China is conducting an open market policy and Chinese firms are seeking independent audit services. As a result, the Chinese accounting profession is expanding at a tremendous speed, and has played an important role in economic reform. However, Chinese auditing operates in a very different environment from those experienced in Western countries. Consequently, there is considerable concern about auditor independence in China. The purpose of this paper is to examine some reasons for a lack of independence in the Chinese audit profession. We critically review empirical evidence regarding auditor practice in China. We then make some suggestions that might improve auditor independence.

Technological change, competing product introductions, and shorter product life cycles are often regarded as having made product life cycle cost analysis a significant factor contributing to the performance of manufacturing and marketing departments. Research consensus indicates that the ability of managers to influence life cycle costs is greatest during the product design phase, as it defines and establishes the fundamental characteristics of a product. However, a review of the literature suggests that the role of budget as a planning or control mechanism influences the relation between product life cycle cost analysis and performance. Specifically, when budgets are used primarily as a planning mechanism, product life cycle cost analysis is expected to have a positive impact on departmental performance. In contrast, when budgets are used predominantly as a control mechanism, life cycle cost analysis is unlikely to contribute to performance. The results of an empirical study provide support for this expectation. The findings therefore show that role of budget is critical to the extent to which life cycle cost analysis contributes to positive performance outcomes. Consequently, organisations need to ensure that budgets are used primarily as a planning rather than as a control mechanism to facilitate life cycle cost analysis enhancing departmental performance.

Empirical evidence suggests that competitive advantage is of considerable importance to organizations as global competition, extensive changes in technology, and customer demands intensify. However, little work has been done in the management accounting arena to identify critical organizational strategies that might facilitate it. Following a literature review, this study assesses the extent to which product life cycle cost analysis, customer involvement, and cost management contribute to the competitive advantage of firms. The findings of this research show that life cycle cost analysis, customer involvement, and cost management enhance an organization's competitive advantage, consistent with the study's theoretical expectations. The provision of empirical evidence on the utility of these three variables to the promotion of competitive advantage underscores the need to conduct further research focusing on them in management accounting.

A number of recent influential reports have identified off balance sheet financing as an important factor in the build up of systemic risk in the banking and finance sector during the period leading up to the Global Financial Crisis. The Basel Committee on Banking Supervision reacted to these reports and other pressure by unveiling Basel III as part of an extensive reform package, an important component of which is a number of measures designed to reduce the impact of off balance sheet financing on systemic risk. This paper identifies some concerns relating to the design of these measures and illustrates how reliance by the Committee on figures found in general purpose financial reports is questionable, as the International Accounting Standards Board has recently proposed modifying rules for consolidation accounting in ways which promote off balance sheet financing. This paper demonstrates how the Board’s proposals interact with Basel III in ways that are unlikely to reduce systemic risk.

Organizations are increasingly calling for greater budgetary oversight of the product innovation process. A major focus of their concern is the costs associated with product innovation together with their need to enhance their financial performance through these endeavours. However, the literature has raised a number of issues arising from such budgetary proposals, suggesting that the creativity of those involved in product innovation should not be constrained by cost concerns, that the use of management control systems is incompatible with product innovation, and that budgets may stifle innovation. It is argued in this paper that the extent to which product innovation has a positive impact on the financial performance of firms is dependent on the manner in which budgets are used in organizations. If budgets are used predominantly as a planning mechanism, then such budget planning facilitates product innovation resulting in enhanced performance. In contrast, if budgets are used primarily as a control mechanism, then it is unlikely that product innovation will contribute to financial performance. The results of the study are consistent with these expectations. This paper makes a contribution to the literature by providing empirical evidence of the impact of budgets in the context of product innovation.

Evidence suggests that innovation budgets need to be carefully managed due to increasingly demanding markets, changes in technology and greater international competition. Companies often express concern over the magnitude of their innovation costs, potentially inhibiting them from investing in new product development. This has given rise to concern for innovation budget pressure, which focuses on constraining costs to budgeted levels even if further expenditure might facilitate enhancements in terms of the quality and speed of the innovation process. However, suggestions have been made that decision systems in these settings could benefit in terms of performance outcomes from improvements in information system (IS) information quality. The literature suggests that the impact of quality of IS information on departmental performance is dependent on whether there is an emphasis on innovation budget pressure. The results of this study show that when innovation budget pressure is high, quality of IS information enhances performance. In contrast, when the emphasis on innovation budget pressure is low, quality of IS information does not promote performance.

