Patricia Myers, East Carolina University, Greenville Fred Neumann, University of Illinois, Urbana-Champaign Nancy Nichols, James Madison University, Harrisonburg Daniel O'Leary, University of Southern California, Los Angeles Thomas Omer, University of Illinois at Chicago, Chicago Jane Ou, Santa Clara University, Santa Clara
3. Accounting historians remind us that the fundamental task of accounts has been, not to measure wealth and income, but to keep track of debtors, creditors, and cash. This is still their main task; without it, business would collapse. But we have not been content with this immense achievement. Double entry does not demand intellectual brilliance, and its practice and teaching can get boring. So we are now trying to graft extra uses onto it, by promoting it into an aid to management and investment problemsÐsomething for which it was not intended and is not particularly suited. Investment-decision theorists are trying to get more juice out ofthe well-sucked orange. We may wish them well but they have limited expectations.
Fifth, as to the role of selected internationalaccounting firms (the Big Six), the analysis was not comprehensive, as it treated some of them in one country and others in another. One could not find the basis on which the authors made their choice of an internationalaccounting firm for each country and then arrive at their conclusions. One expects that the authors should have an overall description ofthe status of these offices in the nations selected, number of partners, and staff, foreign and nationals, function, volume, signifi- cance, and importance of their work in the fields they carry on, i.e., accounting, auditing, management, consulting, tax, etc. We know the difficulty of obtaining this information, but for the Big Six this should not be a problem.
The fifth chapter analyzes recent trends in public sector accounting. The author emphasizes the role ofthe government as an institution allocating resources, com- plementary to the market. Market forces plus government intervention should cooperate to reach an optimum state ofthe economy. Where the market is an ineffective mechanism, e.g. in education, health care, etc., public sector entities have an important role to play. They should be equipped with adequate accounting systems allowing the improvement of public accountability of managerial and governmental bodies. (The operation of such systems in the European Union could be observed on the occasion ofthe events of March 15, 1999, when the European Commission members resigned from office after the inspection carried out by accounting and auditing experts.) The author discusses the emerging forms of management (managerialism), which represent a major step toward greater efficiency in the public sector. New forms of management in public sector entities require the application ofaccounting systems using both a full accruals basis and the full set of financial statements, including the statement of costs and results. The author argues that this process concerns not only public utilities, but also such entities as a commune, a ministry, or even a central government viewed as a whole (p. 137).
Evans, T.: See Kirsch, R., Laird, K., and Evans, T. Fevere-Marchesi, M.: Audit Quality in ASEAN 121 Galassi, G.: European Financial Reporting, A History xx Ghicas, D., Iriotis, N., Papakaki, A., and Walker, M.: Fundamental Analysis and the Evaluation of IPOs in the Construction Industry xx Graham, R. and King, R.: Accounting Practices and
Theaccounting profession in China is much younger and inexperienced compared to most Western countries. The Chinese Institute of Certified Public Accountants (CICPA) was founded in November 1988. This is the first professional accounting body founded in China since the establishment ofthe PRC in 1949. In most western countries, accounting firms and auditing firms are alike and their associated professional bodies are independent, private, and self-governed organizations not affiliated with the state. The situation in China is quite different. Accounting firms and auditing firms are treated separately. This is evident by the parallel coexistence ofthe CICPA and the Chinese Association of Certified Public Auditors (CACPA) established in 1991. Although CICPA and CACPA are technically private organizations, they are governed and regulated, respectively, by the Ministry of Finance (MOF) and the State Audit Administration (SAA) and their day-to- day functions are directly influenced by substantial government involvement (Chow et al., 1995; Macve and Liu, 1995; Graham, 1996). The establishment of an accounting firm or an auditing firm and the qualifying procedures for becoming a CPA or a practicing auditor were within the discretion of their respective sponsoring body. The parallel coexistence of both accounting and auditing firms has led to many problems in the Chinese public accounting profession such as abnormal competition and duplicate audits (Li, 1991; Li and Lin, 1991). Following a notification issued by the MOF in June 1995, the two professional bodies emerged to form a new professional body by the name of CICPA, under the direct control ofthe MOF. This change has resulted in the unification of name, institution and regulations. While the work ofthe SAA after the merger focuses on governmental audits and audits of state-owned enterprises in compliance with economic laws, the performance ofthe attest function is restricted to the CPAs.
The meaning of TFV is obviously of crucial importance. From a legal point of view, UK courts have placed considerable reliance on expert witnesses in developing accounting case law. The expert witnesses as to the meaning of TFV would likely be composed in large measure of pillars oftheaccounting profession. In this sense, it might therefore be said that TFV means whatever the pillars oftheaccounting profession officially declare it to mean. Successive UK governments have taken the position, at least up to the Companies Act 1989, that the precise definition of what is necessary in order to give a proper impression ofthe financial results and position of a business is a technical accounting matter and should therefore be left to theaccounting profession. Parliament would lay out guidelines, and would establish certain minimum requirements (especially regarding disclosure), but would leave the ``fine tuning'' to theaccounting profession, either through published recommendation or by general practice.
