Accounting, Organizations and Society 34 (2009) 797–802
Contents lists available at ScienceDirect
Accounting, Organizations and Society
j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / a o s
The economic crisis and accounting: Implications for the
research community
Anthony G. Hopwood *
Saïd Business School, University of Oxford, Park End Street, Oxford OX1 1HP, United Kingdom
a r t i c l e
i n f o
a b s t r a c t
Introducing a group of essays and articles on the implications of the current economic and
financial crisis for accounting practice and research, this article provides an overview of
some of the principal issues and themes. Noting that very little research has been done
on the management accounting implications of such crises, particular consideration is
given to exploring the significance of and potential for research on this topic. Drawing
on unpublished research and personal experiences, the importance of having a wider
understanding of an organization’s information environment is stressed.
Ó 2009 Elsevier Ltd. All rights reserved.
The current economic and financial crisis has significant
accounting regulators but also the already increasingly
implications for accounting, both for practice and for the
challenged International Accounting Standards Board.
research community. In the areas of financial accounting,
Whilst one strand of research has most certainly encour-
auditing, management accounting and the regulatory insti-
aged moves in this direction, there is now an emerging
tutions that oversee accounting and auditing practices
interest in looking at the actual ways in which the changes
there are genuine worries that the crisis has revealed
were realised. How, in other words, have very abstract con-
numerous problems and inadequacies. In the academic
ceptual ideas been realised in practice, how have the inher-
and research community it certainly has illuminated issues
ent ambiguities been operationalised in calculative terms,
that are in need of serious research attention. More than
and with what wider consequences? This is indeed an area
that, however, the crisis also points to the rather limited
where focussed empirical investigation, both quantitative
focus of much current accounting research. Too much
and qualitative, has the possibility of casting some light
intellectual inquiry in the area of accounting seems to
on an issue of current policy significance.
operate within the parameters set by practice rather than
The apparent failure of the audit industry to identify
questioning and challenging these, at least from time to
any of the emerging banking crises and failures is also
time. Although the implications for research in accounting
resulting in serious embarrassment in the sector. Regard-
may not be so great as that within the finance research
less of any more private communications with regulators
community where the serious lack of critical research is
and others, in the United Kingdom at least there is now
much more visible, a more detailed consideration of the
an explicit but very private acknowledgement of the
implications of the crisis for accounting research neverthe-
problem in the upper reaches of the professional insti-
less points to the need for a more rigorous investment in
tutes and a few of the major firms. Moreover the latter
diverse research perspectives rather than an unquestioned
are still wondering and worrying if their failures are likely
following of a singular mainstream view.
to result in any costly legal challenges – creating a genu-
So, for example, the move to fair value accounting is al-
ine worry that the Big Four could still become the Big
ready being hotly debated, embroiling not only national
Three. For that reason the British audit industry is
currently in the midst of intensifying its lobbying of gov-
ernment for legislative changes in the limits on its legal
* Tel.: +44 1865 228 472; fax: +44 1865 288 651.
E-mail address: Anthony.Hopwood@sbs.ox.ac.uk
liability.
0361-3682/$ - see front matter Ó 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2009.07.004

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A.G. Hopwood / Accounting, Organizations and Society 34 (2009) 797–802
Such developments point to the limited insights we still
theoretical and methodological issues are of real impor-
have into the actual functioning of auditing and the audit
tance, not least in helping to avoid methodological capture
industry. Now intensely commercialised, the latter has be-
by practice norms, frameworks and ways of looking at the
come a dominant lobbyist in nearly every area of account-
world. But as numerous other social science disciplines
ing policy making, often being seen as trying to promote
illustrate, there are ways of balancing interests in the need
rules, regulations and standards that facilitate its commer-
for sound and reliable research with genuine interests in
cial operation rather than necessarily provide a more
the complexities of practice. It really is important to under-
transparent and accurate insight into corporate function-
stand how accounting has become implicated with the cre-
ing. Sometimes operating individually as audit firms but
ation of new financial practices, with objectifying and
often collectively through such trade associations as FEE
simplifying the increasingly complex financial transactions
in Europe and IFAC internationally, such political endeav-
that have emerged from an ever expanding investment in
ours are poorly understood and little researched. Even
financial engineering. Equally significant is the need for a
the resultant proliferation of audit regulatory and standard
more informed understanding of the changes that have oc-
setting institutions raises some interesting research ques-
curred in the influence structures in the world of account-
tions as such institution building can sometimes be a
ing politics both national and international, of the
way of deflecting pressures and calls for more fundamental
changing role that accounting plays in the informational
change rather than facilitating such change itself. Is that
environment of organizations and with how accounting
the case in auditing or not? Moreover even the operation
changes in relation to shifts in the underlying nature of
of the audit craft itself has neither been the subject of seri-
the socio-economic system in which business operates.
