Book Review Section

{Journals}acfi/41_1+2/d112/makeup/d112.3d

Accounting and Finance 41 (2001) 131± 139

Book Review Section Chun Wei Choo The Knowing Organization: How Organizations Use Information to Construct Meaning, Create Knowledge, and Make Decisions (New York: Oxford University Press, 1998) This book examines, discusses, and comments on how organisations use information to construct meaning, create knowledge, and take actions. According to Choo, organisations that manage this process effectively earn the nomenclature `knowing.' Upon reaching this `knowing' plateau, organisations not only gain elite and coveted membership, but they are also rewarded with organisational success. The knowing process is comprised of three sub-processes: sense making, knowledge creation, and decision making. Overlaying and influencing these three sub-processes are the cognitive needs and affective responses of the organisational player(s), as well as the unique set of situational factors that help define the given setting. This knowing process is represented by a conceptual model presented at the end of Chapter 2. Subsequent chapters expand upon a specific aspect of the model, providing readers with a deeper understanding of the highlighted aspect and its relationship to the model as a whole. A further refinement of what embodies a knowing organisation is presented near the end of the book. Here Choo adds the need for the organisation to ensure `that the three modes of information generation and use are linked together in a single, broader process by which the organization socially constructs meaning, learning, and doing' (p. 237). The book is well researched, argued, and written. Choo shows that he is a fluent and even artful writer. In addition, Choo's decision to use a number of organisational cases is most wise. These cases serve to offer concrete examples and maintain high reader interest. It is certainly true that these cases will help make the book more accessible to the wider, non-academic readership that the author includes among his intended audience. On the other hand, it is possible that practitioners may find the book overly theoretical for their tastes and may resist the sometimes long paragraph structures featured. But those readers who commit themselves to the task will find their efforts amply rewarded. My one disappointment with the book was its tendency to focus on its subtitle rather than its main title. Choo does an excellent job teasing out and describing the organisational infrastructure that allows an organisation to use information to construct meaning, create knowledge, and make decisions. He spends much less time, however, discussing the knowing organisation from the perspective of using knowledge to `confer a special advantage, allowing it [the organisation] to maneuver with intelligence, creativity, and, occasionally, # AAANZ, 2001. Published by Blackwell Publishers, 108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden MA 02148, USA.


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Book Review Section / Accounting and Finance 41 (2001) 131±139

cunning' (p. 4). And it is especially this idea of cunning that I greatly yearned to learn more about. According to my Collins New English Dictionary, an ability to be cunning is an integral, as opposed to an optional, part of being `knowing'. While Choo describes the cunning use of information by Royal Dutch Shell, this occasion is the exception. Instead Choo's descriptions, and apparently even his model, take more of a reactive versus proactive approach. Choo writes, for instance, `The model is based on a number of guiding ideas. Information needs arise when the individual recognizes gaps in his or her state of knowledge and ability to make sense of an experience' (p. 63). The chosen focus is unfortunate, for I would have liked to hear more of the author's thoughts about the information processes associated with what I might call proactive, curiosity-driven, star-gazing ± call it by whatever name you wish ± information seeking. Ralph Adler University of Otago

J. Hoggett and L. Edwards Financial Accounting in Australia (John Wiley & Sons, Brisbane, Fourth Edition, Revised and Updated, 2000) This is the fourth edition of the popular introductory accounting textbook on financial theory and practice in Australia. The text follows a similar fivepart format to previous editions, but has been revised to incorporate new chapters on the use of accounting in personal and business decision-making and the regulatory environment of accounting. In this edition, a greater emphasis is placed on the role of accounting in economic decision making in business. The text also considers the increasing role of information technology in accounting and the international influences on the standard-setting process. The first part, Accounting for Decision Making, features chapters on the role of accounting in decision-making and the financial reports for decisionmaking. The financial reporting chapter discusses the newly established Financial Reporting Council and the recent reforms to the standard-setting process in Australia. It also includes a discussion of the AARF, the UIG, the ASIC, the ASX and the various international influences on accounting. Throughout the text, some 26 AAS and AASB standards are referred to in relevant topics. This is an effective way of introducing students to the accounting standards rather than just having a token chapter on accounting standards. The second part, Accounting Systems and Processes, includes chapters on recording transactions, adjusting the accounts and preparing financial statements, completing the accounting cycle, accounting for merchandising, # AAANZ, 2001


