Professional Firms Research Articles

THE CHALLENGES OF PROFESSIONAL ACCOUNTING PRACTICES IN NIGERIA PRIVATE SECTOR WITH RESPECT TO FINANCIAL FAILURES IN RECENT TIMES

This paper seeks to examine the challenges of professional accounting practices in Nigeria private sector with respect to financial failures in recent times. Survey technique was used and a total sample of one hundred and twenty questionnaires were sampled, purposive sampling technique was used to select one hundred and twenty (120) auditors, accountants, financial managers/directors and other management staff forms the bulk of the entire respondents. Descriptive statistical techniques such as frequency distribution and percentages response analysis were used to analyze data. Results however, revealed that majority are of the opinion that there is yet a level of quality in the financial reports as pertaining to the private sector. It also indicates that the business environment does not permit accountants independence overall. It therefore established the fact that the private sector has not been up to the task of meeting the user’s expectation in their financial reports. It thus implies that accountants are party to inadequacies of financial statements in the private sector. It thus implies that professional accounting practices are yet relevant in the financial reports of the private sector. It thus implies that professional accounting practices are identified with certain deficiency that affects disclosure in corporate organizations. This confirmed the depth of corruption and inefficiency in fund management of the private sector. This indicates that the reason for the shortfall in financial reporting is non conformity with professional accounting practices. This indicates that the accountants also contribute to the increasing financial failures of the private sector. This implies that the business environment of the private sector have an influence on the accountants. This confirms the extent at which these qualities reflect in private sector financial reporting. Based on these findings, it was recommended that emphasis on conformity with professional accounting practices. Also, to combat unethical practices by accountants and professional firms, there is a need to educate company executives, policy-makers and the public about the human costs of anti-social and unprofessional practices, as they deprive ordinary Nigerian citizens of their human and social rights and the accounting profession in Nigeria must therefore continue to monitor development in the external and internal reporting environments through its audit, investigations and forensic accounting faculty and respond adequately.

Researching leveraged finance part 2

Leveraged finance is an important market for professional advisory firms such as investment banks, financial sector law firms and the ‘Big 4’ consultancies. As well as researching the leveraged finance market, researchers and information professionals in these firms are often asked to find the underlying documentation for high yield bonds and leveraged loans. In this article Ian Hunter discusses the availability of these documents and considers the best sources.

Transnationality – Sharpening the Integration-Responsiveness vision in global professional firms

The “transnational” (Bartlett & Ghoshal, 1988, 1989) has become a popular organizational construct, and is increasingly relevant to contemporary global firms. However, there is very little empirical research on the organizational aspects of this form, and there is a lack of knowledge regarding the transnational aspects in professional service firm theorizing. Building on some fundamental organizational and international management literature, as well as an understanding of contemporary global professional firms, we expect that the transnational will exhibit specific organizational structural features with both high levels globalization and local responsiveness. We then proceed to describe an exploratory study of ten global engineering firms—this context is important since engineering firms are far less tied to national (local) jurisdictions than are other professional firms. Our findings reveal that the leadership/management areas were largely globally integrated, the hiring/HR functions were singularly locally oriented, while the other organizational areas we studied – namely structure/process and project teams – exhibited both global and local features. These findings extend professional service firm theorizing, exposing the balance between axes of specialisation, norms of reciprocity and customer management system; to include organizational features that allow a balance between the globally integrated and locally responsive.

Researching leveraged finance part 1

Leveraged finance is an important market for professional advisory firms such as investment banks, financial sector law firms and the ‘Big 4’ consultancies. As such, researchers and information professionals in these firms are often asked to research the market. This may be to produce a list of leveraged finance deals in a particular industry or jurisdiction, to find the size or composition of the market or to find expert commentary, including predictions for the future. In this article, Ian Hunter explains the ways in which leverage finance is defined, describes the leading sources and highlights some caveats to bear in mind when relying on the sources.

