ABSTRACT This study examines the efficacy of an innovative public enforcement mechanism: the China Securities Regulatory Commission (CSRC) random inspections. Since 2016, the CSRC has carried out random inspections in which both inspectors and inspection targets are randomly selected. The selected inspectors conduct on-site inspections focusing on information disclosure, corporate governance, and other normative operations of the selected listed companies. Unlike other public enforcement mechanisms, the inspection targets in this approach are completely random. Random inspections are thought to save regulatory costs and overcome problems such as selective enforcement, with the potential to create an effective deterrent for listed companies, resulting in a “governance effect”. However, random inspections may also induce a “gambler’s fallacy” among executives in the inspected companies, resulting in the “bomb-crater effect”. We find that internal control quality decreases significantly in randomly inspected companies, supporting the bomb-crater effect hypothesis. Moreover, the deterioration in internal control quality caused by CSRC random inspections is more pronounced in firms with overconfident executives and in non-state-owned enterprises. In addition, the reduced quality of internal controls triggered by random inspections leads to lower-quality accounting information, an increased likelihood of financial restatements, and more frequent non-standard audit opinions. Overall, our results reveal the presence of bomb-crater effect in CSRC random inspections.

ABSTRACT International research collaboration has been advocated by universities globally. While international collaborations offer remarkable opportunities for advancing knowledge, they also present unique challenges. Navigating the turbulent waters of international collaboration can be an overwhelming area, with many researchers being faced with the challenge of how to start. In this editorial, we draw upon our collective experience of over 25 years of individual and institutional international research collaborations, establishing partnerships, mentoring others and reviewing the available literature to date. We provide in-depth reflections and offer practical suggestions on the basics, processes, and the many ‘how to’ aspects of international accounting research collaboration that are so often taken for granted. This paper is structured as a roadmap of ‘how to’, suggesting 25 focus areas that are worth considering when designing, planning, implementing, and reflecting on your international research collaboration. Our roadmap offers novice researchers, early-career researchers, those ‘new in academia’, or researchers who are new in collaboration at the international level timely, actionable insights into navigating the complexities of international collaborations. This paper also provides additional food for thought for experienced researchers, enabling the opportunity to reflect on their own experiences.

ABSTRACT This paper investigates the impact of mandatory auditor tenure disclosure in the auditor’s report on auditors’ behaviour regarding audit quality. Specifically, we examine audit outcomes following the implementation of PCAOB Auditing Standard (AS) 3101, which requires auditors to disclose the year they began serving consecutively as the company’s statutory auditor. The rule became effective for fiscal years ending on or after December 15, 2017. Using a differences-in-differences approach, we assess changes in audit quality by comparing firms subject to the regulation in 2017 with those not yet required to disclose auditor tenure. While previous research has documented investors’ reactions to AS 3101, its effect on audit quality remains unexplored. We find some evidence suggesting that the transition from voluntary to mandatory disclosure influenced auditors’ decisions, leading to more conservative financial reporting and higher audit quality. Notably, we do not find strong evidence that the effect is more pronounced for firms with long-tenured auditors in the post-implementation period. Rather, the greater transparency, reliability, and salience of tenure information following the PCAOB’s mandate appear to have influenced auditors regardless of tenure length. Plausibly anticipating heightened public scrutiny, auditors across tenure levels adjusted their behaviour accordingly, contributing to improved audit quality.

ABSTRACT Using insights from the reflection literature, the study presents an argument for incorporating a capacity for reflective thinking as an additional dimension of professional scepticism (PS). Calls by regulators for increased PS conflict with the depiction of an auditor’s PS as a trait which is difficult to change. This study examines the influence of reflective thinking on PS and how it impacts PS changes over an auditor’s career. We explain that two dimensions of reflective thinking, reflection and critical reflection, are important dimensions of PS which facilitate its dynamism. We support this argument with empirical evidence justifying their inclusion as dimensions of a scale designed to measure PS. This evidence is based on the analysis of a large sample of professional auditors. Using this sample, we develop a new PS scale and undertake exploratory factor analysis thereon, evidencing that reflection and critical reflection are dimensions of PS. It suggests a new PS scale incorporating seven dimensions. We term this new scale the Reflective Scepticism Scale (RSS) and validate it using, inter alia, confirmatory factor analysis.

ABSTRACT This study examines the relationship between firms’ tax integrity and innovation output. Using the tax credit ratings disclosed by the Chinese State Administration of Taxation as a measure of tax integrity, higher tax integrity is found to be associated with higher innovation output. This result is primarily achieved through the external resource mechanism, including increased credit funds, more trade credit financing, and reduced financing costs. A cross-sectional analysis shows that the impact of tax integrity on corporate innovation output is greater among firms with a poor law environment and a strong corporate tax avoidance motive. This study expands the literature on the factors influencing corporate innovation by investigating a new dimension of tax integrity that demonstrates the economic consequences of corporate integrity. Furthermore, this study provides guidelines for governments on how to enhance the tax credit rating system and improve indicator judgment and disclosure mechanisms, thus further promoting corporate innovation.

