The global financial crisis was followed by calls for a transformation of conventional finance, t... more The global financial crisis was followed by calls for a transformation of conventional finance, towards more ethico-aesthetic models. One avenue was to consider the alternative aesthetic of Islamic financial institutions (IFIs). IFIs offer profit-loss sharing (PLS) schemes as a distinctive spiritual alternative to conventional investment products. IFIs ontotheology clashes with the epistemology of modern banking and finance. The accounting for PLS creates tensions due to practical complexity that militates against implementation of the authentic Islamic financial contracts. This paper seeks to identify the role of accounting in IFIs' practice of interpretation to resolve the struggles that have taken place around the implementation of PLS schemes as a means of spiritual based financial alternatives. We explore how IFIs use accounting in rendering notions of spiritual/prophetic values applicable to practice or how it colludes against their implementation. Our study adopts a qualitative research methodology, framed around 40 interviews and observations of PLS implementation in IFIs in five Muslim countries in Asia and the Middle East, and one in the United Kingdom. We combine the literature on accounting and religion with the ideas/concepts from the literature on religion in organizations, political economy and Islamic law/finance. These perspectives enable us to better reveal how accounting works to reinvent spirituality. In our context we show how accounting mediates the conflicting interests and intentions that arise within the epistemological clashes that happen as the scared/religious strives to take its place in the capitalistic context of the conventional finance industry. Highlights: The struggles IFIs face in implementing profit and loss sharing schemes The tensions around PLS schemes induce the use of accounting to offer pseudo-spiritual finance Accounting role in mediating conflicting interests and intentions
What US basketball can teach bankers (and the rest of us) about performance related pay structures and risk : Excellence in Leadership (special issue on Risk)
Monitoring of the Risk Management System and the Role of Internal and External Audit
In Woods M Kajuter P and Linsley P Editor International Risk Management Systems Internal Control and Corporate Governance Oxford Elsevier 2007 P 131 141, 2007
Integrating risk management with performance management
This article argues that, post Enron, governance reforms around the world have served to raise th... more This article argues that, post Enron, governance reforms around the world have served to raise the profile of risk management, and emphasise the need for a corporate wide approach to internal control that is overseen by the Board of Directors. In the US, this is most clearly demonstrated by the emergence of Enterprise Risk Management (ERM), defined as 'a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.' (COSO, 2004, p.2). In practical terms, however, the introduction of an enterprise wide holistic risk management system poses a big challenge to all but the smallest of organisations. The financial crisis has clearly shown that enterprise wide risk management remains a dream rather than a reality for even the world's largest and once highly respected companies.
This study explores the challenges of implementing International Financial Reporting Standards (I... more This study explores the challenges of implementing International Financial Reporting Standards (IFRS) at the organisational level. Based on interviews with experts with aggregated experience relating to the transition projects of over 170 reporting entities, this paper highlights the main challenges in delivering a successful implementation of IFRS. The findings show that the problems faced in implementation include lack of education and training, securing executive level support, identifying and responding to the wider business-related implications of the transition, and issues with capturing the necessary information for reporting under IFRS. This paper complements the existing literature and offers a qualitative alternative to considering the transition to IFRS, offering insight into the organisational context of IFRS implementation. These insights are useful not only from a historic perspective, but also for organisations and regulators in the many jurisdictions where IFRS is permitted but not required, where more reporting entities will voluntarily move to IFRS based reporting in the future. More broadly, they are also applicable to the challenges faced in implementing new and significantly revised IFRSs.
The increasing adoption of international accounting standards and global convergence of accountin... more The increasing adoption of international accounting standards and global convergence of accounting regulations is frequently heralded as serving to reduce diversity in financial reporting practice. In a process said to be driven in large part by the interests of international business and global financial markets, one might expect the greatest degree of convergence to be found amongst the world's largest multinational financial corporations. This paper challenges such claims and presumptions. Its content analysis of longitudinal data for the period 2000-2006 reveals substantial, on going diversity in the market risk disclosure practices, both numerical and narrative, of the world's top-25 banks. The significance of such findings is reinforced by the sheer scale of the banking sector's risk exposures that have been subsequently revealed in the current global financial crisis. The variations in disclosure practices documented in the paper apply both across and within national boundaries, leading to a firm conclusion that, at least in terms of market risk reporting, progress towards international harmonisation remains rather more apparent than real.
This paper reviews the origins and development of the value chain (Porter,1985) and its developme... more This paper reviews the origins and development of the value chain (Porter,1985) and its development into value shops and value networks. We argue that these "value models" pay insufficient attention to the increasing role of information and communications technology (ICT) or to the emergence of new understandings of risk and risk management. The role of ICT has moved from being merely a support activity to being integral to primary business value adding activities. As ICT has become more embedded in primary and secondary activities, risk management has become more important to the organization's value adding activities. Risk management has become a primary business tool, aimed at achieving organizational objectives given a predetermined organizational risk appetite and an acceptance of the risk/return trade-off. In turn this has led to risk management driving performance metrics and internal controls. Both ICT and risk management play a role not only in primary value adding activities but also in supporting the primary functions, both of which can be sources of competitive advantage. We argue that ICT and risk management are cyclical in nature and we apply life cycle theory to consider value chains, ICT and risk management as interdependent. We develop the idea of a value cycle to reflect a shift in thinking from the value chain as a linear process into a cyclic one based on continual evolution and learning. This takes account of organizational developments-especially those relating to ICT and risk management-that have taken place since Porter's original value chain model was developed.
