School of Accounting and Commercial Law – Te Kura Kaute, Ture Tauhokohoko: Centre for Accounting, Governance and Taxation Research

Permanent URI for this collectionhttps://ir.wgtn.ac.nz/handle/123456789/21217

See the Centre for Accounting, Governance and Taxation Research website for more information about the centre or the School of Accounting & Commercial Law website for their degrees, people, courses, contact details, news and events, and research.

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Open Access
Accountability and Public Governance in New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2018) Dormer, Rodney; Ward, Sarah
This paper provides an insight into an already very substantial, but increasing, body of literature relating to accountability and public governance. Given the size and diversity of that literature what follows is a summary of the main themes or challenges that are currently emerging. Within the literature there are numerous attempts to provide a definition of the concept of accountability. The dominant, economically framed, discourse is reflected in Bovens (2007) frequently cited definition as: … a relationship between an actor and a forum, in which the actor has an obligation to explain and justify his or her conduct, the forum can pose questions and pass judgement and the actor may face consequences. (p. 450) Thus New Public Management models of public governance emphasise hierarchical arrangements of contractual, or quasi-contractual, relationships between a principal and an agent. However, in the twenty-first century new models are emerging that seek to respond to the challenges of heterarchical, networked organisational arrangements. Central to these challenges is “the problem of many eyes” as actors are confronted with multiple forums with different objectives and expectations and differing levels of power. Accountability is not then simply vertical, but is also horizontal and diagonal. To the extent that public governance moves beyond accountability for inputs and outputs, to accountability for outcomes (or results) further challenges of measurement and attribution arise. Again, the literature on performance measurement in the context of the public sector, particularly on the difficulties of defining and measuring performance, is very extensive. But whilst for some functions of government it may be possible to pre-define and subsequently measure both the work and desired results involved, for many functions that is not the case (Wilson, 1989). The practical result has been a continued focus on, management of, and accountability for inputs. Even when able to be measured, the results that governments seek to achieve are seldom the consequence of the activities of a single agency and will seldom be realised in the context of a single budgetary horizon, electoral cycle, or even a generation. As Lowe (2013) has suggested: The key conceptual flaw of this approach is that it is based on the idea that outcomes are the result of a linear process from problem, through intervention to positive outcome. (p.214) To the extent that cause and effect is multi-systemic involving the contributions of a number of, government and non-government, organisations, models accommodating joint accountability are required. Given the plausibly inequitable nature of a model in which individual contributions can not be identified, understanding the distinct but inter-related nature of accountability and responsibility becomes important. A further challenge to the dominant conception of accountability lies in its utilitarian conception of the natural world as a series of resources able to be owned (by individuals) and utilised to provide services and benefits to humans. However, alternative cultural perspectives, including that of te Ao Māori, imbue elements of the environment with a life force, enduring identity and rights. As such they are also due accountability. Such conceptions also inform an increasingly important broadening of the, normally economically framed and financially defined, judgements of organisational (and governmental) performance. They also involve a less transactional and longer-term perspective that encompasses the stewardship role of government to pass on to future generations a strong economy, well-functioning society and a healthy environment. A focus on societal and environmental, as well as economic, criteria is not new but has been given more currency by the United Nations Development Goals, the Global Reporting Initiative and the International Integrated Reporting Council. Broader conceptions of wellbeing and thus a broader framework by which governments should be held accountable, have been discussed by Sen (as basic freedoms) and Nussbaum (as capitals). They have also informed the development of the New Zealand Treasury’s Living Standards Framework. Although, arguably the operational and accountability impacts of that framework have, as yet, been limited, recent announcements by the new Government suggest that may change. Finally, the challenges to accountability in an increasingly dynamic digital environment include: • opportunities to use different forms of information, including narrative and pictures, delivered in a range of different ways; • rather than the passive provision of information, opportunities for public agencies to engage in participatory process that support a well functioning democracy; • the ability to both broaden the scope and accelerate the speed of those processes; and • the potential to facilitate distributed governance across government agencies and between those agencies and service providers in the community and private sectors. As noted, this paper provides an overview of the key challenges currently emerging from the substantial literature on accountability and public governance. It does not propose any solutions for those challenges but will hopefully support a constructive debate on how systems of public accountability might be designed differently in the future.