Arguments have been made in the literature that product quality provides a basis for establishing and maintaining a firm’s competitive advantage. Proposals suggest that the framework provided by environmental management accounting facilitates product quality having the attributes that are likely to contribute to competitive advantage, and hence it is likely that environmental accounting plays an influential role in that relation. The purpose of this study is to examine empirically whether there is evidence for environmental management accounting impacting on the relation between product quality and competitive advantage. These findings support the view that environmental management accounting has an important role to play in firms. Specifically, the results of the study suggest that product quality contributes to a firm’s competitive advantage when the reliance on environmental management accounting is high. However, it fails to do so when the reliance on environmental management accounting is low.

Issues relating to the financial and non-financial performance of firms are attracting considerable research attention. Four specific factors are focused on this paper, namely quality of information system (IS) information, corporate environmental integration, product innovation, and product quality to investigate the extent to which these variables influence financial and non-financial performance. All four independent variables were found to enhance the performance assessed in non-financial terms. In contrast, the results show that product innovation alone influences financial performance. The findings of this study suggest that the efficacy of these factors may be more effectively assessed by evaluating their impact on performance measured in non-financial terms, thereby suggesting that the inclusion of non-financial measures in performance evaluation models should enhance control system functioning.

Increasingly demanding markets, changes in technology and greater international competition have made the effective management of product R&D together with its associated costs essential. The magnitude of R&D costs are of concern to many companies, potentially inhibiting organizations from investing in new product development. Although rising costs of R&D and the growing dependence of companies on R&D for product leadership increase the need to plan and evaluate R&D activities more effectively, difficulties have been experienced in applying budgetary control systems to R&D. Despite such concerns, the published literature indicates that an emphasis on financial factors in setting the size of R&D budgets is becoming a competitive necessity. A review of the published literature suggests that interfunctional market coordination, the relative use of strategic alliances and the nature of competition in terms of product cost versus product innovation are potentially instrumental in influencing the degree of emphasis on financial factors in R&D budget setting. The results of the present study indicate that these three organizational and environmental variables result in an emphasis on financial factors in setting the size of R&D budgets. Implications drawn from the findings are discussed.

Life cycle cost analysis is considered in the literature to be of increasing importance to firms as international competition intensifies and technological change continues. The literature increasingly emphasizes that rapid technological change and shortened life cycles have made product life cycle cost analysis critical to organizations. Although significant benefits are attributed to life cycle cost analysis, there is little evidence regarding the extent of its application in organizational settings. Moreover, there is scant systematic evidence available with respect to the array of factors that may influence its use. However, a review of the literature suggests that customer profiling, competitive advantage, and quality of information system information are three factors potentially impacting the extent to which life cycle cost analysis is used in firms. The results of the study illustrate first, the degree to which product life cycle cost analysis is used across a random sample of organizations. Second, that all three independent variables play a positive role in affecting the extent to which product life cycle costing is used in firms.

Organizations are increasingly reliant on their top management to provide research and development (R&D) units with a strategic focus reflecting changes in their competitive environments. However, little research has specifically explored implications arising from top management involvement in R&D budget setting. This study examines empirically the extent to which such involvement is associated with first, an emphasis on financial factors in setting R&D budgets, and second, with the importance of budget targets for R&D managers. Third, the study evaluates the impact of that involvement on R&D performance evaluation. The results of the research provide evidence of the relation R&D budget setting has to these three factors.

A thought-provoking article by Hartmann and Moers [Accounting, Organizations and Society, 24 (1999) 291] recently addressed two critical issues, the first being the research that has centered on reliance on accounting performance measures (RAPM) and second, the use of contingency theory in behavioral management accounting. They examined and critically evaluated statistical methods used to test contingency hypotheses, and in particular, they addressed the use of moderated regression analysis that they considered is the dominant form of statistical analysis in budgetary research. This paper reviews, first, much of the work conducted by Hartmann and Moers (1999) in the context of the wider literature in management accounting. Second, the paper puts into context many of their concerns and addresses a number of issues arising from their paper. Doing so may facilitate further progress in the behavioral literature and clarify a number of matters that would otherwise limit the field of endeavor.

Quality has typically been regarded as a key strategic component of competitive advantage and, therefore, the enhancement of product quality has been a matter of prime interest to firms. Quality provides a basis for strategic advantage, and thus improvement in product quality may lead to enhanced performance. However, a frequent concern is that product quality no longer provides enduring competitive advantage; instead, it has become essentially a competitive prerequisite. Hence, an assessment of whether improvements in product quality are reflected in greater quality performance is likely to be of considerable interest to organizations. Suggestions have been made that the implementation of environmental accounting also contributes to the enhancement of quality performance. Argues that the greater the integration of environmental issues into financial decision processes, the better the performance of the firm. Investigates the extent to which product quality and the implementation of environmental accounting positively influence quality performance.

