Call for Papers Accounting Ethics and Tone at the Top Centre for Accounting Ethics, University of Waterloo Journal of Business Ethics Special Issue Symposium

Dates: 18-20 April, 2013 Location: Toronto, Canada Symposium Link: http://accounting.uwaterloo.ca/ethics/EthicsSymposium.htm

Guest Editors: Sally Gunz, Centre for Accounting Ethics, School of Accounting and Finance, University of Waterloo, Canada Linda Thorne, Schulich School of Business, York University, Canada

Organizing Committee, Centre for Accounting Ethics University of Waterloo, Canada: Sally Gunz Theresa Libby Linda Robinson

Scope of Special Issue: The theme of this Issue and its supporting Symposium is an intentional challenge to the academic accounting ethics discipline. There is a growing literature exploring issues of tone at the top particularly as it impacts governance. An understanding of managerial values and intent goes to the heart of the services the accounting profession provides and this is reflected in at least two distinct streams in the literature. The challenge laid down by this Symposium and call for papers is to consider tone at the top in its broadest sense; to identify those questions to date unexplored and to investigate the interactions between existing paradigms. The role of tone at the top and its interaction with accounting has a long history. The first recommendation of the Treadway Commission for the public company in 1987 addressed ‘the tone set by top management’ (NCFFR, 1987). It was one of three key elements the Commission identified ‘within the company of overriding importance in preventing fraudulent financial reporting’ with the other two being Internal Audit and Audit Functions and the Audit Committee (p. 11). A stream of articles followed examining the relationship between tone and accounting responsibilities (for example, Finn et al, 1988; Booth & Schulz. 2003). The professional demands for skepticism and independence place accountants, in all their diverse roles, in a position where the assessment of those in key decision making and the culture they create becomes fundamental to the fulfillment of professional accounting responsibilities. Today such demands find expression in the COSO Internal Control Framework (COSO, 2011) that expects entities to demonstrate a commitment to integrity and ethical values and management and the board of directors to lead by example in developing values, a philosophy, and an operating style in the pursuit of the entity’s objectives (p.27.). International Audit Standards recognize the role of the control environment in corporate governance/management and the reciprocal role of the auditor in assessing risk by understanding “Management’s philosophy and operating style – Characteristics such as management’s: • Approach to taking and managing business risks.

• Attitudes and actions toward financial reporting.• Attitudes toward information processing and accounting functions.” (IAASB, 2012). The growing literature on tone at the top and accounting ethics follows at least two identifiable streams. There is an evolving body of archival work studying the impact of observable board or management characteristics on financial reporting quality (see, for example, Klein, 2002; DeFond and Francis, 2005). A second approach is empirical, using survey and experimental methodologies to explore the relationship between governance or tone on auditors/the audit process (for example Cohen et al, 2002; Booth & Schulz. 2003; Cohen et al, 2007; Hunton et al 2011). This Symposium and Issue invites papers reflecting a full range of methodologies. It seeks papers that explore questions that have yet to be addressed and urges scholars to consider the interaction of the existing streams and whether this in turn can take the literature in new directions. Examples of questions that might be considered include, but are not limited to: • Boards of directors hold key roles in corporate governance. With increased focus on independent directors, might the significance of the board in shaping ethical culture be changing? • The audit committee plays a pivotal role in the oversight of the organization’s ethical environment and compliance with laws and regulation. To what degree is this oversight affected by the tone at the top? To what degree do audit committees monitor that the tone set by top management is reflected in financial reports supplied to external stakeholders? • The interaction of risk management, control systems and ethical practices has long been recognized. What is the impact on this interaction of tone at the top? • Much has been written about the impact of performance evaluation and compensation on earnings quality and ethical decision making. Where does tone at the top figure in these equations and how might accounting measurement systems impact outcomes? • Financial reporting processes continue to feature in many of the major corporate frauds and scandals. What is the impact, if any, of the ethical tone set by senior management on financial reporting processes and decisions? If there is an impact, is there opportunity to influence the ethical tone and therefore reporting outcomes? • An organization’s approach to corporate social responsibility is often touted as demonstrating the actual tone at the top. Is there any validity to such assertions? If, as indeed is often argued, many efforts in regards to corporate social responsibility are more show than substance, is there a role for the accounting profession in altering this position? • Since the Treadway Commission and likely before, it has been widely recognized that the tone at the top impacts both internal controls and the internal audit process. Thirty-five years on, what has the accounting profession learned? • The work of the auditor requires a sound understanding of corporate culture through the lens of appropriate skepticism. How effective are the tools used by auditors to measure corporate culture (tone)? Do these actually translate to improved audit quality? • It is often assumed in the literature that whatever tone senior management creates will inform all levels of the organization unimpeded. Yet there is evidence, at least when it comes to positive ethical messages, that life is more complicated and what lower level employees may believe to be the real message is far removed from what is touted on high. How can accounting control and measurement systems improve the chances of an accurate flow? Does the nature of the message translate to substance?

