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The management of accounting numbers: Case study evidence from the ‘crash’ of an airline

The management of accounting numbers: Case study evidence from the ‘crash’ of an airline

Jorissen, Ann and Otley, David (2010) The management of accounting numbers: Case study evidence from the ‘crash’ of an airline. Accounting and Business Research, 40 (1). pp. 3-38. ISSN 0001-4788 (Print), 2159-4260 (Online) (doi:

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Financial misrepresentation has usually been analysed by large‐scale empirical research. However, the generality gained from such an approach is at the cost of understanding the rich and complex nature of financial misrepresentation in real organisations.We adopt a case study approach to gain more insight into the incentives, embedded in contracts, which trigger decisions to engage in financial misrepresentation and the underlying elements of discretion in these processes. In particular, we examine whether contractual incentives should be considered as endogenous or exogenous and we take a more integrated and dynamic perspective than is typical. Our findings demonstrate that in order to understand the decision processes of real managers it is necessary to distinguish between negotiable and non‐negotiable contracts of the firm. Using a multi‐theory perspective we observe that the direction of the causation assumed in the agency framework (i.e. contracts influence behaviour) is often reversed in the case of negotiable contracts (i.e. managers influence contracts). The case findings also provide insights into a number of additional variables which enlarge the discretion of a senior manager to engage in financial misrepresentation. The manipulation of accounting numbers can be achieved by many mechanisms which traditional methods based on accruals would not detect. The use of a wider range of research methods is therefore desirable.

Item Type: Article
Additional Information: [1] First published in print: 2010. [2] Published online: 4 January 2011. [3] Published as: Accounting and Business Research, (2010), Vol. 40, (1), pp. 3-38.
Uncontrolled Keywords: financial misrepresentation, airline, neogitable and non-negotiable contracts
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Faculty / School / Research Centre / Research Group: Faculty of Business > Department of Accounting & Finance
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Centre for Governance, Risk & Accountability (CGRA)
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Last Modified: 14 Oct 2016 09:24

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