-irrelevant shocks no price reaction exists. Ramakrishnan and Thomas 
(1995) note that these three types of shocks are unlikely to completely describe reported 
earnings, but definitely help us to better describe the relationship between stock prices and 
accounting earnings. Equations 3 and 4 suggest that the MTB ratio is positively related to 
persistent accounting income, while temporarily high or low accounting income do not 
have a significant effect on the MTB ratio. Therefore, we hypothesize that permanent 
income components are significantly related to the MTB ratio, while the transitory and 
price-irrelevant components are not. 

As noted by Hayn (1995) and Martikainen (1997), among others, it can be further 
hypothesized that accounting losses are temporary and, therefore, bear less weight than 
accounting profits when investors are forming their cash flow expectations. This is because 
the equity holders have a put option o