Management Accounting Research, 2000, 11, 451–474

doi: 10.1006/mare.2000.0144
Available online at http://www.idealibrary.com on

Smaller business governance: Exploring

accountability and enterprise from the margins

John Ritchie* and Sue Richardson†

Smaller businesses now rank higher upon the corporate governance agenda. This agenda
places their accountability and ‘enterprise’ particularly at issue. It is only put at issue
because of just one possible problematization however. That problematization firstly
assumes judicious accountability to be the crux of good governance with accounting
at its hub. It secondly assumes that smaller businesses are the very seedbed of any
‘enterprise economy’, virtually irrespective of what form they take, or ‘enterprise’ they
display. By then combining these assumptions together, this finally reproblematizes
any relationship between accountability and ‘enterprise’, so that ‘de-regulation’ and
decoupled accountability liberates smaller business ‘enterprise’ further. Others might
question and challenge the very basis, as well as particular formulation, of this
problematization however. A better grasp of the greater fluidity and complexity of
smaller businesses would make the boundaries of their accountability and ‘enterprise’
more clear and leave their respective margins more suitably exposed. As a key potential
instrument for that purpose managerial accounting research might then better inform the
debate by specifically rendering these boundaries more visible while also identifying the
precise scope for manoeuvre at/across their margins as well. To that end this paper uses
certain enabling frameworks to construct and interpret the particular case of managerially
accounting for a grown smaller business working across exactly those margins from the
perspective of a ‘reflective practitioner’ acting as a field researcher for these purposes. As
well as offering fresh insights into how far the boundaries of accountability and enterprise
might legitimately stretch, this case calls for more critical thinking about how they might
change.

c 2000 Academic Press

Key words: smaller business governance; the role of managerial accounting; accountability;
enterprise; marginality.

*University of Durham Business School, Mill-Hill Lane, Durham, DH1 3LB.

†Author to whom correspondence should be addressed: Sheffield University Management School,
9 Mappin Street, Sheffield S1 4DT.
Accepted 30 August 2000.

1044–5005/00/040451+24/$35.00/0

c 2000 Academic Press
452 J. Ritchie and S. Richardson

1. Introduction

Corporate governance is in flux. A range of further developments has been

proposed. Some provoke notably lively debate. Those concerning smaller businesses
particularly so. Few issues challenge associated UK Company Law and its accounting
and audit mandate more. To their respective ‘deregulationist’ critics such codes
presently appear too excessive, inflexible, burdensome impositions for any would-be
‘enterprise economy’ to bear. However, these same codes faced different criticisms
before. For example, certain leading texts acknowledge that UK Company Law’s
ad hoc growth, relative permissiveness and extensive concessions over limited
liability status, not least to smaller businesses, have often been problematic (Cheffins,
1997; Davies, 1997). Currently such codes are officially under review with wider
consultations in process (Department of Trade and Industry, 1998, 1999), often
bearing other European and International codes in mind (Centre for Law and
Business, 1999). In view of companies, a major White Paper is expected by 2001.
Since it has been estimated that nearly 70% of all businesses are sole traders or
partnerships, this may limit the import for smaller businesses, despite an increasing
number of incorporations generally (Hicks, 1997; Griffiths, 1999; Prime, 1999).
However, the particular claims of smaller businesses currently attract vigorous
academic debate (Milman, 1999; Rider and Andenas, 1999). Even the core construct
of limited liability has thereby received intense scrutiny (Grantham and Ricketts,
1998). While arguably never originally intended for such (Ireland, 1984), many
smaller businesses cannot necessarily grasp what incorporation implies, or deploy
it to desired effect (Freedman, 1994; Hicks op. cit.). In pursuit of such issues the
study of law and accounting are thus brought closer together (Freedman and Power,
1991; Freedman and Godwin, 1993). How well informed this underlying convergence
towards smaller businesses will eventually prove is still potentially at issue however.
This flurry of debate itself poses problems. In particular it makes it difficult to
decipher what direction these changes might take. Short et al. (1999) nevertheless
consider where reform might redress any imbalance between accountability and
enterprise in corporate governance now. In so doing they distinguish accountability
from enterprise like these were two distinct pillars of governance so fundamentally
different that they could even potentially conflict with each other. However, any such
triangulation of governance, accountability and enterprise can be problematic in
principle, whatever mutual balance prevails. Governance is an almost perennial ob-
ject for reform whereas accountability has only recently been placed at its very crux
(Power, 1997; Bovens, 1998). Likewise enterprise has rarely been fully satisfactorily—
or even officially—agreed, defined, and measured up to (Burrows, 1991; Keat and
Abercrombie, 1991; Gray, 1998). Hence there is a clear risk that, with such individ-
ually different shades of meaning, their mutual triangulation might confuse matters
further, unless steps are taken to instil greater conceptual clarity from the outset.
Accountability and enterprise thus first need this greater conceptual clarity and
understanding if they are to be such distinguishing pillars for corporate governance
ahead. Although Short et al. constitute such governance more widely, enterprise
was originally closely associated with smaller businesses, at least until more
diffuse meanings took hold (Ritchie, 1991). Thus, with the objective of imparting
greater conceptual clarity into debate about smaller business governance, this
paper first reviews the basic constructs of accountability and smaller business
 Smaller business governance 453