Open Access
Agency Theory and Trust Ownership of Shares
(Te Herenga Waka—Victoria University of Wellington, 2005) Emanuel, David; van Zijl, Tony
The problems of agency theory related to security valuation are normally discussed in the context of “owner-managers” and “outside shareholders”, and/or equity-holders and debt-holders. In this paper we discuss agency problems that emerge when there is only one shareholder (and no debt), but where the shareholder is a trust with separate income and capital beneficiaries. Trust ownership of this sort is not uncommon. The agency problems emerge as the two classes of beneficiaries have claims on cash flows that occur at different times, with income beneficiaries having claims until “capital” is transferred to the capital beneficiaries. The agency problems that are discussed are dividends, risk shifting, capital structure, cost capitalization, and investment policy. In all cases agency problems arise, and in some respects the agency problems are more pervasive than in the more “orthodox” settings.
Open Access
Analysis of Change in Present Value Measurements
(Te Herenga Waka—Victoria University of Wellington, 2005) Bradshaw, John; Khanna, Bhagwan; Roush, Melvin; van Zijl, Tony
In recent years, the leading standard setters for financial reporting have shown an increasing preference for fair value measurement. However, present value is often the only acceptable method of estimating fair value and therefore the actual result of the swing to fair value is likely to be increased use of present value in financial reporting. This paper addresses the issue of interpretation of a change in present value between successive reporting dates and shows that the change can be analyzed by use of the familiar variance analysis framework widely used in management accounting.
Open Access
The Annual General Meeting as an Accountability Mechanism
(Te Herenga Waka—Victoria University of Wellington, 2005) Cordery, Carolyn Joy
This review of Annual General Meetings (AGMs) as they evolved historically in English parishes and early joint-stock companies shows the manner in which they provided valuable opportunities to fulfil organisational accountability. AGMs enabled members to call elected governors to account and, in generating forums for organisational construction, supplied models which were foundational in early company law. As face-to-face meetings, AGMs were heterogeneous and presented non-financial information to augment publicly available financial information. Whilst low attendance at AGMs indicates apathy and modern technological advances may enable their replacement, recent calls to revise the legal requirement for an AGM have not gained traction. This paper therefore suggests a recommitment to the process of AGM accountability as practised in early public sector and profit-oriented organisations. This will enable today’s organisations to utilise the potential of the AGM as a formal and transparent mechanism to deliver accountability.
Open Access
Are All Independent Directors Created Equal? Do Their Professional Backgrounds Influence Firms’ Financial Disclosures? Evidence From Biotechnology Firms
(Te Herenga Waka—Victoria University of Wellington, 2015) Enache, Luminita; Parbonetti, Antonio; Srivastava, Anup
The empirical evidence on the association between board structure and firms’ voluntary disclosures is mixed and controversial. We extend the literature by arguing that independent directors do not represent a homogeneous group of people, as previously considered. We hypothesize that the professional backgrounds of independent directors shape their assessments of costs and benefits related to disclosure of information that potentially reduces agency costs but also lessens firms’ competitive advantages. Using hand-collected data from a sample of biotechnology firms, we find results consistent with this idea. Particularly, firms whose independent directors provide links to the wider social community, but lack functional or business experience, more frequently disclose proprietary information. We find opposite results for the firms whose independent directors possess significant functional expertise. We conclude that all independent directors are not equal in their influence on firms’ disclosure policies. Our study has several policy implications.
