Cognitive approach to understand the impact of conflict of interests on accounting professionals’ decision-making behaviour

This paper adopts a cognitive approach, by integrating social cognitive theory and throughput model, for examining the process through which conflict of interests affects the accounting professionals’ decision-making behaviour. The model has been tested by conducting a quasi-experiment with 105 professionals from the Big Four accounting firms in the UK. The low positive outcome expectancy of compliant decision-making, high perceived difficulty in making compliant decisions and less ethical judgements are evidenced to be the situational cognitive predictors, and high propensity to morally disengage the dispositional cognitive predictor of the likelihood of deviant decision-making behaviour. The proposed cognitive approach provides a novel perspective for investigating decision-making behaviour in situations involving the conflict of interests. To facilitate effective management of conflict of interests, this study suggests implementing behavioural interventions for strengthening the accounting professionals’ independence in fact

Managing Conflict of Interests in Professional Accounting Firms: A Research Synthesis

This paper synthesises the research related to managing conflict of interests in professional accounting firms. The main purpose is to provide information about the current state of knowledge on this topic and to highlight the areas requiring further research. The extant research has been reviewed by developing a framework through the integration of Risk Management Framework by ISO 31000:2009 and the International Code of Ethics for Professional Accountants. Specifically, literature has been classified across the establishment of context, assessment, treatment, control and monitoring of conflict of interests. The literature reveals that there is a lack of understanding about how the conflict of interests operates at the level of an individual accounting professional. Addressing this gap will help to develop behavioural interventions for strengthening the professionals’ independence in fact and, thereby, facilitating the management of conflict of interests. The key message this synthesised research provides for professional accounting firms and the regulators is that, for effective management of conflict of interests, behavioural interventions should be informed by the professionals’ unconscious (automatic) as well as their conscious (controlled) cognitive processes. This study is the first one to view the conflict of interests in a professional accounting environment through the lens of behavioural risk management. Moreover, the framework adopted for reviewing the extant literature provides a comprehensive view of the issues surrounding the ineffective management of the conflict of interests

Recompensa, um motorista para a criatividade; papel mediador das avaliações de recompensa entre auto eficácia e desempenho criativo

The purpose of this dyadic study was to explore the insight that trigger the creative performance. For such purpose self-efficacy and rewards in shape of challenge and threat appraisal were used. A Survey was conducted to collect the data from the public and private sector organizations related to technical education in Punjab. Sample was the faculty member working on positions of instructors, senior instructor and lectures. A total of 302 respondents were analyzed. The results of the analysis show that there is significant relationship among self-efficacy and creative performance. The mediation analysis also shows that challenge appraisal of rewards for creativity and threat appraisal of reward also worked as mediator. Consequently, we reached at the point that having high level of self-efficacy, individuals in technical education organizations appraises the reward as a challenge and perform creatively. And on the other side having low level of self-efficacy, but appraising the Reward as a threat, tends to impact negatively on creative performance.El propósito de este estudio diádico fue explorar la información que desencadena el rendimiento creativo. Para tal fin se utilizaron la autoeficacia y las recompensas en forma de desafío y evaluación de amenazas. Se realizó una encuesta para recopilar los datos de las organizaciones del sector público y privado relacionadas con la educación técnica en Punjab. La muestra fue el miembro de la facultad que trabaja en posiciones de instructores, instructor senior y conferencias. Se analizaron un total de 302 encuestados. Los resultados del análisis muestran que existe una relación significativa entre la autoeficacia y el rendimiento creativo. El análisis de la mediación también muestra que la evaluación desafiante de las recompensas por la creatividad y la evaluación de la amenaza de recompensa también funcionó como mediador. En consecuencia, llegamos al punto en que, al tener un alto nivel de autoeficacia, los individuos en las organizaciones de educación técnica valoran la recompensa como un desafío y se desempeñan de manera creativa. Por otro lado, tiene un bajo nivel de autoeficacia, pero evaluar la recompensa como una amenaza, tiende a tener un impacto negativo en el rendimiento creativo.O objetivo deste estudo diádico foi explorar a percepção que aciona o desempenho criativo. Para esse propósito, a auto-eficácia e as recompensas em forma de desafio e avaliação de ameaça foram usadas. Uma pesquisa foi realizada para coletar os dados das organizações do setor público e privado relacionadas à educação técnica em Punjab. Amostra foi o membro do corpo docente trabalhando em posições de instrutores, instrutor sênior e palestras. Um total de 302 respondentes foi analisado. Os resultados da análise mostram que existe uma relação significativa entre autoeficácia e desempenho criativo. A análise da mediação também mostra que a avaliação de recompensas de recompensas por criatividade e avaliação de ameaças de recompensa também funcionou como mediador. Consequentemente, chegamos ao ponto em que, tendo alto nível de autoeficácia, indivíduos em organizações de educação técnica avaliam a recompensa como um desafio e realizam de forma criativa. Por outro lado, ter baixo nível de autoeficácia, mas avaliar a recompensa como uma ameaça, tende a impactar negativamente no desempenho criativo