enterprise themselves; second, explores their managerial accounting implications

and consequences, using a particular case study of a smaller business enterprise
in its accountability network to make these clearer; third, in conjunction with the
original framework, the paper questions just how far the boundaries of smaller
business governance, accountability and enterprise can legitimately stretch, and how
this implicates the performance of the managerial accounting role, at a time when
reform remains publicly debatable.

2. Prefiguring accountability and enterprise in smaller business governance

As pillars for refocusing corporate governance generally, and smaller business

governance particularly, the constructs of accountability and enterprise first need to
be individually refigured, then better related together. This requires capturing what
lies at the heart of the two fields of knowledge concerned, recognizing how loosely
coupled they have been before.

Accountability
For itself accountability otherwise underscores much social life, albeit in an
increasing variety of ways (Douglas, 1980). While consistently difficult to define (Day
and Klein, 1987), and currently theoretically loaded (Munro and Mouritsen, 1996),
it can take plural forms, their exact configuration varying across organizations and
society at large. For these particular purposes accountability may take any of the four
ideal-typical forms shown in Figure 1.
This typology draws upon basic grid/group (Douglas, 1982) and related cultural
(Thompson et al., 1990) and information space (Boisot, 1995) theories, specifically
extended towards so-called enterprise culture (Hargreaves-Heap, 1992), and more
generally replicated elsewhere (Caulkins, 1999). This specifically distinguishes
vertical/hierarchical ‘rule’- from horizontal ‘relational’-based accountabilities while
recognizing that certain hybrid forms variously combine both. In principle Type 1 is
therefore strongly rule-based; Type 2 strongly combines both; Type 3 combines them
weakly; and Type 4 relies upon the strength of mutual ties and relations instead.
In addition, differing individual Types must specifically reconfigure together before
true multi-way accountability networks develop as a result. As a leading subset of
such accountabilities in general (Ijiri, 1975), forms of accounting should likewise vary,
as corresponding contingency theories would imply.
Type 1 is the most formal and extant of all the accountabilities outlined here and, to
most individual actors, its most prescribed and least discretionary form. Outwardly
clear and intelligible, the process itself appears highly determinate, being enclosed
around recognized rules, and conducted impersonally against its own set agenda.
Should that process become overformalized compliance may appear more effected
than real and maybe create scope for ‘creative compliance’ instead. Thus, Type 3
accountability so lacks formal rules and relational commitment in principle that it
can take very divergent forms in practice. If it is seen as the potential ‘hidden side’
of Type 1 accountability it may act as cover for its shortfalls and/or supplant some
aspects of this instead. Under certain circumstances it indeed appears more like
accepted custom-and-practice. In that case it can be so taken-for-granted that, for
example, without being legally obliged to do so, many organizations customarily
454 J. Ritchie and S. Richardson

Strong
Accountability

E TYPE 1 TYPE 2
Mandatory/ Contingent/
R Codified Bounded

C TYPE 3 TYPE 4
Compliant/ Collateral/
A Assumed Reciprocal

Weak H O R I Z O N T A L Strong
Accountability Accountability

Figure 1. Ideal-typical forms of accountability.