Book Review Section / Accounting and Finance 41 (2001) 131± 139

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and accounting systems. The accounting systems chapter includes an overview of the accounting software program M.Y.O.B. The overview provides an introduction to M.Y.O.B and contains a description of the general ledger, cheque-book, sales, purchases, accounts receivable and inventory functions. The discussion includes some sample screen dumps from the program and a very brief illustration of several transactions entered into the M.Y.O.B program. This chapter would have been more beneficial with some M.Y.O.B exercises for the student to complete. The third part, Accounting for Assets and Liabilities, includes chapters on cash management, receivables, inventories, acquisition and depreciation of non-current assets, revaluation, disposal and other aspects of non-current assets, liabilities, and the conceptual framework and measurement. The liabilities chapter has been revised and updated and includes provisions and contingencies, debentures, bills payable and other types of long-term debt. The conceptual framework chapter has been updated to include the recently established Financial Reporting Council and the new role of the AASB. The fourth part, Accounting for Owners' Equity includes partnerships and company formation. The chapter on company formation mentions the amendments made to the Corporations Law and the role of the ASIC. The fifth part, Financial Reporting and Analysis, includes chapters on company operations and reporting, statement of cash flows, and analysis and interpretation of financial statements. The text is presented in a three-colour design and an easy to follow format. A typical chapter is supplemented by concepts for review, clearly stated learning objectives that are linked to discussion, questions for review, discussion questions, exercises, problems featuring more challenging activities, a decision case, a critical thinking case, a financial reporting case based on the Coles Myer Ltd financial report in Appendix 1, and a communication=group activity complete with instructions on how to incorporate the activity into the classroom. The concepts for review identify what the reader should have learned before studying the chapter and the questions for review test the reader's understanding of key concepts and processes. The text is accompanied by a CD-ROM which includes extra demonstration problems, additional problems, decision cases and also two extra appendices on the time value of money and some selected accounting standards which should be useful references. The text has many supplementary materials for both the student and the instructor. Instructor materials include a solutions manual, test bank, and PowerPoint slides. In addition, there are online resources available from the website at http://www.johnwiley.com.au/tertiary/faia. The website provides a GST worked problem, extra questions to test student knowledge and web links to accounting firms, newspapers and professional accounting associations. On this website you will also find a link to WebCT (an online course management system) which enables instructors to design and develop courses online. # AAANZ, 2001


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This text is suitable for introductory first-year courses in accounting. For those institutions offering an introductory course with components of management accounting, Hoggett & Edwards' other introductory text `Accounting in Australia' would probably be more suitable. This text contains exactly the same 20 financial accounting chapters with an additional six chapters on managerial accounting. Jacqueline Birt The Australian National University

Anita S. Hollander, Eric L. Denna and J. Owen Cherrington Accounting Information Technology and Business Solutions (Boston, USA: Irwin McGraw-Hill, 2nd Edition, 2000) This is the second edition of the popular text by Hollander et al., and, once again, the authors step outside the conventional by presenting an `eventsbased' approach to understanding accounting information systems, in a wellwritten and interesting manner. The authors also address the perennial problem of balance between accounting and information systems knowledge by the use of `supplementary chapters'. These explain various aspects of the topics at hand in a more comprehensive manner, and combine with `main' chapters to provide a more complete discussion of an area. The book contains nine main chapters and seven `supplemental' chapters. Chapter 1 provides an introduction to the basic concepts behind business processes and some discussion of various changes in the accounting systems arena. Chapter 2 describes business process modelling using a `Resources, Event, Agents and Location' (referred to as REAL) methodology. Chapter 3 describes the traditional accounting cycle and the traditional role of technology in that cycle. Following a critique of these, it proposes an alternative accounting systems architecture using events-based accounting. Chapter 4 pursues this new architecture, outlining methods for the analysis and design of such a system. Chapter 5 discusses business risks and internal control, presenting both traditional and new philosophies of control. Chapters 6, 7 and 8 deal with the Sales=Collection, Acquisition=Payment and Other Business Processes respectively, describing the various processes and discussing both traditional and new approaches to modelling these processes. Chapter 9 concludes the main part of the text by synthesising the previous material into a `business solution'. The seven supplemental chapters present detailed discussions of various topics touched on previously, including Flowcharts and Data Flow Diagrams, General Ledger Architecture, Data and Databases, EDP Controls, Information Technology Components and Software Applications. # AAANZ, 2001