ous description nor a more critical examination. So whilst
That latter point suggests a further implication of the
major audit firms were willing to support and even finance
current crisis that could have implications for accounting
laboratory investigations of the exercising of audit judge-
inquiry, namely how it illustrates the shifts that have oc-
ment, they rarely have allowed studies of what they actu-
curred in the western capitalist system, particularly in the
ally do. Research at a distance was acceptable but more
United States and the United Kingdom. While numerous
critical inquires into the actual functioning of auditing
commentators and analysts had charted the move to a fi-
was significantly less attractive. It is as if there is a very
nance capitalist model, the current crisis has placed partic-
strong preference for auditing to remain a mystery – a
ular attention on the growing influence of the banking and
seemingly professional mystery rather than a commercial
financial sector and the enormous growth in financial
actuality. Could the present crisis change that? I, at least,
transactions internally generated by the activities of that
am not optimistic.
sector. Not only that, it also has cast a new light on the rapid
The crisis is also encouraging more critical examina-
shift of profits to that sector and the wider implications that
tions of the managerial innovations that have emerged
this might have had for the distribution of income in soci-
from the audit industry, not least its pursuit of the bureau-
ety. Alongside such realisations we have also observed
cratisation of risk in the name of risk management. Coming
the resultant pressures on the audit industry to facilitate
through a crisis where risks have been real and perceived,
the avoidance of tax payments on and the offshoring of
increasingly it is coming to be seen that risk management
those very profits. In the United Kingdom where the audit
mechanisms do relatively little to facilitate the real man-
industry is deeply implicated in the provision of tax advice
agement of risk. Adding as they do to costs – and the in-
and avoidance, there are numerous cases where, on the one
come of the consultancies involved, by isolating rather
hand, an auditor is approving accounts as true and fair
than integrating the management of risk, the bureaucratic
whilst, on the other hand, helping to make another set dif-
mechanisms still promoted by the audit firms and their
ferent, possibly even ‘untrue’ and ‘unfair’. With so many
associates provide yet further evidence of the relatively
financial transactions moving from the public domain to
limited understanding that the audit industry has of real
the largely unregulated private sphere of hedge funds and
time management in action.
private equity, the full extent of the impact of the new eco-
Trying to understand the crisis and reflect on its implica-
nomic landscape on accounting is difficult to know. Be that
tions also illustrates the dangers of the drift away from the
as it may, I sense that even previously critical researchers
world of accounting practice that has been a characteristic
also have been surprised by the sheer extent of the changes
of so much accounting research for the last few decades. In-
that have been revealed as the crisis developed. Even if the
deed at times it is possible to think that for some there has
world of finance retreats to a position not dissimilar from
been a drift away from accounting itself: at the very least
its most recent past, perceptions and understandings of it
there has been a pronounced move towards studying
are likely to have changed. Or at least they ought to have.