assume they ‘owe’ some kind of accountability to customers and suppliers as part
of their ‘normal’ conduct, and simply comply accordingly. Should they depart
from accepted practice any resulting sanctions may not then extend much beyond
tampering with rules and relations at the margins and disengaging accordingly. Any
similar tradeoffs at the margins are much less likely under Type 4 accountability. In its
case mutual ties and relations perform like collateral for enabling exchange and/or
reciprocity to develop. As a result of its particularistic, rather than universalistic,
nature Type 4 accountability evolves more around persons, groups and situations
than impersonal rules and regulations. Simply because relations are conducted in
their own terms, and each party has its own end in view, does not imply this form
of accountability will necessarily enhance congenial mutuality however (Rainnie,
1989). Rival collateral (or, alternatively, ‘social capital’) might indeed negate potential
reciprocity and promote dysfunctionality instead. The main difference for Type 2
forms of accountability is that, while Type 4 also relies upon situated relationships,
this type combines these with more impersonal rules as well. The strong multi-way
accountability which then results, makes this less singularly directed than either
Type 1 or Type 4, while Type 3 remains weakest overall.
Like accountability itself, smaller businesses (and their enterprising nature) are
now studied from an increasing range of theoretical angles compared with before
(D’Amboise and Muldowney, 1988; Julien, 1998). As businesses these typically work
through accountability networks activated both inside and outside individual firm
boundaries. Many customarily valued ‘relational’- over ‘rule’-based accountabilities
in this respect. A concern with the balance of such accountabilities lay at the heart
of the classic public/private company dilemma which is still at issue in the present
corporate governance reform debate.
 Smaller business governance 455

Newer
Micro-Firms

First
Order Mature Founder Growing Founder
Firms Firms Firms

Second
Order Family Firms Entrepreneurial Firms
Firms

Third
Order Co-operatives Professional/
Firms & Community Partnership Firms
Firms

Network/
Franchise Firms

Figure 2. Smaller business typology.

Smaller business enterprise

Just how enterprising smaller businesses really are cannot be made clear until they
are better mutually differentiated from each other instead of being considered to be
very much alike and equally enterprising regardless. Such differentiation should
better distinguish different types of smaller businesses from each other, and the
particular organizational forms individual businesses can choose over their specific
life cycle. Otherwise, stereotypical contrasts between smaller and larger businesses
will persist, as if each type were very much alike, obscuring vital differences
between/within smaller businesses in the process. In this respect smaller businesses
could potentially take the different organizational forms shown in Figure 2, possibly
shifting between types, with some proprietors progressing through successes and
failures in the process.
In view of the individual forms here identified, the many self-employed working
on the fringes of this so-called ‘sector’ pose certain distinct problems. In particular
it is difficult to disentangle the person from any abstract entity which can be called
‘the business’ in this respect, with important accounting consequences (Boden, 1999).
Similar problems can occur with many micro-firms as well. These are classically
considered to be by far the most numerous, not always incorporated, most personally
managed, widely scattered, individually minute employers. More particularly they
remain liable to relatively short-term and/or vulnerable independent existences,
although they can also make their founders sufficiently resilient to restart them
as well (Gibb and Ritchie, 1982; Rosa and Scott op. cit.; Scott and Ritchie, 1984;
Scott and Rosa op. cit.). While many micro-firms remain preoccupied with their own
456 J. Ritchie and S. Richardson

survival and reproduction as they stand, potentially becoming mature founder firms,
others consider transforming their basic organizational character through further
growth to potentially become growing founder firms. However, only a notably small
percentage of all foundings both actively pursue, and subsequently attain and
sustain, such growth, although more potential support has since become available
(Storey, 1994). Moreover, even these might only grow episodically, in particular
bursts and phases, with various additional risks attached, and then encounter
other plateaus, crises and/or breakpoints at specific intervals between. For that
reason, genuinely sustainable ‘entrepreneurial’ breakthroughs associated with the
entrepreneurial firm can be considered relatively rare, if not entirely against-the-odds
occurrences, which an increasing range of interventions seeks to accelerate (Hendry,
1995). Thus, the enterprising nature of smaller businesses varies between types,
changes over time, while its intensity fluctuates likewise.
Naturally sell-offs, mergers, acquisitions, joint ventures/alliances and buy-outs
and buy-ins, cut across individual firm boundaries and complicate organizational
management processes, although organic growth has not necessarily proved
straightforward either. Storey (op. cit.) found that relatively few micro-firms grew
much beyond their original founding state. Indeed some alternatively choose not
to grow despite plateauing as a result. Even when they overcome their doubts, a
significant number do not then grow much, or for very long, in any proven sustain-
able way, especially among younger turbulent business sectors. The very fear that
growth might compromise their founding character, and then leave their ownership
and management exposed, can prove notably constraining, even among stable family
firms (Kets De Vries, 1996a), where some developmental paralysis could result. Any
mismatch between business growth and organizational character can also impinge
upon co-operative/community firm, professional partnership and emerging network-
franchise firm development likewise. Such differing dispositions towards organic
growth make it important to distinguish studies which approach this from inter-
pretive (i.e. growth ‘neutral’) rather than normative (i.e. growth seeking/enabling)
standpoints in recent accounting related research particularly (Chittenden et al.,
1990; Romano and Ratnatunga, 1994; Kirby and King, 1997; Kirby et al., 1998).
Standard organizational theories may not yet fully grasp what these particular
differences imply for governance, accountability and enterprise (Aldrich, 1999),
along with certain informational and accounting life cycle theories likewise (Holmes
et al., 1991). No one particular organizational form every fully dominates the smaller
business ‘sector’, although their respective frequency and durability naturally vary,
and newer forms of network and alliance which cut across them may yet arise.
Moreover, even forms of ownership can vary and fluctuate over time. Thus,
habitual/portfolio multi-firm founders (Scott and Rosa, 1997; Rosa and Scott, 1999);
differential partnership arrangements (Freedman and Finch, 1997); evolving family
relationships (Gersick et al., 1997); and other emerging networks, alliances and
corporate/venture capital tie-ins necessarily complicate the picture.

