Form vs. Substance: The Implications for Auditing Practice and Research of Alternative Perspectives on Corporate Governance

33 Pages Posted: 4 Sep 2007 Last revised: 5 Dec 2012

See all articles by Jeffrey R. Cohen

Jeffrey R. Cohen

Boston College - Department of Accounting

Ganesh Krishnamoorthy

Northeastern University

Arnold Wright

Northeastern University - Accounting Group

Date Written: August 27, 2010


The objective of this paper is to provide a more comprehensive view of corporate governance than that considered by the traditional agency literature predominately employed in auditing and accounting studies of governance. Specifically, we discuss three widely recognized additional theoretical perspectives: resource dependence, managerial hegemony, and institutional theory. Resource dependence is developed in the strategic management literature and focuses on the contribution of governance mechanisms as a vehicle to help a firm achieve or further its strategic objectives. In contrast with the agency and resource dependence perspectives which offer a functional view of governance, the managerial hegemony perspective views the board and its attendant committees as being under the control of management and hence could be potentially viewed as dysfunctional from a stockholder viewpoint. Finally, institutional theory, developed in the sociology of organizations and organizational behavior literatures, suggests that it is necessary to understand the substance of the interactions between different governance parties and how these parties use at times symbolic gestures and activities to maintain their form to all relevant parties.

Although the value of using multiple theoretical perspectives with respect to governance has been well recognized in the economics and behavioral literatures, this is the first paper that we are aware of that examines the effect of using alternative theories of governance on accounting/auditing issues that are influenced by the governance structure of a firm. In addition, we examine how these theories provide a useful basis for reconciling conflicting findings in the existing agency-based audit-related governance literature. Finally, we provide examples of how these alternative theories provide important new insights to issues in auditing research and practice.

Keywords: Corporate governance, Resource dependence, Managerial hegemony, Institutional theory, Agency theory

JEL Classification: G34, M41, M49

Suggested Citation

Cohen, Jeffrey R. and Krishnamoorthy, Ganesh and Wright, Arnold, Form vs. Substance: The Implications for Auditing Practice and Research of Alternative Perspectives on Corporate Governance (August 27, 2010). Auditing: A Journal of Practice & Theory, Vol. 27, No. 2, 2008. Available at SSRN: or

Jeffrey R. Cohen (Contact Author)

Boston College - Department of Accounting ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3165 (Phone)
617-552-2097 (Fax)

Ganesh Krishnamoorthy

Northeastern University ( email )

360 Huntington Ave.
Boston, MA 02115
617-373-4651 (Phone)
617-373-8814 (Fax)

Arnold Wright

Northeastern University - Accounting Group ( email )

406 Hayden Hall
United States

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