Behavioural Framework for Managing Conflict of Interests in Professional Accounting Firms

This paper proposes a behavioural framework to complement professional accounting firms’ measures for managing conflicts of interest. Following an empirical examination of the process through which conflicts of interest affect accounting professionals’ decision‐making, we develop guidance for practitioners that will enable them to incorporate behavioural interventions while establishing the context, assessing, treating, controlling and monitoring conflicts of interest. The interventions are aimed at strengthening accounting professionals’ independence in fact by increasing the professionals’ expectation that compliant decision‐making will result in positive outcomes, increasing their perception that making compliant decisions is less difficult than making the alternative decisions, facilitating the formation of highly ethical judgements and lowering their propensity to disengage. The data were collected through a quasi‐experiment with 105 professionals from the Big Four accounting firms in the UK. Our work offers practical implications for professional accountants, executive directors, regulatory bodies, executive training and academic research. Other professions facing the ramifications of conflicts of interest (e.g. law, engineering, medicine and architecture) may also use the proposed framework to improve their ethics policies and corporate governance codes for managing conflicts of interest

Conceptualising Silence in External Corporate Communication: A Case Study of Pakistan

Although existing research has extensively explored corporate disclosure, a very little is known about why corporate organisations may remain silent while communicating with their external audiences. This study offers a definition of corporate silence and develops a conceptual framework for the study of silence in the narrative communication of corporate organisations. We develop a typology based on the forms and motivations for corporate silence in written corporate documents. Data was gathered from 26 interviews with senior managers from regulatory bodies, audit firms and listed companies in Pakistan and a grounded theory approach was used for data analysis. We postulate that self-protection from fear and discomfort, cooperation, managerial opportunism, apathy, and resistance are the prime motivators of corporate silence. The analysis also leads to the development of five different forms of silence: (1) defensive; (2) prosocial; (3) opportunistic; (4) authoritative; and (5) counteractive

Predicting Bankruptcy Using Z-Score and Z Double Prime (Z”): A Study of Pakistan Stock Exchange

Due to the unprecedented happenings and dynamic conditions of international economic system, firms are always at the verge of bankruptcy no matter how sound they are, their sustainability is always in jeopardy. Besides, lenders are continuously raising red flags and giving consistent warnings about possible perils of corporate failure due to fragile economic conditions and increasing debt levels in both corporate and individual businesses these days. Hence there was an exigency to ‘develop indicators for monitoring long term progress and sustainability of companies. Thereof it would contribute in illustrating to business analysts, firm stakeholders about the relevance of embracing these active checks for predicting bankruptcy as a sustainable business practice. This created a bizarre cult to look into the matter seriously. For this there is no mantra, no clever feats, sure-fire quick strategies. Instead there are well-defined, simple, systematic and sophisticated models to assess sustainability of companies. Thus, to avoid the tide of massive/substantial corporate failure and any future catastrophe; there is a dire need to identify the most suitable and preeminent model that can truly forecast the likelihood of default ahead of time in given circumstances. And, mainstay of this study is to provide an answer of question in hand by comparing two most venerable model choices i.e. Altman’s Z-score and Z double prime (Z”)

Gender diversity of boards and executives on real earnings management in the bull or bear period: Empirical evidence from China

