The Influence Of Organizational Culture On Accounting Procedures (Coursework Sample)

THE INFLUENCE OF ORGANIZATIONAL CULTURE ON ACCOUNTING PROCEDURES
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Organizational Culture and Accounting Procedures
An organization’s culture is its guideline for daily activities that captures and reflects that organization’s goals, objectives, mission, and vision (plan) for the future. Accordingly, it influences accounting procedures. Whether a company uses a clan, adhocracy, hierarchy, or market organizational culture affects the accounting system, process, and policies. Therefore, a company’s corporate culture impacts its accounting procedures by influencing transparency in disclosures, ethical judgment, and intentions to act ethically during reporting and flexibility of the accounting procedures.
An organization’s culture crucially influences employees’ transparency in accounting procedures. In companies with a strong cultural influence, there is a direct relationship between the number of voluntary disclosures and their thoroughness. According to Elkish and Hassan (2014, 285), in a hierarchy culture, employees are more likely to disseminate risk information to appease requests from key stakeholders than in a clan or adhocracy culture. Employees understand that transparent disclosures increase investors’ confidence and reduce uncertainty over the company’s financial health (Herath, S. 2017, 264). Therefore, companies should modify their existing cultures in favor of those that support transparency in disclosures to improve their financial health.
Besides transparency, organizational culture also influences employees’ ethical judgment and intention to act ethically. In a clan organization culture, employees feel a sense of “we-ness” because of shared goals and attitudes, teamwork, cohesion, and consensus. Consequently, they are more likely to cover up their superiors’ fraudulent activities during accounting reporting than in a hierarchical culture (Nguyen, L. et al. 2022). This inclination to overlook the accounting code of ethics is informed by employees valuing their company’s overall health over professionalism and ethics and adhering to internal or external accounting statutory procedures (Herath, S. 2017, 264). In other words, the higher the ranking of an organization’s culture in collectivism, the more likely the employees are to uniformly prioritize the company’s health over observing statutory accounting controls.
Finally, organizational culture strongly and directly affects the choice of accounting procedures. Depending on the culture, a company can adapt, change, or remain rigid in its accounting procedures. According to Nguyen, L. et al. (2022, 331), an adhocracy culture “emphasizes adaptability and entrepreneurialism.” Therefore, such an organization is adaptable, entrepreneurial, and more risk-taking in its accounting procedures to align with changing industry standards. Similarly, a market culture focuses on results, attaining stretch goals, and being the market leader (Elkish, W. & Hassan, M. 2014, 285). Hence, the organization is always changing its accounting procedures to disclose information better. Ultimately, the organizational culture improves accounting procedures and strengthens external relationships with sup