accounting at a distance. As yet this has not been as severe
One implication of that shifting awareness ought to be
in its implications as for those of our colleagues in finance
an increased understanding of the roles that economic cal-
research where increasing numbers have a very limited
culations play in managing not only the creation of profits
appreciation of the complexities of practice and its institu-
but also their extraction. The more ruthless pursuit of prof-
tional context. There nevertheless has been a move away
its should implicate accounting centrally in the changes
from analysing just such complexities and institutional
that have occurred in both the corporate sphere and its
contexts in the accounting area, often in the name of theo-
financiers, not least private equity and hedge funds. The
retical elegance and methodological rigour. Interestingly
calculation of surplus and its articulation and visibility
this is true for both statistically based capital market stud-
throughout the organization and into its financiers seem
ies and a great deal of more critical theorizing. Of course
to have become ever more significant. A whole host of

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A.G. Hopwood / Accounting, Organizations and Society 34 (2009) 797–802
799
financial concepts, accounting practices and other calcula-
see Lazonick & Sullivan, 2000). Such contributions, impor-
tive technologies seemingly have become intimately tied
tant though they have been for practice, nevertheless orig-
up with what has been the increasingly single minded
inated at a considerable distance from practice – providing
attention placed not only on profitability itself but also
a further illustration of research at a distance and the pos-
the transference of those profits, particularly to the finan-
sible extent of its consequences. Although there are some
cial sector.
inquires into the actual functioning of such calculative ap-
Consider the recent example of Alliance Boots in the
proaches to management and their implications for both
United Kingdom. Boots is the largest retail chain in the cos-
the firm and society at large (for an early example see Rob-
metics, health and pharmaceutical sector, having signifi-
erts, 1990; also see Froud, Haslam, Johal, & Williams,
cant oligopolistic powers. Taken over by the US private
2000), so much remains to be known about both the oper-
equity firm KKR in conjunction with an Italian entrepre-
ation of such financial calculations and their infusion into
neur, the firm was so heavily leveraged by its new owners
the management of such enterprises. Already being called
that it no longer made any profits and thereby avoided
into question by both eminent practitioners such as Jack
paying any profits tax in the United Kingdom (The Guard-
Welch (Guerrera, 2009; The Financial Times, 2009) and
ian, 2009). But the continuing management of the underly-
many researchers (see McSweeney, 2008), the current cri-
ing financial surplus of the once profitable and tax paying
sis should provide a strong rationale for much more seri-
firm is already resulting in redundancies, the elimination
ous investigation into this important area. Turning that
of lower price brands, a seeming increase in price levels
rationale into research will not be easy however, not least
and a shift of its headquarters from the UK to the Swiss
because of access difficulties. As with auditing, practitio-
tax-haven canton of Zug. Not only that, however. Boots
ners are hardly likely to show any enthusiasm for knowing
has now pulled out of the Ethical Trading Initiative
more about what they do and how they function.
(Mathiason, 2009), allowing it much greater discretion in
No doubt there are a multitude of other implications
managing its supply chain to purely financial ends. All of
and consequences of the current crisis for accounting.
these processes result in the movement of profits from
Faced with such an array of significant effects I decided
the locales and regions in which they were generated to
to commission a series of short essays from a range of
those of the financiers who have invested in the firm,
scholars reflecting on at least some of the issues that might
potentially to the detriment of the former. In operating
be at stake for accounting and accounting research. Not
such a business in such ways, accounting is obviously of
everyone agreed, so not all aspects of the wider accounting
extreme importance, enabling the objectification and
agenda are addressed. Not all of those that did agree actu-
quantification of the dominant interest, its diffusion
ally provided a commentary, further adding to the specific-
around the business, and management in the name of it.
ity of the views that did emerge. Taken together, however,
Thames Water also provides another example of a Uni-
the essays that follow provide a range of interesting and
ted Kingdom company managed in the name of the short
challenging observations on the contemporary worlds of
term financial interests of a concentrated ownership
accounting practice and research. The initial brief was for
group. Once a nationalised utility, the monopoly is now
a short focussed statement. Some authors have kept to that
owned by the Australian bank Macquarie. The company
while others preferred to offer a longer and more devel-
now makes record profits but it is still proposing to in-
oped insight into their emerging views.
crease water charges by 17% above inflation over the next
5 years, with the largest increase of 10.5% coming next
year. Whilst such rate changes are subject to the approval
Management accounting and economic crises
of the regulator, the company is in a very strong position to
insist on the changes as it can otherwise threaten to radi-
One important area of accounting that is not covered is
cally reduce its investment programme, much of which is
that of management accounting and the associated areas of
regarded as important for environmental purposes. Issues
management information and control systems. Yet the cur-
of sustainability, consumer interests and those of the work
rent economic crisis is putting enormous pressure on the
force and local communities are all likely to be set aside to
functioning of management accounting systems in most
enable the maximum extraction of financial surplus.
