Management accounting at the historical Hudson\u27s Bay Company: A comparison to 20th century practices

Using an environmental contingency approach, Johnson and Kaplan [1987] argued that virtually all management accounting practices used at the time of their study had been developed by 1925 in response to increased uncertainty caused by geographical expansion and large-scale operations. During the 1821 to 1860 subperiod, the Hudson\u27s Bay Company had significant uncertainty which was largely a result of the dynamic environment of its fur-trade operation. Consequently, it should have developed management accounting practices in response to uncertainty. Moreover, the management accounting practices should have been less extensive in the subperiods before and after 1821 to 1860, as these subperiods had less uncertainty. The Company\u27s accounting and related records were examined for 1670 to 1914, and provided evidence to support the contention of Johnson and Kaplan that management accounting practices evolved positively with uncertainty

First external auditors of the Hudson\u27s Bay Company, 1866

At the request of shareholders, the Hudson\u27s Bay Company had its financial statements audited for the first time in 1866. Two external auditors were hired, one for the shareholders and one for management. Three inter-related forces led to this decision: (1) most importantly, the company\u27s shareholders demanded audited financial statements, (2) there was emerging in London at the time the capacity and willingness among London accountants to provide external audit services, and (3) the British Parliament passed various acts that required financial statements of companies in other industries to be audited. After a few years, only the management\u27s external auditor was retained. He subsequently influenced the company\u27s development of management accounting. In addition, the company\u27s early external auditors were influential in the development of the Institute of Chartered Accountants of England and Wales

Internal audit at the historical Hudson\u27s Bay Company: A challenge to accepted history

The accepted history of managerial internal audit is that its origins are in financial and compliance auditing. Managerial was added after firms started to expand geographically or into other businesses. That expansion increased complexity and created problems for managers which the internal auditor assisted in solving with managerial audits. Contrary to that two stage development, something comparable to managerial internal audit was being practiced by the Hudson\u27s Bay Company in the form of inspections as early as 1871. Rather than in financial and compliance auditing, these inspections had their geneses in the desire of the senior manager and the committee (board of directors) for additional information on the fur trade and retail operations. This paper will describe the inspection function at the historical Hudson\u27s Bay Company, the circumstances leading to the development of this function, and how it complemented other controls

The use of internal audit findings in governmental organizations : an experimental study

Transaction cost economics (TCE) provides a theory for examining the phenomenon of internal audit. TCE is concerned with economizing or choosing the lowest cost option from buy and make alternatives. With the buy or market alternative, costs are kept low by competition. However, with the make or in-house alternative, costs are controllable because of the ability to direct and monitor production. In this regard, Williamson (1975, 1985) has argued that internal auditors provide managers with useful information for cost economizing. When in-house production is chosen over market, TCE maintains that there are rational reasons for the choice. These reasons are described by Williamson (1985) as dimensions, namely: asset specificity, uncertainty, and frequency (i.e., size). With the existence of these dimensions, information is needed to direct production activities. Accordingly, the usefulness of internal audit operational information for economizing the (dependent variable) is hypothesized to be positively related to the existence of these dimensions. In addition, based on Penno (1990), the usefulness of internal audit findings for economizing is hypothesized to be positively related to the hierarchical level to which the director of internal audit reports. These hypotheses were tested with an experiment administered to 244 senior executives in 29 departments of two large governmental organizations. The response rate was an acceptable 40.6 percent. A split-plot general linear model was used for the statistical analyses. This entailed a full factorial, repeated measures model for the within-subjects variables, asset specificity, uncertainty, and size The hierarchical level to which the director of internal audit reports was analyzed as a between-subjects variable. The hypotheses for the positive relation of asset specificity and size to usefulness were supported at the 0.01 level, while there was some support for the positive relation for the hierarchical level to which the director of internal audit reports. There was no support for a positive relation for uncertainty

ERP systems and management accounting: New understandings through "nudging" in qualitative research

Purpose This paper aims to show how our understanding of the effects of enterprise resource planning (ERP) systems on management accounting are influenced through nudging by researchers in their preamble before interviews begin. Design/methodology/approach There were two groups of comparable respondents. Each group received a different preamble to the same questions. The differences in group responses were analyzed. Findings When the impact of ERP implementation on the physical, transactional and information flows within the firm were nudged, the responses focused on how the chart of accounts had to be expanded to account for the additional data introduced by transaction processing. When the IT and ERP system knowledge and skills were nudged, the responses tended to emphasize analyses or the use of new information through the use of drill down functionality. This research provides new insights and contributions to understanding how nudging affects or directs respondent assessments of the impact of ERP systems on management accounting. Research limitations/implications The research is limited by the relatively small samples and by the fact that these were different research projects. Practical implications Nudging has an obvious impact on research that should not be ignored. Social implications Unintentional nudging should be considered with all research projects. Originality/value This paper makes explicit that nudging occurs in research whether intentional or unintentional