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Funded CPA-Centre Projects

Thought leadership at the intersection of accounting practice and accounting policy.

Accounting for the Unity of a Nation State: Canada and the Equalization Program

M Persson, V Radcliffe, M Stein

This project addresses how accounting for financial arrangements within states is critical to the formation and maintenance of broader state arrangements. Specifically, it examines the role of accounting in the formation and maintenance of Canada's equalization program. The role of accounting within the Canadian equalization system is not well understood even though it has a significant impact on the wealth and relative power of various provinces. The purpose of this project is to fill a hole in the accounting literature by analysing and developing an understanding of the role of accounting practices in shaping the calculations underlying the Canadian equalization system. This project will address how within the Canadian equalization system accounting practices are not neutral, objective or unchallengeable, but rather are profoundly political instruments employed in justifying particular federal fiscal arrangements.


Exogenous Expansion of the Audit Field: Boundary and Practice Work, and the Auditing of Government Advertising in Ontario

V Radcliffe, M Stein

This research investigates how the legitimacy of audit ideals and practices can be expanded into new jurisdictions through the activities of interested third parties, something we refer to as boundary pull. We examine how this concept of boundary pull led to the Office of the Auditor General of Ontario became seen as a legitimate reviewer of all political advertisements proposed by the Government of Ontario for political bias.


Does Accounting Measurement Impact Markets : A Laboratory Market Efficiency Perspective

M Sooy

Policymakers and academics have reopened debate on the possible link between accounting measurement bases and underlying economic fundamentals. Using laboratory markets where accounting regimes can be directly compared with otherwise equivalent economic parameters, we test whether and how two accounting measurement bases – historical cost accounting and mark-to-market accounting – influence investor perceptions and asset price bubbles. We predict and find that investors perceive stronger links between performance and market price changes in the mark-to-market regime, and also perceive weaker links between their performance and dividends. This corresponds with greater market-level mispricing in the mark-to-market regime. In supplementary analysis, we observe that investors in mark-to-market regimes prefer information about future market prices, but investors in historical cost regimes prefer information about future dividends.  Our study provides theory and evidence supporting the possibility that accounting methods may contribute to asset price bubbles, incremental to market economics.


Auditing and the Development of the Modern State

V Radcliffe, M Stein

This research extends prior research on the roles that accounting plays in both the construction and development of the State by exploring the ways in which accounting practices were significantly expanded and elaborated over time as a technology of government, resulting in greater power and influence being accorded to government auditing professionals. The paper focuses on how government auditing initiatives in Canada were galvanized by simultaneous initiatives taking place in the United Kingdom, United States and a range of other Commonwealth nations. It examines how Auditors-General worked both individually, and in concert, to sell the evaluative potential of accounting to key power brokers within the State, thereby creating advantageous positions for themselves.


When less is more : The Benefit of Partial Relative Performance Information on Creative Problem Solving Performance

K Huo

Innovation requires creative problem-solving which takes a never-before noticed feature of the problem and then build a solution based on that feature (McCaffrey 2012). While prior research has focused primarily on the effect of relative performance information (RPI) in a setting where performance could be improved by an increase in task related effort, it remains unclear how RPI affects performance in a setting where creative problem-solving skills, not greater effort, are required to improve performance. In this study we investigate how feedback type (full or partial RPI) affect performance in a setting where task performance is improved by identifying important but obscure features in problems. We find evidence that non-top performers perform better when provided partial RPI feedback than when provided full RPI feedback, but only when the individuals reside in larger groups which afford the ability to ‘hide in the crowd’.  The results differ for top performers who are not affected by the form of RPI feedback.


The State of Ohio’s Auditors and the Enumeration of Populations

M Persson, V Radcliffe, M Stein

This paper examines the role of the accounting profession as the State of Ohio began to enumerate and identify people with disabilities as part of an attempt by the eugenics movement to eliminate disabled persons from the population. We show that the financial expertise and structures of the State were relied on for the execution of this mandate, which remained in place for over a century.