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Hollander et al., configure the book into a series of `modules', where a module contains one or more main and supplemental chapters, which together cover an entire concept. This feature appears to have strong pedagogical merit, providing the student with a more detailed discussion where required and `wrapping together' concepts into logical units. The `modularisation' also broadens the audience of the book by allowing the instructor (or student) to use only those supplemental chapters necessary. The pedagogical credentials of the text are further enhanced by each chapter's comprehensive set of challenging questions and the inclusion of numerous sections which encourage the student to question the status quo and form their own opinions about the future directions of accounting and information systems. The approach of the text does, however, raise some issues about its use. Firstly, the differentiation between the `traditional' and `new' views has become somewhat artificial, especially in light of the near universal adoption of relational database technology in business systems. Many students will be simply unaware of the traditional view, and drawing this distinction could cloud their learning experience. As such, the text seems more applicable to academically mature students. Secondly, in presenting a more complete coverage of each area by the addition of supplementary chapters, some areas, notably the technology underpinning information systems and analysis and design methods, are dealt with in a cursory manner. The implication of this is that this text is less than ideal where it is a student's only exposure to information systems. Thirdly, the text does not capture some of the recent changes that the widespread adoption of Enterprise Resource Planning systems and E-Commerce have brought to accounting. In some ways, the text reflects a somewhat `traditional view' of accounting information systems as separate systems. In conclusion this text is well written, presents difficult material in a thoughtful manner within a contemporary framework, and contains much to enthuse and challenge the student. It will not suit every accounting information systems course, but for instructors who wish to challenge their students and really get them to think about what they are studying, this text comes highly recommended. Kenneth J. Stevens The University of New South Wales

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Michael McGrath and Christopher Viney Financial Institutions, Instruments and Markets (McGraw-Hill Australia, 2000) This is the third edition of `Financial Institutions, Instruments and Markets' by Michael McGrath, designed for business and commerce students undertaking an introductory unit of study in finance. The text provides a broad view of the Australian financial services industry focussing on financial institutions, instruments and markets. It also examines the international financial markets and foreign exchange market. It has adopted a six-part structure titled: A modern financial system : an overview, Equity markets, The corporate debt market, The government debt market, monetary policy and interest rates, The foreign exchange market and Derivative markets and risk management. The text has impressive coverage of topics spread across 21 chapters. The third edition has been updated incorporating new material on globalisation, the Asian financial crisis, the Euro, the Wallis Committee Report, changes in prudential regulation and also the recently introduced real time gross settlement system of the Reserve Bank of Australia. Each chapter includes general aims, learning objectives, end-of-chapter review questions and exercises, and an extensive number of illustrations along with worked examples. The six parts, presented as an independent set of interchangeable modules, enable the reader or the course coordinator to adopt a flexible sequence different from that presented in the text. Teaching aids such as the instructor's manual and lecture PowerPoint presentation slides accompany the text. The text is well written and presents a thorough and comprehensive view of the Australian financial services industry. The clear writing style contrasts noticeably with other introductory finance texts. Moreover, the well-focused discussion of topics is achieved while retaining the informativeness that characterises a good introductory finance text. However, there are a few aspects of the presentation that could be improved. All the formulae within chapters need numbering with chapter prefixes. This has already been done in Appendix 4B. Even the examples of calculations could be given chapter number prefixed numbers. Formulae in other appendices such as 5A and 5B could be annotated with appendix number prefixed numbers. The text requires updating on the legal aspects of corporate finance. The provisions of the Company Law Review Act 1998 came into effect from 1 July 1998. It introduced significant changes under the government's Corporate Law Economic Review Program (CLERP). Some of the important changes include abolition of par value of shares, authorised share capital, and memorandum of association. Another aspect that requires updating is the prudential supervision of banks. For example, the Australian Prudential Regulations Authority (APRA) issued # AAANZ, 2001



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new guidelines on 28 August 1998 reducing the risk weighting applied to banks' holdings of government securities and other claims on governments from 10 per cent to zero. It is now a standard practice for finance textbooks to include addresses (URLs) to World Wide Web sites. Thus the inclusion of URLs of important financial web sites in Australia such as those of the Reserve Bank of Australia (RBA) and APRA would be helpful for new students in finance. The present reviewer uses this text for the first year undergraduate finance subject. It is recommended for its compelling features such as the concise writing style of the author and the flexible module structure of the text that brings the subject alive with thorough coverage. J. Wickramanayake Monash University