Open Access
Auditor Independence and NAS: a Comparative Analysis of Selected Current Regulatory Frameworks
(Te Herenga Waka—Victoria University of Wellington, 2005) Islam, Ainul; van Zijl, Tony; Karim, Waresul
There is a widespread public perception that the provision of NAS undermines auditor independence. In order to protect auditor independence, the regulatory frameworks of many countries include regulations and guidelines which auditors are required to observe. This paper provides a comparative analysis of selected regulatory frameworks. Regulatory frameworks, with respect to independence, make distinctions between independence of mind and in appearance. It is clear from the analysis of the frameworks that the provision of NAS can threaten both independence of mind and in appearance. There are some NAS for which no safeguard seem to be adequate and which are therefore subject to prohibition. On the other hand, for some nonaudit services the threats are not so clearcut, and auditors are then required to apply professional judgment so that the seriousness of the threats is balanced against the effectiveness of specified safeguards.
Open Access
Board Ethics and Auditor Choice – International Evidence
(Te Herenga Waka—Victoria University of Wellington, 2010) Houqe, Muhammad Nurul; Dunstan, Keitha; Karim, AKM Waresul; van Zijl, Tony
This study examines whether firms' auditor choice relates reflects the strength of board ethics. Using a large sample of firms 132,853 firm year observations from forty-six countries around the globe. and controlling for a number of firm- and country-level factors, we find that firms in countries where “high board ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the relation between board ethical values and auditor choice is mitigated by the firm's board size. These results establish an indirect link between board ethics and financial reporting quality through the firm's choice of auditor.
Open Access
Business strategy and earnings quality
(Te Herenga Waka—Victoria University of Wellington, 2013) Houqe, Muhammad Nurul; Kerr, Ryan; Monem, Reza
Using the Miles and Snow (1978) strategy typology, this study investigates whether business strategy is associated with the quality of reported earnings. In a sample of U.S. listed firms, we predict and find that defender-strategy firms are associated with higher levels of earnings management and prospector-strategy firms are associated with higher levels of accounting conservatism. However, this relation between business strategy and earnings quality is altered during high and low economic growth periods. In high-growth periods, while prospector firms exhibit lesser accounting conservatism, defender firms exhibit lesser earning management. In low-growth periods, the prospector firms become more conservative in reporting while the defender firms engage in more aggressive earnings management. Our findings provide direct evidence of the link between business strategy and earnings quality.
Open Access
Can A Poll Tax Ever Be Acceptable? - Evidence from Colonial New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2008) Fowler, Carolyn; Smith, Andrew M C
Poll taxes, while simple in concept, have a regressive effect and unsurprisingly are usually unpopular for this reason which is why they are not commonly used today. Poll taxes were imposed in 19th century New Zealand, with one of the earliest being a form of poll tax imposed by the Nelson Province in 1856 to fund public education. Despite the inherent shortcomings of a poll tax, the Nelson education tax was eventually accepted and defended by the community and produced revenue to fund public education. This paper examines the history of the Nelson poll tax to determine why it was successful when elsewhere, both in earlier and later times, poll taxes have been the focus of considerable dissent which has eventually lead to their demise. Among other reasons, the poll tax revenue being ear-marked for a specific purpose that was perceived by the wider community as important was a major factor in the success of the tax.
Open Access
Can Budgetary Slack Still Prevail Within New Zealand’s New Public Management?
