How to de-bias investment judgements–unpacking bias and possible remedies in a capital investment context

PurposeResearch on biases in investment decision-making is indubitably important; however, studies in this context are relatively scarce. Unpacking bias has received attention in the psychological literature yet very little attention from management accounting research. This bias suggests that the perceived probability that an event will occur generally increases when the event's description is unpacked into a disjunction of subevents. The authors hypothesize that for a capital investment decision context, managers' judgement of the probability of a future event depends on whether the event is described as one packed event or is unpacked into several disjoint subevents. Additionally, the authors propose that altering the format of the description of an event's occurrence from percentage values to relative frequencies reduces unpacking bias.Design/methodology/approachTo test the study’s hypotheses, the authors conducted two experiments based on a 3 × 2 mixed experimental design in which manager participants were asked to estimate the failure probabilities of technical systems in the context of an investment decision.FindingsThe authors provide evidence that unpacking bias occurs in an investment scenario, which can be characterized as a high-stakes decision context. Changing the format in which probabilities are presented from percentage values to relative frequencies significantly reduces the bias.Research limitations/implicationsAdditional instructions did not further reduce unpacking bias.Practical implicationsFor investment decisions under uncertainty, performance indicators in management templates should be presented in relative frequencies to improve managerial decision-making. The fact that the authors could not show an additional effect of instructions in management accounting reports indicates that it is challenging for management accountants to reduce the biased decision-making of managers by “teaching” them through the provision of instructions.Originality/valueThe authors contribute to accounting research by illustrating unpacking bias and by deriving a debiasing mechanism in a capital investment decision context.

Review of The Role Company Supervision Mechanism in Risk Management Implementation

This study reviews the supervisory mechanism carried out by the company in the implementation of risk management. This research is qualitative research with literature study method. As a result, internal auditors, audit committees and management accountants work together in supervising the implementation of risk-based audits. Internal auditors have a weak contribution because they prefer a supervisory approach so they are supported by the audit committee. The audit committee supervises the internal auditors and provides suggestions for the next audit process so that it can cover high-risk areas. Meanwhile, the external auditor supervises by ensuring whether the financial statements are presented fairly. This research contributes to expanding the study of the role of supervisory mechanisms in companies for the implementation of corporate risk management.

Entrepreneurial Orientation, Market Orientation, Managerial Accounting and Manufacturing SMEs Satisfaction

From a management accounting perspective, this study aims at examining the relations of entrepreneurial and market orientations and SMEs satisfaction in terms of financial and non-financial performance. SEM was conducted on 107 responses including management accountants from the manufacturing SMEs in Malaysia. The results reveal a null relationship between entrepreneurial orientation and financial-performance satisfaction, while it shows a positive impact on non-financial performance. In contrast, market orientation affects financial and non-financial performance positively. However, to understand the null impacts, interviews were conducted with owner-managers of manufacturing SMEs in Penang. Based on the interviews and the analysis, practical implications are provided to entrepreneurs of SMEs, the Malaysian government, and researchers.

Fraud Reporting within an Organization and the Use of the Internal Audit Function as a Training Ground for Management

This study examines the effects of using the internal audit function as a management training ground (MTG) and fraud magnitude on internal fraud reporting decisions. Two experiments examine (1) internal auditors’ reporting behaviors, and (2) other employees’ willingness to report directly to internal audit. In the first experiment, experienced internal auditors indicate that the use of internal audit as a MTG may negatively impact fraud reporting likelihood by internal auditors to the Chief Audit Executive (CAE). Further, using the internal audit function as a MTG inhibits the sense of urgency internal auditors feel to report large fraudulent acts. The second experiment compares management accountants’ preferences for reporting to an anonymous third-party hotline versus reporting directly to internal audit. The results indicate a preference for the hotline that increases with a MTG. This preference is fully mediated by the perceived trustworthiness of internal audit, which is negatively impacted by a MTG.