Internal controls and fraud – empirical evidence from oil and gas company

Purpose The purpose of this study is to examine the type of internal control weaknesses and its impact that leads to fraud activities in an oil and gas company, which is rarely found in empirical research. Design/methodology/approach A case study approach was taken to investigate and analyse the fraud incidents to the deepest understanding. A mixed method of data collection, specifically document analysis and interviews, was used. Findings The study found that internal control weaknesses can be major contributing factors for fraud to be committed. Poor supervision and improper documentation process provide opportunity to misappropriate the assets, worst off if it includes several people that cooperate to conduct those illegal malpractices. Research limitations/implications The results provide further confirmation of the fraud triangle theory on the causes of the fraud, i.e. opportunity because of weak internal control. It also validates with many prior studies conducted by global professional firms such as KPMG, PricewaterhouseCoopers and Association of Certified Fraud Examiners on fraud and its related causes and implications. This study, however, was conducted on only one company with limited number of interviews. Practical implications This study provides some recommendations to improve weak internal control, which in turn will reduce opportunities of fraud committed in the company. Originality/value This study is original, as it focuses on a company that operates in the highly specialized industry, i.e. oil and gas, which is rare in fraud literature, particularly in developing markets such as Malaysia. It has examined various documents and reports of employee fraud that are generally difficult to be accessed by researchers to be finally published in an academic journal. The findings of this study are inferred from direct access of company documents that are private and confidential.

The causes, impact and prevention of employee fraud

Purpose The purpose of this paper is to investigate the causes and impact of employee fraud, focusing on one particular industry, namely, the automotive industry. Design/methodology/approach One company was selected as a case for the study. Qualitative data analysis was used for the study, with two techniques for data collection. First was the content or document analysis on various reports, such as employee fraud reports and records of disciplinary action, and second was a series of interviews with employees from different levels and various departments of the company. Findings This study found that the most popular type of fraud is misappropriation of assets, including theft of cash and inventories. No significant differences were seen in terms of fraudster position, as they can come from both the lower and the executive level. However, majority of the fraudsters come from the operational and sales department. This study also found that majority of the fraudsters in the case study were male, new employees and young adults. Their motivations to commit fraud include lack of understanding about fraud behavior, opportunity to commit fraud and lifestyle and financial pressure. Research limitations/implications The results provide further confirmation of the Fraud Triangle Theory and Fraud Diamond Theory on the causes of the fraud. They are also consistent with much prior research and surveys conducted by global professional firms on fraud and its related causes and implications. This study, however, was conducted on only one company with several series of interviews and three years of document analysis. Future research should collect and analyze data from a higher number of companies with more respondents for interviews and longer period for document analysis to get more accurate results. Practical implications This study provides some recommendations for fraud prevention in the future based on real fraud cases and those that involved managing cases up to and including disciplinary decision. These include closed supervision, fraud awareness training, clearer job descriptions, cultivation of a pleasant working environment and improved security control. Social implications This study found that some of the causes of fraud include social factors like lifestyle and financial pressure due to low income. Policy adjustments, such as an effort to push people beyond the poverty line with higher minimum wages, need to be made to prevent low-income workers from seeing their company as another source of illegal income. Originality/value This study is original, as it focuses on a company that operates in the automotive industry, which is rare in fraud literature, particularly in developing markets. In addition, the company is new, so analysis can be conducted on how the company evolved and learned from the fraud analysis for prevention in the future. Furthermore, this study used two techniques of data collection, so that verification of the findings may be made for better reliability.

A foot in both camps: role identity and entrepreneurial orientation in professional service firms