J. William Petty, Rolffe Peacock, Peter Martin, Michael Burrow, Arthur J. Keown, David F. Scott, Jr, and John D. Martin Review of Financial Management (Pearson Education Australia Pty Limited, Second Edition, 2000) The authors claim to use three primary standards in preparing this second edition text; completeness in the treatment of the topic; readability in terms of content and use of mathematical concepts; and finally the frequent use of stepby-step examples (p. ix). Overall I would agree that the authors have met the goals that they have set themselves. The text does indeed provide a comprehensive treatment of financial management issues that would be suitable for an introductory subject(s). There are 19 chapters in all divided into five parts; Part 1, four chapters dealing with the Scope and Environment of Financial Management; Part 2, four chapters on Financial Analysis and Working Capital Management; Part 3, six chapters on the Valuation of LongTerm Investments; Part 4, three chapters on Financial Structure and Dividend Policy; and finally Part 5, with two chapters on Long Term Financing. A highlight of the text is its readability. The key way in which this readability is achieved is through the use of pronouns which invite the reader to become a fellow explorer into financial management. Chapter 9, a key chapter in the text on Risk and Return, illustrates this point and would be a good chapter for anyone interested in the text to read. Readability is also achieved by employing intuitive and non-mathematical methods in the initial approach to financial issues. These financial issues are then dealt with in a step-by-step manner using examples in many cases that follow on throughout the entire chapter or section; where relevant these examples are linked to a solution via financial tables as well as a financial calculator. Readability and completeness are also # AAANZ, 2001


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shown in the consistent way that the text links financial decisions with the Australian taxation system without engaging in needless repetition. While the text does employ recent and mostly Australian examples of financial management issues in the body of the text, it was felt that the `Focus on Finance' could have been used more extensively and consistently. On a number of occasions the completeness of the text could have been enhanced by reference to a contemporary concern. In the context of the `Focus on Finance' section it was surprising that having raised the issue of financial derivatives in Chapter 18, a simple example was not provided. While accepting and expecting that agency theory would inform much of the theoretical positions of such a text, undergraduate students should at least be exposed to alternative organisational theories from disciplines other than economics, perhaps in a summary form in Chapter 1. In deciding whether to use the text in an educational setting, close attention would need to be focused initially on the curriculum of the course in which it was going to be used. There is potential for some of the material in this text to be covered in other subjects within business and commerce courses; this would not necessarily be a drawback but it could create problems if chosen in a unilateral fashion. The strengths of the text outlined already would become pedagogical strengths. The authors have been particularly generous in the number of problems provided with each chapter and the self-study problems, questions and study problems are well related to the text. The CD-Rom provided to instructors has easy and well laid out solutions and uses both financial tables and calculator responses where relevant. Indeed most chapters have additional supplementary problems and solutions provided on the CDRom. The CD-Rom also provides PowerPoint slides as a possible way to present the information in each chapter. The number of slides, and sometimes the quality, varies from chapter to chapter; the provision of over 80 slides for a particular chapter would suggest perhaps that too much is trying to be achieved. The text on Page 68 draws attention to the `monkey say, monkey do principle' when dealing with problems. In view of this I wish that the text had provided an explicit link between the objectives of the chapter, its content and problems; such links could have been provided within the margin of the text. Students could then study issues and subsequent problems more systematically. In view of the criticism relating to the `Focus on Finance' section, an area that the text needs to improve on pedagogically is the use of the internet. While there is some use made, it is rather limited, and a text dealing with issues such as financial management should not ignore this resource. There could be numerous ways of making such a link including via the interactive CD-Rom (a good resource) that is provided to all students with the text. The following editorial matters, as a matter of personal preference, would have improved the text. Endnotes were provided at the end of the text rather than at the end of each chapter; in some cases explanations should have been # AAANZ, 2001



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provided within the text. (Refer to Chapter 18Ð Endnotes 1 to 4). A summary of the equations used in particular chapters would also have been useful. Finally some statement in regard to the make and model of financial calculators that are used in demonstrating the calculations throughout the text needs to be made in the front section of the text. This text in general has more strengths than weaknesses. It is in particular very readable and, while I have suggested some areas where I would advocate change, this text along with the resources provided could be adapted to a range of introductory pedagogical purposes. Les Hardy Monash University

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