(Te Herenga Waka—Victoria University of Wellington, 2007) Hills, Joanne; Bradshaw, John; Khanna, Bhagwan; Hunt, Chris
The New Zealand (NZ) Government began its public sector reforms in 1984. The purposes of the reforms were to build a more open public sector, a plainer and clearer way of reporting, emphasising accountability and transparency (Wallace, 1993). A central focus of the reforms was to change the accounting culture by adopting accrual accounting and a 3 year budgeting and planning management cycle within Government Ministries. By investigating whether or not budgetary slack is used as a risk management strategy in NZ’s new public management (NPM) control setting, this study examines how successful the reforms are, more that 20 years after their inception. Budgetary slack is the excess requirements for resources or understatement of productive capability. Slack allows a budget to be easily achieved and gives a false perception of managers’ performance, defeating the basic purpose of budgets. As little research has been conducted on this phenomenon in NZ’s NPM, this study was undertaken. Using budgetary slack and earnings management literature, an empirical model is developed to examine whether the potential for budgetary slack exists in NZ Government Ministries. The five Ministries of: Health, Education, Transport, Justice, and Building & Housing, were chosen for this study. They provide a mix of sizes and are very topical for some specific reasons within the political arena. Results of this study will be of interest to the Government, public sector managers, taxpayers, other stakeholders, and academics.
Open Access
Capital Gains and the Capital Asset Pricing Model
(Te Herenga Waka—Victoria University of Wellington, 2001) Lally, Martin; van Zijl, Tony
This paper shows that, in the presence of differential taxation of ordinary income and capital gains, use of the Officer (1994) version of the Capital Asset Pricing Model can result in significant misestimation of the cost of equity capital. In particular, with a high dividend yield, the cost of equity may be underestimated by four percentage points. Underestimation is of particular significance in the context of setting output prices for regulated utility firms.
Open Access
Carbon Risk and Dividend Policy in an Imputation Tax Regime
(Te Herenga Waka—Victoria University of Wellington, 2017) Nguyen, Justin Hung; Balachandran, Balasingham
Australia ratified the Kyoto Protocol in December 2007, which mandates the country to reduce carbon emissions, thereby exogenously affecting firms in highest-emitting industries, or polluters. We examine the role of carbon risk in dividend policy and how this effect varies as between imputation (paying franked dividends) and classical (paying unfranked dividends) tax environments in the unique experimental setting in Australia. We find that the probability of paying dividend and dividend payout ratio are lower for polluters relative to non-polluters subsequent to the ratification. We further document that the post-Kyoto dividend reduction of polluters is driven by their relative increase in earnings uncertainty. However, the negative effect is weaker for firms that pay franked dividends than otherwise. The evidence suggests a causal influence of carbon risk on firm dividend policy, and highlights the significance of imputation tax environment on the impact of carbon risk on dividend policy
Open Access
The Case for the Use of International Financial Reporting Standards in New Zealand: a Briefing Paper Prepared on Behalf of the New Zealand Securities Commission
(Te Herenga Waka—Victoria University of Wellington, 2003) Dunstan, Keitha
The objective of this paper is to examine the issues pertinent to the consideration of the proposal made by the Accounting Standards Review Board (ASRB) that New Zealand adopt the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The purpose of this examination is to provide input to the New Zealand Securities Commission (the Commission) to assist them in their deliberations on making recommendations on the future development of the financial reporting infrastructure for New Zealand’s securities markets. Similar to securities regulators across the world, the Commission has an interest in promoting a strong securities market where the financial reporting framework and its supportive infrastructure results in high quality, transparent and comparable financial reports. There are four identifiable components of the infrastructure that drive the quality of financial reporting in New Zealand. 1) Financial reporting standards; 2) Corporate governance; 3) External audit; 4) Enforcement. The scope of this paper is limited to an assessment of the first of these components financial reporting standards; with an emphasis on an analysis of the consequences of any decision to adopt IFRS in New Zealand. The paper provides a framework for assessing the viability of the IASB reporting framework as an acceptable standard-setting regime for New Zealand that is based on: 1) The quality of IFRS standards; 2) The quality of the IASB standard-setting process; 3) The extent of international acceptance of IFRS.
