Accounting Research in Abacus, A&F, AAR, and AJM from 2008–2015: A Review and Research Agenda

Accounting Standards

Accounting Standards is by far the biggest research stream and is represented by 24 of the top 60 papers (40%). Papers in this area concentrate on the implementation and impact of IRFS. The impacts of IFRS are examined on many dimensions including value relevance (Chalmers et al., 2008, 2011); disclosure (Gallery et al., 2008; Kent and Stewart, 2008; Palmer, 2008); audit and non-audit fees (Griffin et al., 2009); key accounting ratios (Lantto and Sahlstrom, 2009); accounting system classification (Nobes, 2011); analysts’ forecasts (Cotter et al., 2012); and public sector financial statements (Trewavas et al., 2012) (see mainly the left side of Figure 1).

Several papers also focus on IFRS in the international context. The issue of whether countries have adopted IFRS or merely converged with local country standards is raised by Zeff and Nobes (2010). These authors compare several jurisdictions that have implemented IFRS and conclude that there are major differences in the extent to which they have been adopted. Stevenson (2010) discusses the domestic implications of IFRS and concludes that local standard setters still have an important role in setting global standards. Zeff (2008) examines the relevance of IFRS developments in countries such as the United States (Erchinger, 2012; Street, 2012) and Romania (Albu and Albu, 2012), in the Australian context. Researchers have also considered the application of these standards in small to medium-sized enterprises (Potter et al., 2013).

IFRS have been the subject of some controversy and criticism. Haswell and Langfield-Smith (2008) point out 57 serious defects in the Australian version of IFRS. Brown and Tarca (2012) examine whether the potential benefits and downsides of the standards have actually been realized, based on 10 years of practitioner experience. Finally, Mayorga and Sidhu (2012) investigate whether Australian firms comply with regulatory requirements to disclose key assumptions and major sources of estimation uncertainties. They argue that the volume and complexity of disclosure required by IFRS may have a potentially negative impact because they distract users from information relevant to their decision making. Companies with numerous accounting estimates may find disclosure of estimation uncertainties too complex and onerous and not sufficiently useful for their users or their management to warrant compliance.

Kent and Stewart (2008) has the highest local journal cites at 15, with 23 global cites. The paper is cited in top international journals such as Journal of Business Ethics and cross-disciplinary journals such as the Journal of Cleaner Production. It is one of the first studies to examine the link between the extent of IFRS compliance and the quality of corporate governance. Whittington (2008) has the most global cites with 42, and the paper is cited in leading international journals such as Accounting, Organizations and Society and Review of Accounting Studies. Whittington presents two sides of the fair value debate, one that assumes markets are relatively perfect and accounting provides valuations for passive investors, and the other that assumes markets have serious imperfections and accounting provides a valuable monitoring role. It is clear why this thoughtful piece of research has attracted so much global interest.

Environmental Accounting

The burgeoning area of Environmental Accounting is represented by seven of the top 60 papers (12%). Environmental databases such as the CDP (Carbon Disclosure Project) and the GRI (Global Reporting Initiative) provide researchers with global company data on carbon disclosures and sustainability reporting practices. Many reporting initiatives are voluntary, but there is some mandated disclosure (e.g., regulatory violations and environmental sanctions). The topic area examines a range of issues such as the environmental impacts of companies and, conversely, the effect of environmental change on company assets, profits, valuation, and human capital.

There are several studies of corporate environmental disclosure practices. For instance, Haque and Deegan (2010) examine climate change disclosure practices and find an increased trend to report over time. Cowan and Deegan (2011) study voluntary emissions reporting by Australian companies, particularly around the Natural Pollutant Inventory reporting initiative. Other studies consider the effect of assurance by professional advisors and private consultants (Moroney et al., 2012) and the effect of institutional investors on disclosure practices (Cotter and Najah, 2012). Other researchers investigate how disclosure relates to environmental performance (Clarkson et al., 2011) and how the anticipatory effects of introducing an emissions trading scheme affect company valuation (Chapple et al., 2013). Worldwide developments, such as the recent Paris carbon agreement, mean that there will be many opportunities for future research in this area (see the right side of Figure 1).

The Clarkson et al. (2011) paper has the most global cites in this area with 33. It is cited in top international journals such as Journal of Business Ethics and cross-disciplinary journals such as Journal of Cleaner Production. The paper shows how both the level and nature of voluntarily disclosed environmental information relates to environmental performance, and cautions that concerns about the reliability of voluntary disclosure of environmental information is warranted. The paper provides a major input into regulatory policy.