The Effect of Sanction Targets on Manager's Compliance with Regulations

K Huo, M Sooy

Managers frequently face choices that trade off their own wealth with the welfare of others. In response, regulatory agencies have introduced punitive regulations and sanctions to protect vulnerable parties such as outside investors and other employees. We investigate one dimension of sanctions on managers’ perceptions of and compliance with protective regulations – sanctions’ target, which may penalize the violating manager, his/her firm, or both. We theorize that managers will feel greater (rather than less) accountability when sanctions target coworkers than when they target only the manager him/herself. Consequently, we predict that managers’ compliance with protective regulations will be greater in a regime where sanctions target firms for managers’ violations than in a regime where sanctions target managers themselves.


Howard Irwin Ross (1907–1974): A Canadian Pioneer in Accounting Thought and Leadership

M Persson

Ross was born in Montreal and received his BA from McGill University in 1930; MA from Oxford in 1932; and then qualified as a CA in 1917. He joined the accounting firm Touche, Ross, Bailey and Smart (now Deloitte) in 1932 and rose to Partner in 1942, but he remained involved in matters of governance, research, and academia throughout his career. In this capacity, he published articles and books, served as the President of the influential Committee on Accounting and Auditing Research of the Canadian Institute of Chartered Accountants (today CPA Canada), and as a one-term President of the Québec Institute of Chartered Accountants. This was followed by appointment as the Chancellor of McGill University in 1964 and later as the inaugural Dean of the newly established Faculty of Management (now known as the Desautels Faculty of Management) in 1969. For these accomplishments, Ross was awarded honorary doctorates from the universities of Concordia, McGill, Queens, and Sherbrooke and he became the first non-naturalized US citizen to be inducted into the Accounting Hall of Fame in 1977.


How the Prospect of Fault Influences Managers’ Compliance

M Sooy

The SEC relies heavily on ‘no-fault’ settlements in its enforcement, where targets avoid costly litigation by accepting sanctions without admitting or denying fault.  This policy is argued to enable the agency to pursue greater numbers of violators.  However, opponents argue that no-fault sanctions may be less effective, reducing fines to a ‘cost of business’.  In two experiments, I predict and find that managers faced with a compliance choice perceive their compliance differently when regulatory sanctions include fault – when sanctions include fault assignment, managers perceive and weight social objectives in their decision-making.  Consequently, these managers comply more frequently with costly regulations and select higher quality compliance than managers in no-fault conditions. My findings are consistent with fault fostering managers’ social awareness, counteracting the tendency of sanctions to crowd-out ‘civic virtue’. 


Can Accounting Civilize Nature? The case of conservation Performance

D-L. Arjalies, D. Gibassier 

This study examines one of the first performance indices developed by conservationists to assess their effectiveness at saving endangered species. It enriches previous research on biodiversity accounting and its consequences for the conservation of species. The article demonstrates that the use of a conservation performance index based on human incentives might encourage conservationists to focus their efforts on the animals that are most popular or likely to survive at the expense of other faunae. Based on these findings, it discusses the conditions under which the use of financial incentives can help a society address environmental concerns.


Performance Incentives, Divergent Thinking and Training and Creative Problem Solving

K Huo

Creativity theory suggests that effective solutions to creative problems depend on both divergent and convergent thinking (Cropley 2006). Using an experiment in which participants solve insight problems, I investigate the effect of incentive schemes on creative problem-solving performance. I find that both piece-rate pay and a flat wage plus public recognition generate higher performance with divergent thinking training than without. Consistent with the idea that incentives may promote more convergent thinking than divergent thinking, piece-rate pay generates lower creative problem-solving performance than the flat wage in the absence of divergent thinking training (flat wage plus recognition has a neutral effect). The study suggests that when employee performance depends on creative problem solving, firms should implement
incentive schemes and/or control systems that promote both divergent and convergent thinking.


