Accounting knowledge in innovative firms - direct contacts with external auditors for strategic actions

Abstract

Managers' use of auditors in decision processes is well known in the accounting literature, but little is known about owner-managers in innovative firms and their acquisition of accounting knowledge through direct contacts with external auditors. We conducted a multiple embedded study of exploratory character based on 21 interviews with owner-managers and external auditors connected to six innovative firms. We show that owner-managers in innovative firms apply informal management control in early phases of the innovation process and thus also rely heavily on external auditors for such purposes. However, management's acquisition of accounting knowledge may contribute over time to the development of a more formalised control system as their competence increases. This study suggests that a competence-based view may be useful for understanding the role of accounting and external auditors in innovative firms' management control systems.Keywords: accounting knowledge; external auditor; innovative firm; strategic action.Reference to this paper should be made as follows: Blomkvist, M., Johansson, J. and Malmström, M. (2016) 'Accounting knowledge in innovative firms -direct contacts with external auditors for strategic actions', Int.

Business strategy – MSMEs' performance relationship: innovation and accounting information system as mediators

“…However, innovation researches on MSMEs recently prove that accounting information is very important for managers of innovative companies. Accounting information currently serves as part of management control, which is the central part of internal decision-making and managers' strategic measures in innovative companies (Blomkvist et al, 2016).…”

“…Management control systems (MCS) play an important role in dealing with environmental uncertainty in innovating MSMEs (Davila et al, 2009). Accounting information systems (AISs) have become important as part of MCS because of their role in helping with the internal decision-making process and as a measurement tool for managers' strategies in MSMEs (Blomkvist et al, 2016). The AIS is considered important for building that capacity (King and Burgess, 2006).…”

The auditor : Creating a concept of the auditor through auditors' own perceptions and understandings of their work in relation to boundary-setting forces

“…The role of the auditor can vary depending on the type of firm being audited (Blomkvist, Johansson, & Malmström, 2016;Collin et al, 2017). The role of the auditor as providing assurance assumes a clear separation between ownership and control, which is not always the case.…”

“…Collin et al (2017) described the consigliere role as one the auditor is suited to performing, since the auditor has no kinship relationship with the family and because the auditor possesses professional ethics and acts independently. Research has also showed that auditors have a critical role in guiding strategic actions in innovative firms (Blomkvist et al, 2016), where owner-managers acquire accounting knowledge through auditors that they need to predict and forecast an uncertain and unknown future.…”

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