Earnings Management

The Earnings Management field is represented by seven of the top 60 papers (12%). This field examines the incentives for managers to manipulate earnings and the manner in which they are able to do so. Wilson (2011) comprehensively reviews the earnings management literature as it relates to Australian companies. The papers in this area focus either on accounting-based measures or market-based measures. For accounting-based measures, Oei et al. (2008) study the effect of management ownership and accruals on earnings persistence; others examine corporate governance and earnings quality (Baxter and Cotter, 2009; Kent et al., 2010) as well as audit reports and earnings management (Herbohn and Ragunathan, 2008). Market-based approaches include investigating the existence of accrual anomaly in the Australian market (Clinch et al., 2012a) and international evidence of the effect of earnings quality on firm valuation (Gaio and Raposo, 2011).

Disclosure

The Disclosure research area is represented by six of the top 60 papers (10%). Artiach and Clarkson (2011) review the field, particularly as it relates to the cost of capital and conservatism. Hsu (2009) examines price-sensitive corporate disclosures under Australia's continuous disclosure regime. Chang et al. (2008) examine disclosure through investor relations programs and their effect on information asymmetry. Other studies consider the disclosure of cash flow components and the prediction of earnings (Arthur et al., 2010), the usefulness of cash versus accrual accounting information for public sector managers (Andriani et al., 2010), and direct versus indirect cash flow disclosures and their association with future earnings and stock prices (Bradbury, 2011).

Conservatism

Conservatism is represented by three of the top 60 papers (5%). Conservatism is the asymmetric verification requirement for good news and not bad news. Lai and Taylor (2008) develop a new measure of firm-specific conservatism. They find conservatism to be positively related to stock return volatility, investment cycle length, and prior period conservatism, and negatively related to firm age, size, and leverage. Lim (2011) examines the relation between corporate governance and conservatism, and Ahmed and Duellman (2011) examine the role of conservatism in monitoring managers’ investment decisions.

Auditing

Auditing is represented by five of the top 60 papers (8%). The auditing process requires astute judgement and strong decision-making skills. Trotman et al. (2011) provide an excellent review of 50 years of research in this area. Other papers have quantitatively examined the competitiveness of the audit services market (Hamilton et al., 2008), internal audit and fraud prevention (Coram et al., 2008), and audit reports and the global financial crisis (Xu et al., 2011). In addition, Hecimovic et al. (2009) offer a qualitative study on the impact of auditing standards on the auditing profession.

Coram et al. (2008) has the highest number of global cites in this area with 25. It is cited in leading international journals such as Journal of Accounting Research, Journal of Business Ethics, Accounting, Organizations and Society, the Accounting Review, and Contemporary Accounting Research. Their research on the effectiveness of internal audit functions in detecting and reporting fraud demonstrates the value add of internal audit functions and has sparked worldwide interest.

Impairment

The Impairment research area is represented by four of the top 60 papers (7%). Bloom (2009) discusses internally generated versus purchased goodwill, and considers whether accounting standards adequately account for goodwill. Carlin and Finch (2009) and Gallery (2009) examine concerns about the IFRS discount rates that managers use to test goodwill impairment and compare these rates to independently generated discount rates. Godfrey and Koh (2009) find that goodwill impairment is negatively related to a firm's investment opportunities.

Cost of Capital

The Cost of Capital research field is represented by only two of the top 60 papers (3%), but the cost of capital is an integral component of many other research areas. The two papers in this area consider alternative approaches to market-based beta estimates to calculate the cost of capital. Guay et al. (2011) examine the effectiveness of implied cost of capital estimates derived from analysts’ forecasts, while Toms (2012) proposes an accounting-based approach to calculate the cost of capital.

The Guay et al. (2011) paper has 23 global cites and is cited in leading international journals such as the Journal of Accounting and Economics, Review of Accounting Studies, Journal of Financial and Quantitative Analysis, Journal of Corporate Finance, and the Accounting Review. It is also cited in leading practitioner journals such as the Journal of Portfolio Management. Its examination of the properties of implied cost of capital estimates using analysts’ forecasts has attracted much interest in academic and practitioner circles alike.

Corporate Governance

Corporate Governance is represented by one of the top 60 papers—a comprehensive review paper by Brown et al. (2011). This paper has the most global cites of all papers in this review at 45. It is cited in top international journals such as the Journal of Business Ethics and in cross-disciplinary journals such as the Journal of Econometrics and Economic Modelling. Corporate governance is integral to many of the other research fields discussed above and the interested reader should refer to these areas to understand the extent of its reach. The final paper in the top 60 is a review article by Benson et al. (2015). This paper reviews the accounting literature along five dimensions: most frequently cited papers, topical coverage, impact on practice, research method, and noted authors. They conclude that accounting research in the Pacific Basin has made a significant contribution to research and practice, both within the region and internationally.