This study investigates whether gender diversity in the roles of executives, boards of supervisors and management impacts real earnings management during the bullish and bearish periods from 2000 to 2017. The sample is separated by bullish (11,616 firm-year observations) and bearish (14,436 firm-year observations) periods. The results suggest that female participation on supervisory boards and executives tend to kerb real earnings management during bearish and bullish periods. Another important finding is that female CEOs are more cautious in real earnings manipulation due to their risk-averse nature during the bearish period, while female CFOs are more likely to constrain real earnings management in the bullish period. This study failed to find the relation of gender diversity on boards of management to real earnings management; however, the study has found that female executives (excluding CEOs and CFOs) who are also directors are more likely to limit earnings manipulation

Managing conflict of interests in professional accounting firms

This study views conflict of interests in professional accounting firms through the lens of behavioural risk management. The research problem driving this study is the accounting professionals’ deviant decision-making behaviour due to conflict of interests. Extant literature suggests that the prevalence of said problem is attributable to the ineffective management of conflicting interests – the existing procedures do not account, sufficiently, for the accounting professionals’ independence in fact. This research builds, primarily, on the work of Moore, Tanlu and Bazerman (2010) and Guiral, Rodgers, Ruiz and Gonzalo (2010). Although they attempted to address the professionals’ independence in fact by examining the psychological and cognitive impacts of conflict of interests, there still is a lack of understanding about the interaction of conflict of interests with decision-making. Consequently, there have been repeated calls for more research to understand how conflict of interests operates at the level of an individual accounting professional. Accordingly, this study is aimed at examining the process through which conflict of interests affects accounting professionals’ decision-making behaviour. To achieve this aim, a cognitive approach has been developed through integration of social cognitive theory and throughput model of decision-making. This research adopts a quantitative approach to investigation and the data have been collected by conducting a quasi-experiment with 105 professionals from the Big Four accounting firms in the UK. Likert-type items/scales are used to record data as the professionals’ self-reports on their perceptions and behaviour. Partial Least Squares-Path Analysis has been implemented for data analysis and hypotheses testing. Following the post-positivists stance, the concern is ‘failure to reject’ a hypothesis rather than ‘proving’ it. The empirical results provide that the professionals’ positive outcome expectancy of compliant decision-making (POE), perceived difficulty in making compliant decisions (PD) and ethical judgements (EJ) play mediating role in the relationship between conflict of interests (CoI) and the likelihood of deviant decision-making behaviour (DD). The low POE, high PD and less EJ are evidenced to be the situational cognitive predictors and the high propensity to morally disengage (PMD) the dispositional cognitive predictor of DD. Decision-making behaviour is evidenced to be prone to bias due to the significant role of POE and PD in the decision-making process. These results suggest that the process through which CoI affects accounting professionals’ decision-making behaviour is governed through the agency of their POE, PD and EJ. During this process, CoI plays biasing role and due to which the deviations from compliant behaviour might occur even undesirably. Therefore, DD is high in case of the professionals who perceive the negative outcomes of compliant decision-making to outweigh its positive outcomes, perceive high difficulty in making the given compliant decision, form a judgement that deviant decision choice is the most ethical and have high propensity of considering unethical behaviour as acceptable. Thus, in the events of conflict of interests, the likelihood of deviant behaviour can be reduced through encouraging amongst professionals the high POE, low PD, high EJ and low PMD. This study holds significance since it provides the much-needed empirical evidence for the role of accounting professionals’ cognitive processes in the relationship between conflict of interests and their decision-making behaviour. The cognitive approach adopted in this study provides a novel perspective for investigating the decision-making process. Moreover, the robust experiment employed for data collection adds to the extant research that lacks in experimental scenarios for addressing conflict of interests. Since all the insights revealed by this study’s results are relevant to the professionals’ state of mind, these insights can be combined to strengthen their independence in fact – to this end, I have proposed a behavioural framework to complement the accounting firms’ current efforts for managing conflict of interests. On a practical level, the professional accounting firms, the accounting professionals, the regulators and the other relevant professions can use this study’s findings and the new knowledge for making better decisions and to improve their policies