organizations in the world. Everyday familiarity with both
A multitude of other examples could be given, particu-
business and public organizations suggests that budgets
larly in countries with an Anglo-American financial ethos.
are being continually set aside and reformulated. There
However although there is a growing awareness of such
are more and more pressures for restatements of expecta-
profit management and extraction processes, surprisingly
tions: are revenues likely to materialise, are redundancies
little research has been done into the processes involved,
inevitable and when and at what level, just what are the
technical and organizational. Yet some of the calculative
possibilities for radically changing cost levels, and so on.
technologies that have helped to operationalise the prior-
There has been a growing informational intensity around
ity attached to both profit and shareholder value have
not only cash but the concept of liquidity, with the latter
emerged from the accounting research community (e.g.,
necessitating
much
deeper
understandings
of
cash
Rappaport, 1998) and the wider intellectual justification
convertibility, asset quality and so on. Strategies are also
given to such single minded pursuits has also gained
being constantly recast, illustrating in the process the
significantly from highly regarded researchers (for an
importance of being strategic rather than merely having
overview by one of the most influential see Jensen, 2002;
a strategy. Ad hoc analyses of a multitude of different as-
for a history of the development of the concepts involved
pects of the economic functioning of the organization are

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A.G. Hopwood / Accounting, Organizations and Society 34 (2009) 797–802
becoming a form of standard practice. Management
balance of the information flows shifted to the external –
accounting is moving to operating in continuous time. In
where the real problems reside – at the very time it was
these and many other ways economic information flows
intensifying the internal. In other words, a vibrant organiza-
are assuming an ever greater salience in the management
tion adjusting itself to an economic crisis is likely to be, at
of organizational affairs.
least temporarily, much more information intensive.
Prevalent though such a state of affairs might be, it is
Olofsson and Svalander’s observations suggest that an
nevertheless one that is poorly represented in the research
organization that did not intensify the flows of external
literature whether at a descriptive or an analytical level.
information in this way might well get ever more efficient,
Although there have been a number of more general orga-
but efficient to the end it could still go to its financial grave
nizational studies, particularly in times of past crises (see
because it had lost touch with its changing and crisis rid-
for example Jick & Murray, 1982; Levine,1978; Nottenburg
den environment. Survival and longer term effectiveness
& Fedor, 1983; Starbuck & Hedberg, 1977), management
seemingly call for a more holistic informational response
accounting research gives little or no guidance on the
as suggested by the newly poor behaviour hypothesis.
modes of organizational response to economic crises.
Intriguing though such a hypothesis might be, I am not
Whilst there are literatures on the individual accounting
aware that either it or the more general observation of the
systems and technologies which sometimes discuss the cir-
informational characteristics of organizations in crisis situ-
cumstances that might facilitate their use, there are few in-
ations have been the subject of further research inquires.
sights into what might be a more holistic organizational
Not only was the original study seemingly never published,
response. Is this a time for a greater informational inten-
but other researchers have never been so fascinated by the
sity? How should the configuration of economic and finan-
more holistic patterns of information response to major
cial expertise within the organization be mobilised and
organizational disturbances, crises or otherwise. While
changed? Are there uniform patterns of such developments
studies have been conducted of particular management
or are more contingent factors at work? Do the more suc-
accounting practices and systems, we do not seem to have
cessful survivors approach the mobilisation of economic
developed a more sophisticated understanding of the
and financial information flows in particular ways?
cumulative functioning of an array of economic and other
One early inquiry that did address some of these impor-
sources of information. It is as if the informational map
tant issues was never published although it is mentioned
of an organization has never been drawn.