Purpose– Professional service entrepreneurs (PSEs) paradoxically practice their profession in highly institutionalized contexts that require intense socialization, while also enacting another role as an entrepreneur. Activities consistent with entrepreneurship may be unnecessary for – and possibly contradictory with – activities consistent with professional roles. The purpose of this paper is to address the question of how two highly important role identities (professional and entrepreneurial) relate to entrepreneurial orientation (EO) in professional firms.Design/methodology/approach– Using a survey methodology, the authors measure entrepreneurial and professional role identity importance, and PSE’s perceptions of firm-level EO, using a sample of 138 medical practitioners who own and operate their own small-to medium-sized professional practices. In this paper, the authors examine the associations of the importance of these identities, and the relative importance of one to another, with EO.Findings– The authors find that a PSE’s entrepreneurial role identity importance is positively related to the EO dimensions of risk taking and innovativeness, while professional role identity importance is negatively related to risk taking. Additionally, the authors find that the degree of relative importance (centrality) of an entrepreneurial role identity to a professional role identity is related positively to the EO dimensions of risk taking, innovativeness, and proactiveness.Research limitations/implications– This is a cross-sectional study. As such, the authors examine associations rather than a process. The sample is limited to professional medical practitioners in the USA who own and operate their own practices.Originality/value– This paper helps to better understand why some professional firms are more entrepreneurial than others. The findings suggest that, even in the conservative context of professional services, the PSEs entrepreneurial role centrality is consistent with the EO of the firm’s strategies.

Discretionary policy, strategic complementarity and tax evasion: a strategic analysis of the Italian audit mechanism

Underlying this work is the idea that there is a problem of strategic complementarity of individuals who choose to evade, which results from the discretionary policies of governments and the strategic implications of the Studi di Settore (Sector Studies), the mechanism used in Italy to evaluate the income (in reality, the turnover) of some professional categories and small firms. In the Italian case, policy discretion and the Sector Studies lead to a failure of the coordination mechanism of taxpayers and confer a strong advantage for the coordination mechanism of tax evaders. The outcome is a coordination failure where individuals converge to the least efficient equilibrium from a social perspective.

Founder CEOs and Innovation: Evidence from S&P 500 Firms

Using a novel data set on founder CEOs in S&P 500 firms for the period from 1993 to 2003, this paper investigates the relationship between founder CEOs and innovation. While entrepreneurs as individuals have long been considered change agents, it is not clear whether entrepreneurs as managers of large organizations may facilitate organizations’ innovation performance. Our main results show that the existence of a founder CEO is correlated with a 31 percent increase in the citation-weighted patent count before we control for R&D spending and a 23 percent increase in the citation-weighted patent count after we control for R&D spending, suggesting that founder CEOs are more effective and efficient innovators than professional CEOs. As boundary conditions of the relationship, we find that the positive effect of founder CEOs on innovation is stronger in more competitive and innovative industries. Furthermore, our results suggest that founder CEOs are more likely to take their firms in a new technological direction. Finally, we provide evidence that the innovations of founder CEO-managed firms create more financial value than the innovations of professional CEO-managed firms. Our findings are particularly convincing because the results are consistent across various robustness checks that control for potential selection issues and other endogeneity concerns.

Founder CEOS, Target Selection and Acquirer Returns: Evidence from IPO Firms

Drawing from the literature on entrepreneurial overconfidence and M&As, we argue that founder CEO-managed firms perform worse than professional CEO-managed firms when they participate in M&A transactions. We test our predictions using a sample of acquisitions by newly listed US public firms from 2000 to 2012. Consistent with our arguments, we find that acquisitions led by founder CEOs experience lower abnormal returns compared with acquisitions led by professional CEOs. We also find that the negative relationship between founder CEOs and abnormal returns is amplified by CEOs’ M&A experience. We rule out alternative interpretations, including private benefits of control and founder CEOs’ potentially inferior M&A skills. The results are consistent across various robustness checks that control for potential selection issues and other endogeneity concerns.

Societal Impact of CSR Initiatives of Companies in Kerala

The study adopts qualitative approach to find out the CSR spending pattern by the companies in Kerala and the main initiatives adopted by the companies in Kerala and the impact these initiatives have on the society and environment with reference to the archival documents collected from multiple sources including the annual and CSR reports from these companies, reports prepared by the researchers and professional firms. It was found that even though the number of companies for which the CSR rule is applicable is less in Kerala, the impact of CSR initiatives executed by these companies are enormous on the society. It helped to improve the quality of life by supporting hospitals, schools, efficient water and energy management, construction of roads and buildings, pollution control, sophisticated methods for waste management, new technologies and quality seeds for farming, sustainable practices in the operations and processing activities.