The findings show that the LS of a country plays an important role in financial disclosures. A comparatively higher level of legal protection rights provided to investors and debt-holders in common law countries, as documented by La Porta et al. (1996), results in a broad-based corporate ownership and high level of debt financing. These corporate characteristics are expected to trigger higher information demand from the financial statements users, which is likely to be matched with detailed financial disclosures in common law countries. The regression results also show that there is no significant association between cultural values and financial disclosures in common law countries. We interpret these results to suggest that financial disclosures in common law countries are more influenced by information demand rather than by cultural values. Thus, cultural values have a minimum direct impact on financial disclosures in common law countries. As far as code law countries are concerned, the regression results show that only the cultural value of IND seems to have a significant impact on financial disclosures. Though the coefficients of other three cultural variables are statistically significant, they are not in the expected direction. These results thus provide mixed signals with regard to the impact of cultural values on financial disclosures in code law countries.
Abstract: This study examines the relation between stock prices and accounting earnings and book values in six Asian countries: Indonesia, South Korea, Malaysia, the Philippines, Taiwan, and Thailand. The analysis is based on a residual earnings model that expresses the value ofthe firm in terms of book value and residual income. The model holds for any clean surplus accounting system. However, for finite time horizons, biased accounting may affect model estimates. The six countries examined in this study differ in faithfulness to clean surplus accounting as well as bias (conservatism). The study addresses two questions. First, are there systematic differences across countries in the value relevance ofaccounting, and are these differences related to accounting differences? Second, are there systematic differences in the incremental and relative information content of book value per share (BVPS) and abnormal (residual) earnings per share (REPS) across the countries, and are such differences related to accounting differences? We find differences across the six countries in the explanatory power of BVPS and REPS for firm values. Explanatory power for Taiwan and Malaysia is relatively low while that for Korea and the Philippines is relatively high. These differences are generally consistent with differences in accounting practice; however, since Korean accounting practice is strongly influenced by tax law, we did not expect the high association for Korea. Second, with respect to the incremental and relative explanatory power of BVPS and REPS, we find BVPS to have high explanatory power in the Philippines and Korea but little in Taiwan. In all six countries REPS has less explanatory power than BVPS in most years. Again, the evidence may be interpreted as suggesting accounting practice affects valuation (with Korea again as the exception). Finally, we provide evidence on the sensitivity ofthe timing of comparisons of stock prices and accounting values. We find that comparing prices at year-end (even though annual accounting information has not been released at that time), in general, provides the highest correlation between market and accounting numbers.
and plan participants. Most ofthe regulatory interest has been directed towards disclosure issues. The effect of culture on disclosure practices has been investigated often with the intent of determining the potential for harmonization ofaccounting standards. Zarzeski (1996) found that both the secretiveness of a culture and market forces could affect disclosure behavior. In a study focusing on employee benefits, Needles et al. (1991) hypothesized that regulatory differences across countries would appear in the disclosures for pensions. However, results ofthe study indicated that the overall degree of regulation for a country was not reflected in the pension disclosure practices. The countries studied appeared to exhibit fairly similar disclo- sures. A more recent examination by Street and Gray (1999) notes that relatively few differences exist in pension disclosures pursuant to IAS 19 when compared to those prepared under U.S. GAAP. This finding leads us to question the applicability of pension disclosures as a means to examine any underlying cultural differences.
This paperback volume contains a dozen papers presented at a workshop held in June 1994, which was hosted by the Department ofAccountingofthe Universitat de Valencia and sponsored by Comparative International Governmental Accounting Re- search (CIGAR). Three broad themes permeate the papers: (1) governmental accounting standards and practices in a country (Germany, the UK, Scotland, Italy, Poland, China, and New Zealand) (2) comparative governmental accounting standards and practices (OECD countries and three Scandinavian countries), and (3) the public sector audit and the accountability of governments (UK and Dutch experiences). All ofthe papers are in the English language.
The book gives copyright credit to PricewaterhouseCoopers, for most ofthe descrip- tion and explanation seems to have been taken from, or is heavily based upon, the firm's 830-page handbook, Understanding IAS (see Capsule Commentaries, Vol. 34, No. 3, p. 457). It is not made clear whether material that goes beyond the contents ofthe handbook, which was published in October 1998, was supplied by the author of this volume, by the firm, or by both. The author has not written a preface, so it is not evident how the volume was compiled and also how it was designed for use in university curricula. But it obviously represents an authoritative, detailed source of IASs for any course that makes extensive use of them. The volume would also be very useful to accounting practitioners, chief accounting officers, and financial executives whose clients or companies have a significant international focus.
