Conventional proposals to reform corporate governance based on the rational model of decision making may be insufficient in preventing future corporate debacles. Typically underestimated are the pressures from conflicts of interest and bias on reputational intermediaries. Judgements and choices made by auditors during professional engagements may not strictly adhere to the rational model of decision making. This is of significance with regard to the gatekeeper function of auditors and relevant legislation. A discussion on earnings management elaborates by suggesting that strictly numerical measures are not a reliable guide to the quality of corporate governance. It is suggested that our understanding of monitor behaviour in corporate governance would be improved by placing it on psychologically more realistic foundations. Some of these foundations are introduced.

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Marnet, Oliver, 'Behaviour and rationality in corporate governance', Journal of Economic Issues (2005) 39(3) pp.613-632 RAE2008The agency view of corporate governance requires effective monitors and gatekeepers to align the interests of the agent with those of the principal. One common denominator in recent corporate debacles appears to be the collective failure of gatekeepers and monitors. This paper suggests that conventional proposals to reform corporate governance through legislation, codes of best practice, and the like, are necessary, but underestimate the pressures from conflicts of interest and bias which reputation intermediaries face in their interaction with colleagues and clients. The aim of this paper is to integrate various strands of the literature on corporate governance, cognitive research and behavioural economics to shed light on questions regarding the independence of boards of directors and external auditors.Peer reviewe

This paper mobilises notions of professional closure and political economy to analyse the development of the Egyptian accounting profession . We rely on interviews with Egyptian Society of Accountants and Auditors (ESAA) board members, government officials, representatives of international/local firms, and academics. Legislative documents (particularly Accounting Practice Law 133/1951), regulations and publications were also analysed. Established since 1946, ESAA's initial attempts to embed an 'Anglo-American' professional model were curtailed by the newly independent State enabling non-credentialed and relatively less experienced native practitioners to be registered as qualified accountants. The State's influence persisted during the socialist period of nationalisation with a de-emphasising of the accounting profession as an occupational group. The early stages of market capitalism witnessed attempts to re-develop a private-sector-led profession with the support of international organisations, which re-asserted the dominant position of ESAA members. However, government, ESAA and international agencies' efforts to repeal the original Accounting Practice Law and achieve market closure for the primary benefit of ESAA members were thwarted by political pressure from non-ESAA accountants. Nonetheless, ESAA eventually secured privileged access to the listed firms' audit market. This paper aims to enhance our understanding of changing State-led priorities on accounting professionalization in African developing countries.

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This paper is a case study-based investigation of aspects of the current paradigmatic approach to 'good' corporate governance, with its focus on the interlinked roles of internal control and risk management procedures, internal audit and external audit, overseen and coordinated by a formal structure of board committees, in particular the audit committee. The evidence that we adduce from the study of four high-profile cases of perceived accounting and governance failure provides limited assurance that this approach will in fact be cost-effective or efficient in preventing further such cases of accounting and governance failure. Specifically, issues as to remuneration and fee dependence, lack of relevant knowledge and expertise, social and psychological dependence upon executive management appear to have significantly and negatively affected the quality of decision-making of governance gatekeepers. This suggests that further consideration of relevant economic, institutional and cognitive/behavioural factors beyond the rational choice model of traditional economics should underpin future developments in required modes and structures of governance.

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