Accounting and Global Environmental Change

The Accounting and Global Environmental Change field is an evolution and continuation of the Environmental Accounting field (see Linnenluecke et al., 2015). The 2015 Paris Climate Treaty to limit temperature change to below 2°C will lead to renewed efforts for mitigation and adaptation to climate change and present many opportunities for natural experiments. Researchers can build on existing papers on Environmental Accounting, and on emerging research in the Global Environmental Change field, by studying topics such as those relating to the disclosure of environmental impacts and performance (Bachoo et al., 2013; Cotter and Najah, 2012; de Villiers and van Staden, 2011; Griffin and Sun, 2013; Ji and Deegan, 2011; Kamal and Deegan, 2013; Loh et al., 2015; Mock et al., 2013); capital market effects (Bird et al., 2013; Chapple et al., 2013; Clarkson et al., 2011; Herbohn et al., 2014); and the role of accounting in supporting environmental change strategies (Hartmann et al., 2013; Linnenluecke et al., 2015; Tang and Luo, 2014).

Future Research in International Accounting Standards

There have already been many studies conducted in the European Union and the Asia-Pacific region that investigate the implementation of international accounting standards. But there are still many opportunities for future research arising from ongoing developments related to the international adoption of IFRS. International accounting standards were first introduced in 2005 to ‘bring transparency, accountability and efficiency to financial markets around the world’ (IFRS, 2016). The standards were supposed to bring many benefits, for example, reducing the cost of capital, decreasing information asymmetry, and increasing comparability and understandability. 3 However, they have been found to also have drawbacks; for instance, the cost of implementation (Lai et al., 2013); unintended consequences relating to fair value accounting (Goncharov and van Triest, 2014); the process of convergence with existing regulatory regimes (Devi and Samujh, 2015; Mala and Chand, 2012; Nguyen and Gong, 2014) and limited suitability to the public sector (Laswad and Redmayne, 2015); and small to medium-sized businesses (Chand et al., 2015; Devi and Samujh, 2015).

By 2015, more than 120 countries had adopted IFRS and many others permit the use of IFRS in some circumstances. Adopting countries in the Asia-Pacific region include Australia, Bangladesh, Hong Kong, New Zealand, Singapore, South Korea, and Taiwan. China, India, Japan, and Thailand are yet to fully adopt IFRS, offering research opportunities related to the future of IFRS in these jurisdictions. Future research can contribute to the ongoing monitoring of the effects of international accounting standards, including studies on important fundamentals of accounting. Researchers interested in this field can build on existing studies of value relevance (Chalmers et al., 2011; Clacher et al., 2013; Martinez et al., 2014); disclosure (Stent et al., 2013; Wee et al., 2014); earnings management (Navarro-Garcia and Madrid-Guijarro, 2014); private equity valuation (Palea and Maino, 2013); conservatism (Barker and McGeachin, 2015); firm financing behaviour (Tarca et al., 2013); and earnings forecasts (Chalmers et al., 2012; Cotter et al., 2012). There have also been studies investigating specific standards (e.g., IAS 19 Defined Benefits (Cho et al., 2014) and IFRS 8 Segment Reporting (Kang and Gray, 2013)). This work could be further extended in the international context.

There is also considerable research and discussion on the Conceptual Framework underlying IFRS. Decision usefulness to capital providers is the main emphasis, with the more conservative stewardship approach a secondary consideration and prudence not a real factor at all. As Gebhardt et al. (2014) point out, this is particularly relevant to debt contracting where conservatism is valuable through monitoring, facilitating access to debt funds, risk sharing, and dividend conflict between owners and debt holders. Gebhardt et al. (2014) make a convincing argument for reintroducing prudence back into the Conceptual Framework.

Changes to international accounting standards will continue to provide important research topics for academics, particularly when it comes to providing feedback to standard-setting bodies about post-implementation issues (Ewert and Wagenhofer, 2012). There will also be opportunities to conduct natural experiments on the effects of these changes. The current work program for the International Accounting Standards Board (IASB) includes topics such as revenue recognition, financial instruments, insurance contracts, and development of a Conceptual Framework. There are also assessment-stage projects regarding discount rates, goodwill and impairment, income taxes, pollutant pricing mechanisms, post-employment benefits, primary financial statements, provisions, contingent liabilities and contingent assets, and share-based payments. The IASB also has several projects in development, including business combinations, disclosure, equity methods of accounting, financial instruments with characteristics of equity, and financial instruments which account for dynamic risk management. Finally, the IASB also has an inactive project—Extractive activities/intangible assets R&D—which could be back on the research agenda in the not too distant future.

Future Research in Auditing

None of the four Pacific Basin accounting journals included in this review focuses exclusively on auditing. Nonetheless, the area has attracted a lot of attention in recent publications and is starting to emerge as one of the healthiest and most fruitful research streams. There are many emerging areas in audit research, including competition and pricing (Carson, 2013; Carson et al., 2014; Ciconte et al., 2015; Dutillieux et al., 2013; Kend et al., 2014; van der Laan and Christodoulou, 2012); the effects of regulatory change (Carey et al., 2014; Houghton et al., 2013; Lee et al., 2013); trust (Howieson, 2013); reputation (Bigus, 2015); and audit judgement and decision making (Trotman et al., 2011).