Mounting evidence indicates that capital markets often apply short-term pressure on firms to gain short-term results by focusing primarily on reported financial performance. As a result of short termism, it has been argued that companies are likely to cut expenditure on R&D which might otherwise improve longer-term performance. As there is a growing consensus that R&D is critically important to both organizational and national performance, short termism may have significant detrimental organizational consequences. One implication arising from a short-term R&D bias, and examined in this paper, is its effect on market time reduction. Arguments are examined that suggest a dominant R&D strategy is to reduce product time to market. Concerns have been expressed, however, that such a strategy is applicable in specific circumstances only. A review of the literature suggests that analyst and shareholder bias against high-risk, long-term research in favor of lower-risk, short-term product R&D influences organizations to reduce the time it takes to get a product to market when the emphasis in the marketplace is on cost competition rather than product innovation. The findings of the study suggest that when the emphasis on competition on cost rather than innovation is low, short-term R&D bias does not affect market time. In contrast, when the emphasis on competition on cost rather than innovation is high, the results indicate that short-term R&D bias positively influences market time reduction. The study concludes with suggestions for further research.

Reports indicate that capital markets frequently focus on short-term corporate financial performance. Arguments suggest that the R&D projects of many firms are skewed towards short-term, low-risk projects with relatively modest expected benefits, reflecting both a response by companies to financial market pressure to maintain short-term returns and a short-term R&D bias. Anecdotal evidence suggests that one response to short-term R&D bias by firms is for them to seek R&D partnerships with customers and suppliers. A theory is developed which suggests that when firms compete on the basis of product costs, they are likely to seek partnerships with customers and suppliers in order to respond to short-term R&D pressures. In contrast, when competition is innovation-based, firms are unlikely to pursue R&D partnerships in response to short-term R&D bias. The results of an empirical study provide support for this proposition.

Behavioral research in management accounting has made significant progress over the past half century. Although that progress has not often been smooth, it has demonstrated the need to pay careful and close attention to behavioral issues to promote effective organizational functioning. The range of issues addressed has expanded dramatically, consistent with the growth in the complexity of organizations, and the need to manage cross-national operations. This paper provides a review of major findings in the field. It then examines work that reflects on prior literature and puts forward proposals that may contribute to the advancement of the discipline. Finally, it considers some emerging research issues and suggests some conclusions.

Two issues currently facing Australia having implications for financial reporting and trade are first, calls for the reintroduction of the true and fair view (TFV) override and second, the move to harmonize Australian accounting standards with those of the International Accounting Standards Committee (IASC). The purpose of the article is to examine the likely effects of such moves given the increasing globalization of both financial and product markets. The conclusions of the article suggest first, a reintroduction of the TFV override would be consistent with its role in the Fourth Directive as the fundamental principle of financial reporting. Second, harmonization with IASs by default will allow an override, as IAS 1 now provides for one. Third, Australia's harmonization of financial reporting requirements with the wider global community may be impeded because of inconsistencies between IASs, US GAAP, and EU Directives. Hence, the proposed reintroduction of the TFV override together with IASC reporting is unlikely to enhance Australia's link to the wider global community, leading to potential negative consequences in both financial and product markets.

ABSTRACT Concerns have been expressed by capital market participants that Chinese accounting standards may systematically result in consistently higher profits than those reported under International Accounting Standards (IASs). This paper empirically examines the gap between Chinese accounting standards and IASs in terms of profit differentiation. Using data from the annual reports of Chinese companies which have both domestic and foreign shareholders, profit figures determined by Chinese accounting standards and IASs are compared. The results suggest that there is a significant difference between Chinese accounting and international practices in terms of profit measurement. The study also suggests that the current requirement is justified for dual audit of the annual reports of Chinese companies which have domestic and foreign shareholders.

Domestic refrigerator manufacturers have had to cease their use of CFCs following the implementation of the Montreal Protocol. Two primary substitute refrigerants have been adopted; one being HFC‐134a and the other being hydrocarbons. Given the availability of hydrocarbons and pressure from both the green movement and the Framework Convention on Climate Change, there has been a marked increase in their use. The purpose of the paper is to examine the role of financial investment appraisal methods in the decision processes of refrigerator manufacturers in their responses to the phasing out of CFCs. The contribution made by financial decision tools to their decision‐making processes arising from the CFC phase‐out has not been reported. The decision choices of refrigerator manufacturers is of importance to the issue of whether their responses to the Protocol reflect a strategy designed to enhance long‐term competitiveness, or whether they were in response to immediate pressures to satisfy regulatory, cost and other short‐term interests. To address these issues, field study data were collected from refrigeration and refrigerant companies operating in Australia, Europe, New Zealand and the UK.