Case: Non-compliance at Fokker Services

From late 2005 through to late 2010, Fokker Services BV (FSBV) failed to comply with the economic sanctions the United States (US) Government had established against Iran and Sudan. By scanning the case, violations by FSBV came to light in a structured way, laying bare how FSBV operated to evade export control, breaching sanctions regimes and export control laws. Next, analysis stipulated that the cause and conditions of the violation of the export control regulations were mainly rooted in the tone at the top, the role of (intermediary) management and the absence of a Compliance Program. Subsequently, a short-term and a long-term response were formulated addressing the tone at the top, the development of an Internal Compliance Program, and the application of soft controls to promote an ethical culture.

Can Ethical Political Leadership Restore Public Trust in Political Leaders?

This article presents findings from a qualitative study (via in-depth interviews with 121 local political leaders from 65 local authorities in the UK) that aims to understand how ethical leadership practices can restore public trust in political leaders. The study finds that being a moral person, an ethical political leader sets good examples of behaviour, sets the tone at the top and challenges those who do not behave ethically, as well as encourages, supports and rewards those who perform and conduct themselves well. As a result, the level of public trust in political leaders is likely to increase gradually.

Perceptions of Tone at the Top from the Inside: Insights into Audit Pricing

Tone at the top plays an important role in entities’ internal control over financial reporting (ICFR) and in auditors’ planning and risk assessment decisions. Using a novel measure based on employee perceptions, we find that strong tone at the top is associated with reduced audit pricing and that this relation holds even for firms that report effective ICFR. This relation is stronger when employees’ tone perceptions are more consistent throughout the organization, when accounting is more complex, and when earnings manipulation risk is higher. We also find that strong tone is negatively associated with the incidence of reported material weaknesses and positively associated with positive abnormal accruals, and that the management integrity component of tone is more strongly associated with audit pricing than is the quality of management communication. Finally, we find evidence that auditors become familiar with employees' tone perceptions in the normal course of an audit.

The Availability of Reporting Channels, Tone at the Top, and Whistleblowing Intentions

SOX requires the establishment of anonymous whistleblowing channels for public companies, but private companies are free to implement the channel(s) of their choosing. Although anonymous channels have long been considered a “best practice”, the evidence on their efficacy is mixed, creating confusion as to how private companies should proceed. Additionally, most studies comparing non-anonymous and anonymous channels have used a within-participants design, where both channels are available, limiting their ability to determine the incremental effectiveness of different whistleblowing systems. We find that offering either an anonymous channel or dual channels improves reporting intentions, relative to a non-anonymous channel, but primarily when tone at the top is weak. When tone at the top is strong, reporting intentions are not statistically different across the three systems. We also find no evidence that dual channels improve whistleblowing intentions relative to an anonymous channel, regardless of the tone at the top.

ETHICAL LEADERSHIP AND TEACHER PROFESSIONAL VALUES: MATTERS ARISING FROM THE NORTHERN REGION OF GHANA

<p>School heads as senior executives are thought to provide the institution ethical tone at the top to impact on subordinates. As a result, the study investigated how heads ethical leadership and teacher professional values influence students’ academic achievement, using a survey of 370 respondents in senior high schools in the Northern Region of Ghana. Questionnaires were used to collect data and analysed using descriptive and inferential statistics. It emerged from the study that ethical leadership practice of school heads and unadulterated professional values are fundamental to teachers, students and the entire school organization. Results from the study showed that mentorship, honesty and trust were core ethical leadership attributes of heads. The current study and other empirical research points to the fact that teacher professional values including reliability, professionalism and trust are keen in teacher’s career success. The study recommends that practicing and prospective heads are made to go for professional development sessions on ethical leadership behaviours. Again, induction and effective orientation on professional standards and values should form part of teacher recruitment and lifelong learning since they are vital for positive teacher identity and excellent learning outcomes.</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0716/a.php" alt="Hit counter" /></p>

Corporate Culture and Financial Reporting Quality

With the increased focus on corporate culture as an important determinant of organizational behavior and outcomes, we study how corporate culture affects firm financial reporting quality. Relying on the Competing Values Framework (CVF) to define four types of corporate culture, we find that collaboration (competition)-oriented culture firms have lower (higher) financial reporting quality and these effects are incremental to corporate governance and tone at the top. Further analyses support our main findings and suggest that collaboration culture is associated with the likelihood of reporting a material internal control weakness, while competition culture is related to a lower likelihood of an internal control weakness and a restatement. We contribute to the "cultural revolution" led by economics and finance schools of thought and provide empirical evidence that corporate culture shapes financial reporting quality.

The Effects of Tone at the Top and Professional Skepticism on Fraud Risk Judgment Among Internal Auditors in Indonesia

Failure of the internal auditors (IAs) to appropriately apply fraud risk judgment could result in audit failure in revealing fraud and scandals. It leads to significant harmful consequences to the IAs’ profession. In carrying out their duties, IAs sometimes have to face top management pressure. Tone at the top becomes essential in creating an ideal working environment for the IAs. Moreover, the lack of professional skepticism has been one factor causing an auditor’s failure to achieve the optimal result in detecting fraud. The findings from 202 respondents revealed that the IAs who have high professional skepticism are more effective in making fraud risk judgments. However, the direct influence of the tone at the top on fraud risk judgment is not statistically supported. This new finding may help professional regulatory bodies and the internal auditing function consider the profile and its necessary environment to elevate fraud risk judgment to regain public trust in the profession.