from time to time in other literatures. Way back in 1975
The salience of a perspective similar to that of the syn-
the Swedes Olofsson and Svalander (1975) probed into
drome of newly poor behaviour also emerged many years
the response of one Swedish organization to an economic
ago in a consultancy capacity. A former student knowing
downturn, albeit perhaps one that was not quite as severe
of my interest in understanding the informational charac-
as the present crisis. Nevertheless their findings are still fas-
teristics of organizations and their embedding in the wider
cinating. Terming the observed response ‘newly poor
socio-political fabric of the organization asked if I would
behaviour’, Olofsson and Svalander noted that the crisis re-
meet him to discuss a particular problem which his firm
sulted in an intensification of economic information flows
was facing with the development of its information systems.
within the organization. Financial information was re-
Although lean and hungry, the company had neverthe-
ported in more detail, more frequently, for more organiza-
less survived a particularly deep economic recession that
tional segments and units, and both systematically and in
had driven most of its major competitors into bankruptcy.
an ad hoc manner. The economic and financial aspects of
The firm was now looking not only for ways to re-establish
the functioning of the organization were made more visible
its markets but also for ways to economise on its existing
both absolutely and in relative terms. So whilst previously
operations so that it could generate funds for the renewal
there might have been competing dimensions of visibility –
of its market position. One aspect of these changes was a
operational data, social and human resource information,
considerable rationalisation of its information and IT sys-
marketing intelligence, competitor intelligence and so on,
tems with proposals for these systems to take over other
as a result of the intensification of the internal economic
internal operations that had previously been the province
and financial information, the alternative sources of visibil-
of different parts of the organization. Hardly surprisingly
ity became relatively less significant. And therein lay a po-
strong political opposition had emerged and it was this
tential problem. For as Olofsson and Svalander pointed
that had encouraged the former student to approach me.
out, the economic crisis generating the difficulties for the
He thought that I could help him to solve the political
organization was external to the organization. Adjustment
dilemmas that he was facing. Talking the problem through,
to it most certainly required internal economising but it
it seemed to me that the changes proposed were predi-
most likely also required different responses to the shifting
cated on only a very partial insight into the informational
external circumstances. The longer term adjusting, func-
characteristics of the organization. Not only that, but it also
tioning and possibly survival of the organization required
appeared that changes in approach were being proposed
an externally oriented shift in strategy and corporate action,
without having any adequate insights into the characteris-
as well as a process of internal economising. Indeed it is
tics of the organization that might have enabled it to sur-
possible that at the very time that there was an intensifica-
vive when so many of its major competitors had not.
tion of the internal economic and financial information
‘Why had you survived?’, I asked. Through good man-
flows there should have been an even greater development
agement was the abbreviated answer I received then and
and intensification of the information entering the organi-
subsequently from others in the organization. ‘But what
zation from its wider market contexts so that the overall
aspects of good management?’, I asked. No one was really

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A.G. Hopwood / Accounting, Organizations and Society 34 (2009) 797–802
801
sure: ‘just good management’ my contact and his col-
tion. The pioneering contributions of Jay Galbraith were
leagues tended to reply! ‘Why do you ask?’, they inquired.
illustrative of this. In Designing Complex Organizations
‘Well’, I said, ‘if you survived and many others didn’t, per-
(1973) Galbraith provided a framework for understanding
haps that was a reflection of your superior knowledge of
some of the key factors that shape the information inten-
both the market and the ways in which it was being af-
sity of organizations and the variety of ways in which the
fected by the economic downturn’. ‘Oh yes’, they said,
demand for information can either be reduced or met.
‘we are very good at that’. ‘How?’, I asked. They weren’t
Based on reflections on his own experiences in Boeing,
really sure. ‘We just are’, was the repeated response. But
the framework provided a very insightful way of appreciat-
perhaps the questioning had made them less and less sure
ing how different organizations with different cultures can
for they subsequently agreed to a short study of the infor-
and do respond to similar conditions and pressures in very
mational characteristics of their firm using a mapping
different ways – something that certainly makes more
technology that I had developed at that time based on
standard forms of empirical analysis much more difficult.
exploring the information flows impacting on major deci-
Galbraith also provided a way of gaining insights into the
sions taken by the firm.