Open Access
Charity Financial Reporting Regulation: a Comparison of the United Kingdom and Her Former Colony, New Zealand
(Te Herenga Waka—Victoria University of Wellington, 2005) Cordery, Carolyn Joy; Baskerville-Morley, Rachel F
Charities are becoming more highly regulated worldwide and yet they are subject to diverse, country-specific, financial reporting standards. New Zealand is a jurisdiction that has treated all sectors alike in its approach to the financial regulation of charities, whilst the United Kingdom has, for some time, separated the regulation of charities from other entities. This paper provides a comparison of the histories of the evolution of regulation for charity reporting in the United Kingdom and New Zealand. The current process of international harmonization in both jurisdictions is premised on the principle that accounting conceptual frameworks should not be jurisdiction-specific, but charities have proved to be an exception. We suggest in this study that this exception is attributed to different drivers resulting in regulatory distinctions in two otherwise similar jurisdictions. Without persisting in the maintenance of sector neutrality, the inevitable divergence increases the load on preparers, attesters, and users and may lead to lower levels of accountability and transparency.
Open Access
Child Welfare’s Iron Cage: Managing Performance in New Zealand’s Child Welfare Agency
(Te Herenga Waka—Victoria University of Wellington, 2011) Dormer, Rodney
The purpose of this paper is to explain the performance management practice in use within one of New Zealand‟s public service agencies – Child, Youth and Family Services. These practices are described with reference to New Zealand‟s formal model of public sector management and the professional social work model understood by the majority of the agency‟s staff. The paper draws on recent research into performance management practices in nine of New Zealand‟s public service agencies that included Child, Youth and Family Services. This involved a number of semi-structured interviews with managers and staff from the national, regional and local levels of each agency together with a review of relevant documentation. It is argued that performance management practices exist on a continuum representing the „rationality of control‟ which extends from a regulative control model of rules and fixed targets to one that is more reliant on shared understandings, learning and flexible targets. It is further suggested that the institutional structures underlying this continuum determines the extent to which performance management practices within individual agencies are loosely coupled with those used for purposes of external accountability. The paper highlights the tension that exists in an organisation that encompasses the substantive logic of “a values based profession” (Ronnau, 2001) but which is bound by the formal rationality implicit in its system of external accountability that, it has been claimed, “reduces a complex reality to something simplistic and one dimensional” (Tilbury, 2004). It, therefore, argues that the formal model of performance measurement and management of the public service should encompass the broader information and rationality used by managers within public service agencies.
Open Access
Competing Discourses in Social and Environmental Accounting: an Overview of the Conceptual Landscape
(Te Herenga Waka—Victoria University of Wellington, 2004) Brown, Judy; Fraser, Michael
In recent years there has been a marked resurgence of interest in the areas of corporate social responsibility (CSR) and social and environmental accounting (SEA) among business, Governments, public policymakers, investors, unions, environmentalists and others. While at one level there appears to be widespread agreement that CSR and SEA are worthy topics of attention, different groups have very different understandings of these fields. This article provides a meta-analysis of these differences by comparing three broad approaches to SEA: the business case, stakeholder-accountability and critical theory approaches. It also responds to concerns a number of commentators have expressed regarding the current dominance of 'business case' discourses. While not seeking to impose on readers a 'correct' way of viewing SEA and CSR, exposure to competing perspectives is viewed as one way of challenging us to think more reflectively about the frames available to us and their implications for the social realities we construct, embed or seek to change.
Open Access
Conceptual Framework Coherence: Why And How
(Te Herenga Waka—Victoria University of Wellington, 2011) Sutton, David
This paper proposes a basis for progress in the development of a conceptual framework as a basis for regulating GPFR. The broad socio-economic environment is explored to determine the primary purpose of GPFR and its regulation and, from this, to establish the high-level properties of a conceptual framework suitable for that purpose. Amongst the conclusions reached are that the coherence of the conceptual framework is a prerequisite for GPFR development. Coherence offers terseness in the conceptual framework and, thereby, the ability to arbitrate competing claims on GPFR. Identification of the primary purpose of GPFR and its regulation leads necessarily to adopting a specific view of the users, objectives, and qualities of GPFR. This specificity is not arbitrary but, instead, prioritizes satisfaction of the central drivers of conceptual framework development rather than every possible purpose of every possible claimant. The satisfaction of every GPFR user can only ever be incomplete and, thus, the general purpose of financial reporting would not be achieved by adopting a stakeholder theoretical view of the purpose of regulating GPFR. Consistent with the purposive approach we conclude in favour of the investor primacy principle, the proprietorship view of accounting, and the current value variant, fair value.