Governance Tensions in MNCs’ Financial Reporting Quality

T Li., M Magnan, Y Shi

Drawing on institutional theory, corporate governance bonding theory and corporate governance arbitrage theory, this study investigates how the institutional complexity of a multinational corporation (MNC), impacts its accounting quality. We employ a unique sample of MNCs registering affiliates or subsidiaries in offshore financial centers (OFCs). Our analyses show that MNCs cross-listing in the U.S., exhibit lower abnormal accruals, higher accruals quality and more persistent earnings patterns compared to MNCs not-cross-listing in the U.S., thus supporting the corporate governance bonding theory. However, the positive association between cross listing and accounting quality is negatively moderated by a MNC’s choice of OFC subsidiaries or affiliates, thereby suggesting that the internal institutions underlying foreign subsidiaries do relate to the accounting quality of the parent firm. Moreover, a MNC’s OFC choice also negatively moderates the relation between home country governance and accounting quality, thus lending further support to corporate governance arbitrage theory. Our study underscores, to regulators and investors, the co-existence of international mobility of good governance and bad governance for MNCs. Therefore, it is important to enhance monitoring efforts for MNCs with opaque and complex structures, to better detect opportunistic earnings management.


The Impact of Vertical Wage Dispersion on Employee's behavior in Tournaments

K Huo, L Guo, T Libby

We investigate the effect of vertical wage dispersion, defined as the difference in wages between superiors and subordinates, on subordinates’ behaviors in competition. We propose that higher vertical wage dispersion increases subordinates’ desire to reduce the vertical pay gap through
collusion against their superiors in a setting where collusion reduces subordinate effort while increasing subordinates’ pay. Our two experiments test our prediction in one-shot (Study 1) and repeated (Study 2) tournament settings. In Study 1, we find that rather than increasing collusion,
high vertical wage dispersion increases competitiveness and effort contribution. In Study 2, we find support for our prediction that high vertical wage dispersion increases collusion and reduces effort contribution due to the trust building between subordinates that is facilitated by repeated
tournaments. We contribute to the growing research on pay dispersion by studying how vertical wage dispersion affects lower-level employees’ interaction with their peers. We also extend tournament research by studying how a contextual variable outside the tournament, i.e., ex ante
vertical wage dispersion, could affect employees’ willingness to compete or to collude in tournaments. An implication of our finding is that high vertical wage dispersion may make competitive incentives more or less effective, depending on the context.


A.C. Littleton's Final Thoughts on Accounting : A Collection of Unpublished Essays, Amount requested

M Persson


Boundary Work at the Margins of Politics and Auditing : Rationalizing Advertising Probity in Ontario

M Stein


Corporate Governance and Managerial Opportunism, the Moderating Effect of Leader Character

M Sooy, K Huo, L Monzani

In an experimental study, we investigate how shareholder right, financial reporting transparency, and leaders’ character can constraint managerial opportunism. Abuses of managerial power and neglect of shareholder welfare lead to corporate underperformance and loss of confidence in capital markets. We predict that both transparent financial reporting and leader character can empower shareholders and counteract managerial opportunism. We further predict that leader character functions as a substitute for reporting transparency, and vice versa. Our study combines experimental economics decision data with attitudinal (self-reported) and physiological (hormonal changes in saliva) measures. Specifically, we measure individual preferences regarding selfishness, dominance orientation and participants’ levels of testosterone and cortisol in saliva to examine manager decisions from multiple vantage points. Our study combines insights from accounting, organizational behavior, and psychobiology to advance the understanding of how firm characteristics and individual traits / personalities interact to affect managerial decisions.


Harold Cecil Edey : Collection of Unpublished Material from a 20th Century Accounting Reformer

M Persson


Truth and Reconciliation and Indigenous empowerment through accounting

D-L. Arjalies

This research project aims to understand how First Nations organizations, like the Walpole Island Heritage Center (Ontario), would define “Indigenous” forms of accounting. Its goals is to build knowledge on alternative forms of accounting that accommodate the views of Indigenous communities and participate in the process of truth and reconciliation. Despite the key role of accounting in building relationships between the Federal government, the Indigenous communities and the accounting community, little research has actually studied what would an Indigenous community would desire as form of accounting. Given the truth and reconciliation process and the growing interest of the accounting profession for Indigenous communities, it appears crucial to fill this gap. It is indeed of primary interest for the public interest in Canada to be able to empower Indigenous communities through accounting. This research project will co-investigate the topics between the researcher, members of the Heritage Center and people of Walpole Island, by using interviews, conversations, fieldwork visits, videos, photos and archival documents.