Profile of Small Businesses Among Chinese in Vancouver

Historically, both market conditions and ethnic resources explain why the Chinese in Canada thrived in retailing and food services. More recent theories stress how changes in opportunities and relations under globalization shape immigrant business formation and practices. Canada revamped its immigration policy in response to the need for capital and skilled labour in the global age. Increased Chinese immigration in the 1980s from Hong Kong, and in the 1990s and after from PRC, substantially expanded the Vancouver Chinese population and the Chinese consumer market. By the 1980s, Chinese small businesses in Vancouver had proliferated beyond Chinatown-based retailing and food services to include professional firms and upscale restaurants. Using advertisements in The Sing Tao Daily, this study found that a new niche of small Chinese businesses in trades and construction has emerged, accounting for 85 percent of advertising in the Small Business Advertisement Section, and 15 percent of all advertisements in the Daily. The analysis suggests that the development of this new niche has been prompted by economic opportunities that are best seen as driven by demographic and market forces in the age of global migration.

The Awareness of External Auditors and the Management of Kuwaiti Listed Companies on Determinants of Audit Fees: An Exploratory Study

<p>This paper explored the factors that influence audit fees determinants in the Kuwait audit market. A questionnaire was distributed to a number of audit firms operating in the Kuwaiti market and Kuwaiti companies listed on the Kuwait Stock Exchange (KSE). The results indicated that all factors show a Likert-scale score of greater than 2.5, suggesting that all the factors included in the questionnaire influence the audit fee determinants. Among the 25 factors included in this study, audit firm brand name, time spent completing a given job and auditors experience were the most important factors influencing audit fees determinants in the Kuwait audit market from audit firm and companies perspective. In contrast, company age, client company location and audit firm location were the least important factors influencing the determinants of audit fee in Kuwait from audit firm and companies perspectives. The results of the t-test revealed that there are significant differences in the mean ranking of some of the factors assumed to determinant the audit fee in Kuwait audit market between the two groups of respondents (audit firms and companies). The findings presented in this study may help professional accounting associations and both audit firms and companies to better understand the factors influencing audit fee determinants in Kuwait audit market.<strong></strong></p>

People Passion programme: Implementing an innovative workplace learning culture through professional development – the case of KPMG Thailand

With a vision that changes within the organisation could only happen through people, Chief Executive Officer Ms. Kaisri Nuengsigkapian led the creation of a successful workplace learning programme, People Passion within KPMG Thailand, which is part of a global network of professional firms providing audit, tax and advisory services. This article employs a case study methodology to describe the culture, the processes and the activities utilised such as creating a common culture, using a “strengths finder tool”, and encouraging individual growth. To develop the case study, data were collected from employees through in-depth interview, observations and document analysis over a four-year period. The findings of the study show that People Passion is effective in reducing communication barriers within the chain of command, between employees and top management, and in encouraging employees to construct group identity and transform themselves. People Passion also serves as a differentiation tool which allows KPMG Thailand to attract new employees, despite accountant scarcity and high competition from other auditing firms. The article concludes with a discussion of issues of transferability and leadership with this programme.

Comparing Performance and Impediments of Construction and Professional Disadvantaged Business Enterprises in Transportation

Disadvantaged/Minority/Women business enterprises (DBE/MBE/WBEs) in construction and professional fields face several impediments that hinder their business growth and overall performance. In this study, a survey was conducted to compare the importance of the factors that most affect business performance of these business enterprises, the impediments they face, and the advantages and disadvantages of being a DBE/MBE/WBE; the survey was conducted with construction and professional firms in the transportation industry. When comparing responses from 259 business enterprises, the results indicated that construction firms placed significantly higher importance to financial issues and safe work practices than professional firms. In addition, construction firms ranked lack of technology, an unskilled work force, and an expensive work force as significant impediments to their business success as compared to professional firms. No significant differences were detected ranking the advantages of being DBEs. However, regarding the disadvantages of being a DBE, construction firms ranked excessive bid shopping significantly higher than professional firms. The respondents provided a set of recommendations to improve the status of DBEs for use by government policy-makers/owners and prime contractors.