Open Access
Consumption Taxes in Developing Countries – The Case of the Bangladesh VAT
(Te Herenga Waka—Victoria University of Wellington, 2011) Smith, Andrew M C; Islam, Ainul; Moniruzzaman, M
In common with many developing countries, Bangladesh faces problems in raising sufficient tax revenues to fund its economic and social development. To address this problem and to improve economic efficiency and growth, a major tax reform program was initiated in 1991 which centred on the introduction of a valued-added tax (VAT) to replace a range of narrowly-based consumption taxes. This paper revisit the basic structure of VAT system of Bangladesh and attempt to analysis the contribution and performance of VAT in Bangladesh as comparing to other developing countries and also attempt to identify and provide some suggestions in possible area where attention and improved performance are required to enhance the contribution of VAT in economic development of Bangladesh. The relevant data shows that the performance of VAT was quite satisfactory in the initial years - but subsequently VAT collection has remained stagnant at a certain level. As a result, VAT is unable to meet the objectives for which it was introduced. The reasons behind this performance are many, such as: a relatively small number of VAT tax-payers, a general lack of awareness, and a weak monitoring system etc. There is still scope for improving the revenue collection from VAT: by increasing the number of VAT taxpayers; reforming the VAT administration; creating intensive awareness among the people, revisiting the list of VAT exempted items and increasing the efficiency of the monitoring system.
Open Access
Copyright Law And The Digitisation Of Cultural Heritage
(Te Herenga Waka—Victoria University of Wellington, 2011) Corbett, Susan; Boddington, Mark
Tradition, history, and research are terms associated with a cultural heritage institution. In reality, however, these terms evoke a limited understanding of cultural heritage in the 21st century. For, today, cultural heritage institutions are going digital. Internationally, cultural heritage institutions have embraced the use of modern digital technologies with alacrity, financial constraints being the only limiting factor. Digital cameras provide the means to digitise institutional collections in the form of images that can be stored in online and offline databases. Such databases provide a digital archive of a collection that is less demanding of physical storage space than the paper-based archives of metadata and photographs that were formerly compiled by institutions to manage their collections. Digital images of collection items can also be used for interactive displays within the institution, leaving the original item protected and untouchable within its traditional glass case. In addition, digital images can be made accessible to the public on an institution’s website. Online accessibility permits a geographically widespread audience to view the collection and order copies of the images, and also provides a means of ‘digitally repatriating’ a cultural object, albeit in the somewhat limited form of a digital reproduction, to its source community.
Open Access
Cost Contribution Arrangements: China and International Best Practice
(Te Herenga Waka—Victoria University of Wellington, 2005) Holmes, Kevin; Holmes, Carin
This paper addresses the tax treatment in China of a cost contribution arrangement (CCA) in the light of the treatments in a selection of other countries, with the objective of ascertaining whether the law and practice in China conforms to international best practice. The paper arises out of concerns aired by a group of representatives, each from a multinational enterprise (MNE), which operates in China, about the prevailing Chinese law and State Administration of Taxation (SAT) practice with respect to CCAs. These concerns were raised at the International Research Seminar: Joint Research Project on Taxation held in Beijing by the Chinese International Taxation Research Institute and the International Bureau of Fiscal Documentation on 2930 June 2005. The paper is intended primarily to provide an overview of various country practices in relation to CCAs as a basis for further discussion about the state of the relevant law and practice in China.