informational consequences of organizational changes,
Presenting the resultant findings to the Board, at an
both internal and external. Following the dictates of lean
early stage I was interrupted by an exclamation from one
production, for example, and reducing inventories and
of the persons present. ‘Good God’, I still remember him
thereby increasing internal patterns of interdependence,
saying. Asked to explain himself, he proceeded to say
can be shown to increase the demand for internal flows
how another cost saving strategy under consideration
of information in order to manage the interdependency
was the movement of the corporate head office from Lon-
so created. At about the same time Grinyer and Norburn’s
don and the distribution of its staff around a number of
(1975) inquires into the functioning of planning systems
other existing locations. Yet I had demonstrated how a
was one of a number of studies that reinforced the need
very significant element of the continuous flows of market
for a more holistic approach to the understanding of infor-
intelligence that seemingly had played a key role in the
mational processes in organizations. Although they found
organization’s ability to adapt and adapt quickly to shifting
no significant relationship between formal information
market conditions had come from informal flows of infor-
systems and financial performance, they did find that the
mation stimulated by the physical proximity of influential
use of more informal channels of communication, or infor-
actors and departments. The surprised Board member had
mation processes, were associated with higher financial
quickly realised that the envisaged physical move of the
performance as were the number of all information pro-
head office would have eliminated – or at least seriously
cesses functioning in the organization. Lorsch and Allen
damaged – the very flows of information that were now
(1973) equally found that the complexity of management
seen as being so instrumental in their survival and relative
information systems facilitated upward information flows,
success. The company had indeed been an information
but not downward flows. However both upward and
intensive one but it turned out that a great deal of that
downward flows were found to be associated with favour-
intensity was informal and unstructured in nature. Yet
able financial performance, thereby suggesting once again
their conception of information was only a formalistic
that alternatives to formal information systems are an
one, reliant on systems and technologies, the very ones
important part of overall organizational functioning.
that they were proposing to extend at the very time they
Other related studies were also undertaken around that
would have destroyed many of their informal ones.
time. It seemed as though a new perspective might be
The understandings of information and its management
emergent. At some stage thereafter, however, such ap-
in that firm changed almost immediately. It was as if even
proaches to the wider informational analysis of organiza-
the managerial practitioners had originally had a more dis-
tions seemed to loose appeal. The attention of the
tanced view of the information flows in their own organi-
research community shifted to probing into the operation
zation. But their revised view made immediate sense and it
and consequences of individual management accounting
gave them a new insight into at least some of the factors
and information practices in isolation of their wider infor-
that had been of real but unrecognized significance in their
mational context, be they new approaches to costing, per-
survival. Subsequently they did elaborate their formal
formance evaluation and management or whatever. I
information systems and they even rationalised the head
sense that the emergent approaches were too costly in
office, but not quite as severely as they had initially pro-
terms of time, organizational involvement and the wider
posed. But all these later changes were done on the basis
interdisciplinary knowledges that they required. We now
of a new insight into the informational map of their orga-
live with the consequences of that, however, knowing rela-
nization and the ways in which some aspects of informa-
tively little of the overall design and functioning of an orga-
tion fed into their corporate functioning. A more complex
nization’s informational environment. One hopes that that
conception of the organization had emerged.
will change – there are at least a few signs that it might (Kil-
Yet once again it would appear that relatively little re-
foyle, Richardson, & MacDonald, 2008; Porporato, 2008).
search relates to such a holistic understanding of the infor-
mational aspects of corporate life, least of all in times of
economic crisis. It is, however, an area of immense practi-
Conclusion
cal significance as these examples should serve to testify.
In the early days of Accounting, Organizations and Society
Just as in the wider world there is a hope and expecta-
it appeared as though research might move in this direc-
tion that the current economic and financial crisis might

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A.G. Hopwood / Accounting, Organizations and Society 34 (2009) 797–802
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Mathiason, N. (2009). Private equity owned Boots ends ethical link. The
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Acknowledgement
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Document Outline

• The economic crisis and accounting: Implications for the research community
  • Management accounting and economic crises
  • Conclusion
  • Acknowledgement
  • References

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