Pay Governance within the Canadian Context

N De Gannes, M Stein


What Do You Mean "Unlimited"? : Employee response to Unlimited Vacation Policies

M Sooy

This study investigates common differences in unlimited paid vacation policies on employees’ willingness to use Paid Time Off (‘PTO’) and their corresponding employee productivity. Unlimited vacation policies represent significant commitments for organizations, which can yield significant employee welfare and output gains when successful, but can also result in significant employee welfare and output losses if employees perceive the policies to be restricting rather than increasing work flexibility. While business press on the topic has been plentiful, to our knowledge there has been no systematic research into why unlimited vacation polices have had mixed success across firms.


Fair Hydro

V Radcliffe


The effect of pay transparency on pay dispersion and employee motivation

K Huo, L Guo, T Libby

We examine pay transparency’s impact on firm performance by focusing on its effects on employee and manager behavior during repeated interactions. We consider an organizational setting in which managers are given the responsibility of allocating a bonus pool to employees under the manager’s supervision. The bonus pool is a function of firm profit, which increases as the employees’ production increases. Production depends on both employees’ ability and effort. Ability is fixed, but effort depends on the employee’s willingness to work. Following economic theory, we assume that effort provision is costly and employees would rather not work than work unless proper incentives are provided. In a repeated setting, the manager has the opportunity to use pay to motivate the employees to maximize their effort in order to increase firm profit, from which the manager derives his/her bonus. Both managers and employees are motivated to increase their pay which depends on decisions by the other party. Our central tenet is that the level of cooperation between managers and employees will be affected by their desire for pay but also by individual perceptions of equity and social identity. Our two studies look at how employee composition and characteristics affect this relationship with and without pay transparency.


A Historical Analysis of the political and Corporative Nature between the office of the Auditor General of Ontario and The Government of Ontario

M Stein, V Radcliffe

This research examines whether and how the relationship between the Office of the Auditor General of Ontario (OAGO) and the Provincial and Municipal governments subject to audit by the OAGO has changed over the last four decades since the introduction of value-for-money auditing as part of the OAGO’s mandate. While the objective of these audits is to ensure that taxpayers receive value for their tax dollars, commenting on whether the government provides value-for money can potentially create a an adversarial relationship between the OAGO and governments, which could affect how governments respond to and implement recommendations of the OAGO. It could also lead to the OAGO becoming increasingly involved in taking partisan positions on political issues despite the Auditor General not being an elected position. This could lead to the politicization of the OAGO possibly changing its role and effectiveness as an independent body of office of the Legislative Assembly.


How Accounting on the Sustainable Development Goals can Contribute to Politicize Corporations

D-L. Arjalies


Integrating ESG in Executive Incentives

N De Gannes


The Future of Professional Expertise in Taxation : Use of Expert Systems and Artificial Intelligence in Tax Compilation and Planning

M Stein, V Radcliffe


Diversity and Inclusion in Accounting Education

N De Gannes


The New normal : What is the key to maintaining effective professional development remotely?

K Huo

The number of professional employees working remotely has increased dramatically in response to the COVID-19 pandemic. This change to the workplace is expected to be long lasting. One challenge facing organizations that have remote-working, professional employees is how to adapt the typically in person professional development programs to the remote workplace in a way that maximizes learning and development. In this study, we examine how management control systems can be designed to most effectively develop the knowledge of professional employees in a remote work environment. More specifically, we examine how different features of outcome-based relative performance information can affect the extent to which employees chose to engage in remote and self-directed professional development to improve their problem-solving skills. To test this research question, we will conduct an experiment where we will manipulate, between-participants, the type of relative performance feedback (repeated vs. cumulative). We will also group participants with a measured variable of ability (high vs. low). We predict that high (low) performing employees will engage more in professional development when receiving cumulative (repeated) relative performance feedback.


