Compromise and avoidance: the response to new legislation

Abstract

Purpose – The aim of this paper is to describe, analyze and explain the level of compliance of accounting practices with legislation and generally accepted accounting principles (GAAP) within the Swedish water and sewerage sector. Design/methodology/approach – The empirical data are based on a document study of the annual full cost accounting reports for the financial year 2010. We obtained complete data from 250 of Sweden's 290 municipalities. The data are analyzed by statistical methods. The explanations are based on an institutional theory. Findings – Most of the organizations surveyed in this study had taken measures in line with the new regulations, but none of them had adapted fully to the new requirements. Thus, we suggest that the industry has responded to the new regulation by compromise and avoidance. The statistical analyses show that compliance with legislation and GAAP is associated with legal form, minority governance, fee, tax base, population growth and audit firm. Research limitations/implications – This paper provides insight into the factors that explain compliance with accounting regulation. Future research would benefit from researching the decision process when organizations choose to comply or not to comply with specific accounting regulations in the public sector. Originality/value – Few prior studies focus on the actual compliance of accounting practices at the municipal level in relation to accounting regulation and the factors that explain the level of compliance. Knowledge of the factors that explain compliance to accounting regulation will benefit from future policy decisions on regulation and auditing of public sector accounting.

Do audit firm and audit costs/fees influence earnings management in Swedish municipalities?

“…( Source : Statistics Sweden) Change of government is another measure of political competition (e.g. Haraldsson and Tagesson, 2014). The variable was measured as change of party affiliation for the chair of the executive board during one or more of the last three elections (1=yes, 0=no).…”

“…We followed Gilljam and Karlsson's (2012) • Minority government means strong political competition (e.g. Haraldsson and Tagesson, 2014). The opposition have the opportunity to put pressure on the governing parties as they could win formal votes in the political assemblies.…”

“…Achieving this also requires an institutional context that supports enforcement and compliance with the standards (e.g. Haraldsson and Tagesson, 2014; Pope and McLeay, 2011). This is particularly important in an accrual- and principle-based system, which requires judgement from preparers, as there will be a risk of manipulation of discretionary accruals (Jones and Caruana, 2015).…”

Strategic Responses to Changing Climate Change Policies: The Role Played by Carbon Accounting

“…; de Villiers and Alexander ). Institutional theory helps explain the strategy and carbon accounting choices adopted by firms in response to climate change policies and regulations to gain legitimacy (Haraldsson and Tagesson ; de Villiers et al. ).…”

“…Climate change policies and regulations are likely to exert significant regulatory and societal pressures on firms, requiring them to respond appropriately via carbon disclosure and associated internal changes (Hopwood 2009;Alrazi et al 2015;de Villiers and Alexander 2014). Institutional theory helps explain the strategy and carbon accounting choices adopted by firms in response to climate change policies and regulations to gain legitimacy (Haraldsson and Tagesson 2014;). Furthermore, as such policies may impose carbon costs and change the competitive parameters between industries and sectors, institutional theory can explain how the institutional environment can impair or create a firm's economic competitive advantage beyond the advantage sustained by its internal resources (Ratnatunga and Balachandran 2009;Martinov-Bennie 2012).…”