Although papers on the theme of the Symposium will be given preference, papers on other relevant accounting ethics topics will also be considered. Both private sector and public sector issues are of interest. All research methods are welcome. Instructional cases and papers addressing education issues related to accounting ethics and tone at the top are also welcome for presentation consideration.

Subject to editorial review and approval, accepted research papers with discussants’ comments will be considered for publication in a Special Issue of the Journal of Business Ethics (JBE) guest edited by Sally Gunz (University of Waterloo Centre for Accounting Ethics) and Linda Thorne (Schulich School of Business, York University). Travel grants will be provided to one author of each accepted paper and all discussants.

Submission deadline is January 15, 2013: Submitted papers will be subject to blind peer review by academics and practitioners. Submission guidelines are as follows: • Authors must adhere to the editorial style of Journal of Business Ethics at the following link: http://www.springer.com/authors?SGWID=0-111-6-793301-0). • The full call for papers can be found at http://www.springer.com/social+sciences/applied+ethics/journal/10551?detailsPage=societies • Please submit an electronic copy of the paper through the Journal of Business Ethics submission website http://www.edmgr.com/busi/ by selecting the “SI Waterloo Symposium” from the list of available article types. • Notice of acceptance will be sent by February 20, 2013. • Papers accepted for presentation at the Symposium subject to revision must be revised by March 15, 2013.

For more details about the Symposium, please visit http://accounting.uwaterloo.ca/ethics/EthicsSymposium.htm or contact Linda Robinson, Director, Centre for Accounting Ethics; Tel: (519) 888-4567 ext. 36995; Email: [email protected].

References: Booth, P., and A. K. D. Schulz. 2003. The impact of an ethical environment on mangers’ project evaluation judgments under agency problem conditions. Accounting, Organizations and Society 29 (5-6): 473–88. Cohen, J., G. Krishnamoorthy, and A. M. Wright. 2002. Corporate governance and the audit process. Contemporary Accounting Research 19 (4): 573–594. Committee of Sponsoring Organizations (COSO) of the Treadway Commission. 2011. Internal Control Integrated Framework. DeFond, M. L., and J. R. Francis. 2005. Audit research after Sarbanes-Oxley. Auditing: A journal of practice & theory 24 (supplement): 5–30. Finn, D. W., L. B. Chonko, and S. D. Hunt. 1988. Ethical problems in public accounting: The view from the top. Journal of Business Ethics 7: 605-615. Hunton, J. E., R. Hoitash, and J. C. Thibodeau. 2011. The relationship between perceived tone at the top and earnings quality. Contemporary Accounting Research 28 (4): 1190–1224. International Auditing and Assurance Standards Board (IAASB). 2012. Handbook of International Quality Control, Auditing Review, Other Assurance, and Related Services

Pronouncements I. Available at http://www.ifac.org/sites/default/files/publications/files/2012%20IAASB%20Handbook %20Part%20I_Web.pdf. Klein, A. 2002. Economic determinants of audit committee independence. The Accounting Review 77 (2): 435-452. National Commission of Fraudulent Financial Reporting (NCFFR) (Treadway Commission). 1987, October. The Report on the National Commission on Fraudulent Financial Reporting.