Other emerging research is being undertaken in a variety of areas, including internal versus external auditors (Rose et al., 2013; Sarens et al., 2013); corporate governance and auditing (Aldamen et al., 2012; Bliss, 2011; Bolton, 2014; Chan et al., 2013; Contessotto and Moroney, 2014; Purcell et al., 2014; Seamer, 2014; Wu et al., 2014); the effects of international accounting standards (Samsonova-Taddei, 2013); financial crises and auditing (Carey et al., 2012; Xu et al., 2013); non-audit fees (Habib, 2012); and the effect of audit quality on information asymmetry (Clinch et al., 2012b). The variety and depth of auditing research is extremely impressive and the field looks likely to grow even stronger in the future. Opportunities exist here for expanding on emerging research and also for developing integrative and overarching frameworks which draw together the various research streams.

Accounting Education

Research into accounting education is particularly important because accounting provides the information and the workforce that are fundamental to the efficient functioning of capital markets. Accounting education research is diverse. Research on undergraduate-level education covers topics such as approaches to learning and the impact of prior learning (Cameron et al., 2015; Crawford and Wang, 2014). Research on masters-level education considers the benefits of case-based teaching pedagogy (Thaker, 2015) and research on doctoral-level education investigates the impact of higher education policy changes (Heaney et al., 2013). Emerging topics of interest include the performance of domestic versus international students (Phang et al., 2014), the implications of IFRS for accounting education (Jackling et al., 2012) and the effect of educational reforms (Carrera and Carmona, 2013; Heaney et al., 2013).

Research in this very important field is sure to flourish, especially with changes in technology, making alternative and complementary delivery methods available for accounting education. This technology includes using laptops in classrooms and web-based lecturing systems, such as Lectopia or Echo 360. Today's accounting graduates require additional technical skills, such as familiarity with the XBRL Taxonomy and the ability to keep up-to-date with the latest accounting software (e.g., MYOB or Quickbooks). Research could conduct pre- and post-testing of students to determine if they have the necessary skills to enter the graduate workforce.

The Impact of Moving to Fair Value Accounting

Whittington (2015) provides a comprehensive review of measurement in financial reporting covering 50 years of research and practice. Whittington points out that although historical cost is still the predominant measurement technique in practice, progress has been made in implementing fair value accounting, but much needs to be done in choosing between alternative values (entry versus exit values) and this will continue to be a focus for academics and standard setters. The fair value theory of measurement owes its genesis to Chambers and his theory of continuously contemporary accounting (CoCoA). 4

Diversity

Diversity in any discipline is an important topic, but particularly in accounting, where women are under-represented in both academia and practice. Researchers can build on emerging studies on female representation in accounting. Cullen and Christopher (2012) examine the career progression of women accountants in the state public service of Western Australia and New South Wales and find that work-related barriers are significantly negatively related to career progression. Gago and Macias (2014) ask whether the lack of female professors in accounting can be attributed to female academics specializing in non-mainstream fields. They examine the research interests of over 1,000 male and female academics and find no significant gender difference in the choice of research field and conclude that the lack of promotion of women cannot be put down to their choice regarding non-mainstream fields. Whiting et al. (2015) examine the prospects for female partnerships in professional accounting firms in Australia, New Zealand, and the United Kingdom. Their study concludes that women's perceived preferences and organizational structural boundaries contribute strongly to the lack of women partners. The authors also find traditional stereotypical discrimination against women in smaller accounting firms.

Future diversity research can also focus on minority groups, which are extremely under-represented in the accounting field. A promising avenue for future research is to expand upon the study by Lombardi and Cooper (2015), which investigates the under-representation of Aboriginal and Torres Straight Islanders in the accounting profession to further understand their experiences, obstacles, and future career opportunities. There is a strong push for diversity in the board room and in the accounting, auditing, and academic fields; if voluntary codes do not achieve the desired outcomes, then mandatory changes may be enforced. Some overseas jurisdictions have now mandated quotas for gender diversity, for instance, Belgium, Quebec, Denmark, Finland, France, Iceland, India, Israel, Italy, Kenya, and the Netherlands. The implementation of such quotas creates exogenous shocks 5 which are fruitful avenues for future diversity research.

Other promising research avenues

Our content analysis has focused on the main research directions revealed by papers published in Abacus, A&F, AAR, and AJM over the last five years (2011–2015). We appreciate the importance of streams including accounting for intangibles (such as R&D), revaluations, direct versus indirect cash flows disclosure methods, insurance accounting, and mining company disclosures. These are all fields in which there is much research in progress.