Crunch Time for Bank Audits? Questions of Practice and the Scope for Dialogue
SSRN Electronic Journal, 2009
PurposeThe purpose of this paper is to review the way in which auditing issues have been raised a... more PurposeThe purpose of this paper is to review the way in which auditing issues have been raised and addressed during the credit crunch and developing global financial crisis.Design/methodology/approachAnalysis is based on a review of the academic auditing literature, regulatory and audit reports, together with papers from the financial press.FindingsAfter highlighting the relative lack of media attention devoted to the external auditing function in the light of major corporate collapses, the paper considers what, contrastingly, is an active and ongoing series of responses to the current crisis on the part of auditing firms and the profession more generally. Through such analysis the paper explores a number of implications of the credit crunch for both auditing practice and research.Research limitations/implicationsThe paper is constrained in part by the rapidly unfolding nature of events, with important policy developments arising almost on a daily basis. The paper draws primarily on events up to the beginning of October 2008.Practical implicationsThe paper has important messages for audit practice and research, including the technical capacities of external audits in the banking sector, the contributions of standard setting bodies and regulatory oversight, and the scope for enhanced dialogue between such parties and audit researchers.Originality/valueThe paper serves both to focus and stimulate analysis of the credit crunch on the audit profession. It demonstrates the complexity of contemporary practice and highlights the importance, especially from an educational perspective, of developing understanding of banking audit practice and associated regulatory interactions – including the presented possibilities both for research and enhanced academic‐practitioner dialogue.
O ne of the more memorable moments of last summer's credit crunch came when the chief financial o... more O ne of the more memorable moments of last summer's credit crunch came when the chief financial officer of Goldman Sachs, David Viniar, announced in August that Goldman's flagship GEO hedge fund had lost 27% of its value since the start of the year. As Mr. Viniar explained, "We were seeing things that were 25-standard deviation moves, several days in a row )." One commentator wryly noted: That Viniar. What a comic. According to Goldman's mathematical models, August, Year of Our Lord 2007, was a very special month. Things were happening that were only supposed to happen once in every 100,000 years. Either that…or Goldman's models were wrong (Bonner [2007b]).
International Journal of Public Sector Management, 2009
PurposeThe purpose of this paper is to consider hierarchical control as a mode of governance, and... more PurposeThe purpose of this paper is to consider hierarchical control as a mode of governance, and analyses the extent of control exhibited by central government over local government through the best value (BV) and comprehensive performance assessment (CPA) performance regimes.Design/methodology/approachThis paper utilises Ouchi's framework and, specifically, his articulation of bureaucratic or hierarchical control in the move towards achievement of organisational objectives. Hierarchical control may be inferred from the extent of “command and control” by Central Government, use of rewards and sanctions, and alignment to government priorities and discrimination of performance.FindingsCPA represents a more sophisticated performance regime than BV in the governance of local authorities by central government. In comparison to BV, CPA involved less scope for dialogue with local government prior to introduction, closer inspection of and direction of support toward poorer performing a...
The value of risk reporting: a critical analysis of value-at-risk disclosures in the banking sector
International Journal of Financial Services Management, 2008
Page 1. The value of risk reporting: a critical analysis of value-at-risk disclosures in the bank... more Page 1. The value of risk reporting: a critical analysis of value-at-risk disclosures in the banking sector Margaret Woods* Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1RB, UK E ...
The interface of accounting research with education and practice
Accounting Education, 1996
The objective of this paper is to examine the relevance of accounting research in relation to acc... more The objective of this paper is to examine the relevance of accounting research in relation to accounting education and practice. In recent years the link(s) between these three strands has been a matter for debate, and the relevance of academic accounting research has been brought into question. Recent trends in the UK in relation to research include a university funding system which has placed increasing emphasis on the importance of research, an increase in the popularity of the case study style of research, and a growth in accounting research sponsored by the professional bodies. This paper suggests that these trends may not be sufficient to ensure that accounting research is of relevance to the education of accountants and the practice of accounting. We suggest that a research project should possess three qualities: relevance, reliability and realism (the three Rs of research) otherwise even with publicity its impact may remain minimal.
There is an increasing recognition that annual reports need to better disclose the risks facing a... more There is an increasing recognition that annual reports need to better disclose the risks facing a company. Provision of a defined benefit scheme poses one of these risks as companies take on uncertain long term obligations to make future pension payments. This report addresses the issue of how companies should report this risk so that stakeholders can understand a company's exposure to pension risk. As well as providing an analysis of current defined benefit pension scheme risk disclosures by FTSE 100 companies, the report provides examples of current practice and suggests best practice for the future. The authors also make recommendations to the International Accounting Standards Board (IASB) on its current IAS 19 exposure draft and to the UK Accounting Standards Board (ASB). This project was funded by the Scottish Accountancy Trust for Education and Research (SATER) (for further details see page 49). The Research Committee of The Institute of Chartered Accountants of Scotland (ICAS) has also been happy to support this project. The Committee recognises that the views expressed do not necessarily represent those of ICAS itself, but hopes that the project will assist the standard setters in their deliberations on pension risk reporting requirements and guidance.
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