Another finding is that the external auditors of as many as 44 ofthe 125 companies did not express an opinion on compliance with IASs, including the auditors of all five ofthe Canadian companies, the American company, and most ofthe Italian, Japanese, South African, and Swedish companies in the sample. Rightly, Cairns said this result was ``worrying'' (p. 182).
Some ofthe titles and authors are: ``The Future ofAccounting Education'' (by Warren Allen, chairman of IFAC's education committee), ``Needed: Better Account- ing Concepts'' (by Robert N. Anthony), ``Research Agendas for the New Millen- nium: Celebrating Methodological Diversity'' (by Jane Broadbent), ``Thoughts on Management Accounting and Strategy'' (by Michael Bromwich), ``Future Disclo- sures'' (by Philip Brown), ``Management AccountingÐBeyond 2000'' (by Wai Fong Chua and Jane Baxter), ``The Future of Financial Reporting: Removing It From the Shadows'' (by Thomas R. Dyckman and Stephen A. Zeff), ``Accounting Expertise as the Millennium Turns'' (by Michael Gibbins), ``The Past is the Future: Constructing Public Sector Accountants'' (by Irvine Lapsley and Rosie Oldfield), ``Financial Reporting: The Case for a New Global Model'' (by Nicholas G. Moore, chairman of PricewaterhouseCoopers), and ``Trust in Financial Reporting'' (by Geoffrey Whittington).
This position paper issued last November by CGA-Canada argues for the adoption ofInternationalAccounting Standards in Canada. ``Many interested parties are today proposing that Canadian standards be harmonized with FASB standards, especially because of Canada's close tied with the United States,'' but, the article argues, ``there are many compelling reasons why it would not be prudent for Canada to adopt FASB standards'' (pp. 5±6). The FASB's standards, it asserts, are ``the result of a `closed process' designed to accommodate U.S. interests,'' and ``they have been established primarily for the benefit of investors to the exclusion of other groups in society interested in corporate performance'' (p. 6). Other objections to the influence in Canada ofthe FASB's standards are that they are ``rule-oriented and prescriptive'' and that they respond to the ``very litigious environment'' in the U.S. The article seems to be favorably disposed toward the ``fairness exception'' in IAS 1.
There are too few vehicles for ``think'' papers on accounting and its role in society, and this special edition of Pacific Accounting Review helps fill the void. Even though the new millennium will not arrive until January 1, 2001, the pretext amply justifies this collection of interesting and provocative essays. The journal's web site is at: www-par.massey.ac.nz.
This is an excellent and comprehensive handbook, now on its second edition, on the history, structure, and operation ofthe IASC and covering all ofthe topical areas encompassed by the extant InternationalAccounting Standards (IASs) and Interpretations issued by the Standing Interpretations Committee. The author, David Cairns, is the foremost authority on the subject, and he is to be commended for compiling a work that is rich in description, analysis, and criticism. It will be of great value to all who are interested in how the IASC functions and in furthering the reach of IASs.
The overview, written by the editors, provides a review ofthe complex world of European accounting. It reminds readers ofthe variation in legal frameworks and the controlling power of national institutions, which both drive and limit change in a country's theory and practice, and ofthe two current forces which are driving widespread change. The first of these is the European Union's process of legal harmonization, with the twin objectives of providing a level playing field for enterprises competing within the single market, and the promotion of an efficient, integrated capital market for the Union. The second force for change is the drive toward a global accounting standard through the standards issued by the Interna- tional Accounting Standards Committee (IASC). Cultural influences, including the importance of law, the flexibility within national frameworks, sources of finance, and the impact of tax law, are dealt with succinctly. The developing role ofthe IASC is discussed, but the informational content contained in tables seems not to go any further than 1995. Since that time, there have been significant changes in IASs that are not included, but the point to the discussion is not the current status of IASs. Rather, it is the uncertainty of future rule-setting within Europe, and this is achieved.
The booklet makes clear that the French have called upon the national treasure ofthe French language as the arbiter of which internationalaccounting standards may be used in the consolidated accounts of French companies. It is reported on page 34 that a 1998 amendment to the company law allows a listed company to ``draw up its consolidated accounts in accordance with international standards translated into French.'' As the IASC's standards are already available in a French translation and it is unlikely that anyone will ever undertake to translate the encyclopedic U.S. generally accepted accounting standards into French, the issue has been neatly settled.
. Analysts express a desire for US GAAP/IAS reconciliations not so much because they actually use the reconciled amounts but because they do not trust Swedish accounting as much as US GAAP/IAS. The reconciliation is viewed as an ``insurance policy'' against the potential for poor quality in the Swedish accounting system. Still, analysts' reports show that adjustments are made based on the reconciliation information.