The Value of Audit and the Economic History of Market

We argue that the value of audit consists of three components whose relative importance shifted over time due to the changing economics of business. The three components are: (1) detecting fraud, (2) as an element of corporate governance, and (3) facilitating the smooth functioning of capital market. Fraud detection is important in the early history of audit, but the rise of risk-based auditing and increased complexity of business diminish that role. The development of capital markets increases the importance of audit’s role in enhancing corporate governance and its contribution to the efficiency of capital market. However, historical legacy give rise to expectation gap – between the public and the professional – of the value of audit. Professional accounting body and audit firms should educate the public of the value of audit. This paper contributes to this education.

Abusive Tax Avoidance and Institutional Corruption: The Responsibilities of Tax Professionals

Professionals and professional firms provide a range of taxation-related services, from advising clients on their tax obligations to designing and implementing tax-reduction strategies. Provided that tax professionals respect the letter of the law, are all such tax services morally permissible? We answer this question in the negative by distinguishing between institutional integrity and institutional corruption in fiscal arrangements; tax services that promote a situation of fiscal institutional corruption are impermissible, given that they severely inhibit the ability of taxation institutions to collect revenue efficiently and equitably. The professional facilitation of abusive tax avoidance — explicit tax reduction that is contrary to the spirit or intent of the law — is a particularly prominent aspect of fiscal institutional corruption. We illustrate the role of professionals in designing, promoting and implementing abusive tax avoidance strategies through several case studies, including the Wyly offshore network and the KPMG tax shelter scandal. In addition, we claim that tax professionals have specific responsibilities to help remedy institutional corruption associated with abusive tax avoidance. To argue this thesis, we present general principles for assigning remedial responsibilities to particular agents. We then apply those principles to determine what three major groups of tax professionals — accountants, lawyers, and financial experts — ought to do about abusive tax avoidance.

A Longitudinal Examination of Print Advertising by Professional Accounting Firms

This study provides a longitudinal analysis of print advertising by professional accounting firms for the period 1988 to 2012. Findings indicate that the most common messages of recent ads pertain to general image of the firm, auditing services, and tax services. The majority of ads in the most recent time period include a web address. Print advertisements were used by firms of all sizes in all three time periods examined. Print advertising would appear to continue to be an effective way to market a CPA firm's services to potential clients.

Does education signal ability in Ghana? An analysis comparing wage earners with the self-employed

When education signals underlying abilities, income returns to education may not reflect true increases in productivity. This may be a particular concern in developing countries, where education is often prescribed as a major path to escaping poverty. Unfortunately, because education signalling occurs when underlying worker characteristics are difficult to observe, it is extremely difficult to obtain estimates of education signalling. This study uses Spence's (2002) model of signalling to develop a testable hypothesis: in the presence of education signalling, wage earners will see a higher return to education than the self-employed doing similar work. Using the 2005-2006 round of the Ghana Living Standards Survey, the study finds that returns to education are consistently higher for those in the wage-earning sector, which supports an education signalling hypothesis. Signalling appears to be more prevalent at higher levels of education and in large, unionised, and professional firms.

The value of audit and the economic history of market

We argue that the value of audit consists of three components whose relative importance shifted over time due to the changing economics of business. The three components are: 1) detecting fraud; 2) as an element of corporate governance; 3) facilitating the smooth functioning of capital market. Fraud detection is important in the early history of audit, but the rise of risk-based auditing and increased complexity of business diminish that role. The development of capital markets increases the importance of audit's role in enhancing corporate governance and its contribution to the efficiency of capital market. However, historical legacy give rise to an expectation gap - between the public and the professional - of the value of audit. Professional accounting body and audit firms should educate the public of the value of audit. This paper contributes to this education.