Corporate Social (lr) responsibility and Firm risk : The Role of Corporate Governance

Y Shi, C Dunbar, F Li 

Building on Stakeholder Theory and Risk Management Theory, this study explores the role of corporate governance in explaining the variability of the relation between corporate social responsibility (CSR) and firm risk among different firms. The results suggest that CSR activities can reduce firm risk for firms with good corporate governance, as proxied by board diversity, board independence and the presence of a sustainability committee. In addition, this research extends the literature by examining the impact of corporate social irresponsibility (CSiR)—the negative counterpart of CSR — on firm risk. Our results show that CSiR increases firm risk. Further, firms with good governance and thus high public awareness are more quickly (can we test it?) and significantly penalized when engaging in CSiR. Finally, our research reveals that the moderating role of corporate governance is stronger for CSiR-firm risk relation than for the CSR-firm risk relation, therefore validating the asymmetric effect of CSiR relative to CSR.

This work suggests to managers that the goodwill refund effect (social capital) of CSR is not homogenous or unconditional. Our evidence proposes that firms’ engagement in CSR activities can only reduce risk if CSR activities and corporate governance are in tandem. Nonetheless, not all firms fully appreciate the prominence of corporate governance when employing CSR as a strategic investment. Additionally, given that stakeholders allocate greater emphasis on negative components of CSR (i.e., CSiR), if firm financial capacity is limited, managers should focus more on reducing CSiR rather than investing in CSR.


Mispricing, Bubbles and Exchange Values : The Role of Extreme Beliefs

M Sooy

Models of market behavior frequently assume that traders with identical information should believe other traders will arrive on a similar valuation.  However, to the extent that individual traders believe that others possess different valuations, traders may construct order prices partly based on others’ different beliefs.  In three experiments, we examine the tendency of individual traders to overestimate the valuations of other traders (Experiment 1), to also overweight extreme beliefs in estimates of market prices (Experiment 2), and to update their beliefs of other traders based on market price, leading market price to circularly inform and reflect the beliefs of other traders. (Experiment 3).


The Auditor General of Ontario and the COVID 19 Pandemic

V Radcliffe

Governments have taken a number of significant and sudden actions often with limited oversight, justifying these actions based on an immediate need to respond to the COVID-19 pandemic. Much of what governments have done has currently escaped significant criticism since those who provide oversight have had to balance what is seen as governments acting in the face of a crisis and ensuring good public management of the government’s resources. It is the latter which forms the mandate of the Auditor General of Ontario, but increasingly this mandates clashes with political realities as governments seek to gain political advantage through not just good public policy but framing or marketing that policy. This paper aims to understand the role of the Auditor General and dynamics at play, and how these dynamics are impacted by issues of perception and gender of those involved. In sum, this research will provide a better understanding of the role of accounting and auditing in times of critical public policy issues.    


Social Preference and Subjective Performance Evaluation

S Wu

Social preference is an important factor that renders implicit contracts more efficient than traditional self-interest agency models predict. While subjective performance evaluation is a commonly used contract enforcement device when explicit incentives are absent or insufficient, the effectiveness and efficiency of subjective performance evaluation might depend on the social preference of the supervisors and subordinates. In this study, we propose a theoretical framework on the relationship between social preference and subjective evaluation biases, and use archival and survey data collected from two companies in China to empirically test our predictions. We expect that both supervisor and subordinate’s social preferences have significant impact on subjective performance evaluation results. This paper offers useful insights to practitioners and the broader public interest of improving employee incentives within the workplace.


When the Letter of the Law and the Spirit of the Law diverge. Compliance Under Enforcement Gaps

M Sooy, K Huo, R Hudgins

This study examines managers’ compliance with costly regulations when regulations cannot be enforced at the level that is desired, similar to spirit of the law versus letter of the law compliance.  Our primary hypothesis is that individuals will voluntarily bear costs to comply fully with regulations, even when the economic benefits of full compliance accrue to others.  We also predict that full compliance will be lower in the presence of strong economic sanctions, even though these sanctions do not directly impact the economics of full compliance.