Value Creation Perceptions of Management Accountants in South Africa

The Coalition for Inclusive Capitalism launched the Embankment Project for Inclusive Capitalism (EPIC) to tackle the challenge of communicating how value is created for the stakeholders of a company. However, discord on how stakeholder value should be measured exists. Management accountants can successfully measure the value of money in their cost control function, but it remains a challenge on how they perceive the adding or creating of value in their respective roles and if their own perceived performance. The aim of this study was to obtain an understanding study of how management accountants view and navigate through this concept of value creation in general and in their organisation, how and why they engage in value-creating activities for their organisations and its stakeholders. A qualitative approach was adopted to conduct the study and the data collection technique constituted a literature review and questionnaires distributed to 30 participants. The majority of the participants believe that they are creating value for their organisations and positioned their perceived value creation into the economic value category. Some participants believe that the value they create within their organisation cannot be measured. Overall, it is recommended that possible development of tools, models or frameworks to assist management accountants in the measuring or capturing of value should be explored that is of a more subjective nature, so that it would be easier to implement and drive value creation practices in the workplace.

Translating sustainability strategies into performance: does sustainability performance management matter?

Purpose Drawing on the natural resource-based view (NRBV) of the firm, this study aims to investigate the mediating role of sustainability performance management (SPM) practices in the relationship between corporate sustainability strategy (SS) and sustainability performance (SP). The conceptualization of SS and SPM practices follow the NRBV resources and capabilities to promote sustainability for competitiveness. Design/methodology/approach Data for the study were collected through a questionnaire from 114 small-medium to large organizations within environmentally sensitive industries operating in Malaysia. Findings The results indicate the indirect relationship between SS and SP through SPM practices. The results suggest that SS can only be realized through a broader management accounting control system (such as SPM practices) that provides information to generate, analyze and control environmental, social, economic and governance performance. Practical implications As some organizations may face their resource constraints, this study may help managers and management accountants prioritize their focus on SS and adopt the necessary SPM practices to enhance their SP. Originality/value This study sheds new light on the role of the SPM practices adopted by firms to manage their SS.

Evaluation the Application Status of GAAP in Financial Reporting Practice: In Case of Banking Sector in Bangladesh

The prime concentration of this study is to scan the respondents’ opinions regarding the application status of the different units of GAAP in preparing the different financial reports by the sample banks. To meet this objective an attempt has been made to collect opinions from one hundred fifty respondents comprising of fifty chartered accountants, fifty cost and management accountants as well as fifty academicians. Frequency analysis has been used to evaluate their perceptions. The result of frequency analysis reveals that the sample banks greatly apply the accounting entity assumption, going concern assumption, assumption of a stable momentary unit as well as time period assumption in preparing the financial statements. Furthermore, this study has likewise employed ANOVA as well as Chi-square techniques to investigate whether there is any significant deviation amidst the respondents’ opinion concerning the execution of different segments of GAAP for financial reporting practice of the sample banks and the outcomes indicate that there is the significant difference among the respondents’ opinion regarding the application status of the different units of GAAP in financial reporting practice by the sample banks in some cases and in other cases the difference of opinion has also been observed.

Big Data’s Disruptive Effect on Job Profiles: Management Accountants’ Case Study

The abundance of new innovative data sources creates opportunities and challenges for all professions and professionals working with information. One of these professionals is the management accountant (MA). Although their tasks have expanded over time and especially recently, MAs have not fully employed all the available internal and external data sources to describe, diagnose, visualize, predict and prescribe possible solutions that enable smart decisions with positive effects on businesses. Thus, the paper investigates the impact of Big Data, including Data Analytics, on MA’s job profile. Through a review of the most recent academic and professional publications, the paper contributes to the debate surrounding the redefinition of the role of MAs in organizations in a novel informational perspective of Abbott’s theory. The results could serve as a research agenda and incentive for further studies, as well as provide MAs with a guide on the topic of the enlargement of their role(s), respectively, the augmentation of their tasks and responsibilities regarding the analysis of Big Data. Furthermore, the research may provide both a rich and flexible framework to help practitioners in their analysis of potential risks, opportunities and challenges when handling Big Data, and a lens for professional accounting associations and bodies by helping them to prioritize the holding and seizing of jurisdictions as an imperative part of safety and security.