ABSTRACT We examine how firms disclose their use of reverse factoring programs (RFPs) – financial arrangements that accelerate supplier payments through third-party financiers – and how these disclosures affect reported financial positions. Using a global sample of 673 firms from 2011 to 2021, we identify the characteristics of RFP adopters, assess external pressures that drive disclosure (e.g. regulatory enforcement, auditors, analysts, and institutional investors), and analyse whether firms actively manage trade payables to avoid disclosing/reclassifying factored amounts as debt. We find that firms with greater financing needs are more likely to adopt RFPs. Firms operating in high-enforcement jurisdictions, or those with significant analyst following and institutional ownership, more often disclose RFPs – especially when the RFPs are material. Still, only 13% of RFP firms provide any disclosure, often with minimal detail. Our analysis reveals that in jurisdictions without mandatory interim audits, some firms significantly reduce trade payables in the fourth quarter to stay below auditor thresholds and avoid disclosure or reclassification. This behaviour is particularly evident in countries with strong enforcement environments. This paydown pattern is absent where interim audits are required. Our study contributes by offering the first large-sample evidence of how firms respond to regulatory pressures surrounding RFP disclosures. It highlights how differences in enforcement and auditing requirements influence financial reporting behaviour and raises important implications for standard setters seeking to improve transparency around supply chain finance arrangements.

ABSTRACT The purpose of this paper is to investigate whether NGO accountability processes are influenced by religion. To achieve its aim, the paper draws on interview data from officers working in a faith-based NGO in Ghana. The officers describe their work as a commission to God and argue that they are be accountable to God. Religion is employed instrumentally to gain positive beneficiary testimonies that are drawn upon for accountability purposes. Because of their faith identity, NGO officers do not negatively experience hierarchical accountability processes but rather work towards holistic accountability. Our analyses show that the NGO officers utilise religion as a strategic resource that they draw upon to gain funding. Recently some funders have turned to religious and faith-based NGOs because they believe such organisations employ a more effective approach to aid work. The work of these faith-based organisations is important as it can contribute significantly to development.

ABSTRACT This study evaluates the extent to which a professional accounting association’s visual representations are constitutive or merely reflective of professional identity, with a specific focus on the depiction of male and female professionals. Drawing on strong structuration theory, it examines the visual communication practices of the Swedish Accounting Association through 391 covers of Balans, its official journal, spanning four decades (1975–2015). Combining content analysis, cluster analysis, and visual accounting methods, the study explores how male and female professionals are depicted in different contextual domains, and how these images shape or are shaped by professional norms, stakeholder perceptions, and societal expectations. The findings reveal how internal and external structures influenced the association’s visual strategies, their role in navigating tensions between tradition, commercialism, inclusivity, and the evolving depiction of male and female professionals. Taking a longitudinal perspective, this research contributes to a deeper understanding of the role of accountancy associations in the structuration process, providing valuable insights into the evolving professional identity of accountants and the role of visual media in shaping norms related to sex and professional identity.

ABSTRACT This research examines the implications of gender pay gap reporting in the UK, with a specific focus on investigating responses from a crucial group of individuals affected by wage disparities: nonprofessional investors. This study explores the joint effect of gender pay information and CEO gender on investor judgments. A significant number of UK organisations have disclosed gender pay gaps that favour men, raising societal concerns and prompting government reforms aimed at addressing these disparities. Against the backdrop of UK-mandated gender pay gap reporting, this study employs a 2 × 2 between-subjects experimental design to investigate investor reactions to gender pay information and the gender of the company’s CEO. The research findings indicate that for nonprofessional investors, gender pay information and CEO gender interact to influence their investment willingness. Specifically, the influence of gender pay information on investment willingness is more pronounced when the company is led by a male CEO compared with a female CEO. Moreover, the joint effect of gender pay information and CEO gender on investment willingness is mediated by investor perceptions of corporate reputation. Overall, the findings in this research indicate that female leaders do not receive similar rewards and recognition for promoting gender pay equality as male leaders. This study contributes to our understanding of gender pay information and enriches the literature on investor reactions to gender differences in corporate leadership.

ABSTRACT Existing research on professional fields highlights how these are riven by various symbolic boundaries. Boundaries have been noted along lines of knowledge, expertise and morality, although many of these are epiphenomena of size. However, the majority of these insights have been generated by looking at the empirical contexts of North America or Western Europe. It remains less clear to what extent such boundaries are evident in relatively new professional fields found in emerging economies. To partially redress this imbalance in existing scholarship, this study reports on an in-depth empirical study into a relatively under researched context – Latvia. It explores what epistemic and moral boundaries are evident in the accounting field in Latvia and how these are contested. We identify a greater multitude of epistemic and moral boundaries than have previously been identified by literature on the professions. Additionally, we illustrate how these boundaries have strong temporal dimensions which are a unique feature of the Soviet legacy that persists in Latvia. The paper thus advances a concept of a profession that is less a coherent grouping of segments in movement that serve different functions and more a chaotic constellation of different factions, each actively contesting the legitimacy of the other.