Governance implications
Simply questioning whether and how smaller businesses grow raises issues about
how enterprising they really are, considering what some suppose them to be.
Their changeable organizational form alone poses problems for any would-be
standardizing corporate governance and accountability regime. Thus, any search
 Smaller business governance 457

for one single uniform legal (and related accounting) code which will cover all
such likely contingencies has been considered misplaced, if not actively misleading
under these circumstances (Freedman, 1999; Hicks, 1999). At its present stage, much
about smaller business constitutes a shifting, diverse, but also value-laden field of
study, which was classically difficult to define and capture, even for official purposes
alone (Bolton, 1971; Stanworth and Gray, 1991; Ritchie, 1992). Their very distinctive
governance and enterprise should therefore specifically imprint itself upon forms of
accountability and accounting research accordingly.
Such research often proceeds from very baseline assumptions. In particular it
assumes that smaller firms and their proprietors are separate and different from
smaller accounting practices and practitioners, just as ‘business’ and ‘profession’
in general were once considered to be. That distinction becomes increasingly
challengeable once smaller professional accounting practices are also regarded as
another type of smaller business however. As a result, smaller business accounting
can be seen as part of an accountability network enjoining different businesses often,
though not entirely, of a similar nature. Thus, for example, Types 1/2 accountability
relationships, as between smaller businesses and powerful state/official/corporate
agencies and hierarchies outside, are performed differently from those where Types
3/4 prevail, as between certain smaller businesses and their smaller suppliers
and customers, where more ‘peer group’ relationships prevail. What is really
important is how different accountabilities configure and individually balance out
because, while certain fluid configurations enable smaller businesses to develop,
gridlock could undermine this instead. This has important implications for both
the problematization of issues for further accounting research and the selection and
development of methodologies appropriate for their study, now considered further.

3. Researching smaller businesses and the managerial accounting role

Smaller business and accounting are often considered to be separate fields of study
which exert different perspectives upon each other. In future, with reform under
way, research may depend less upon their distinction, and the replication of existing
studies constructed along corresponding lines (Ram, 1999). However necessary this
might be, both these subject fields might increasingly co-evolve together, thereby
extending existing lines of enquiry and yielding fresh topics for study, the pursuit
of which may require more diverse methodologies. Hereafter this paper seeks
to advance the understanding of smaller business governance, accountability and
enterprise by using frameworks evolved for that purpose to inform a particular case
study of managerially accounting for a mature founder firm, of the type identified
in Figure 2, which emerged from evolving family relationships (Gersick et al. op.
cit.) and other networks. In so doing it seeks to determine how far the boundaries
of accountability and enterprise may legitimately extend, and what occurs when
they overextend, thereby overreaching their legitimate capabilities. This corresponds
with what Miller (1998) considered to be the study of ‘accounting at the margins’
which can yield fresh insights which, though valuable themselves, can also lead into
renewed understanding about more central issues and also problems.
A particular type of case study and methodology have been selected for these
purposes. To preserve their essential anonymity both the company name and those
458 J. Ritchie and S. Richardson

of the key individual actor-respondents have been deliberately disguised, but not
treated so impersonally as to make it difficult to capture the very ‘personalism’
which typifies many small business workplaces. This case study is both unusual,
and unusually sensitive, in the character of smaller business governance and
organizational character it reveals, along with the range of consequences this gave
rise to. Such consequences could not necessarily have been anticipated when the
study began and were only rendered fully apparent some time later, as a result
of sustained in-depth investigation up to the point where both the research itself
and researcher also bore their further effects too. The very account offered here is
unusual in that it was originally researched from inside, as it were, by an in situ
management accountant, thereby acting as ‘reflective practitioner’ for these purposes
(Schon, 1991).
Case study research takes several forms (Cresswell, 1998). It both differs from, yet
can also complement, other accounting research methodologies (Otley and Berry,
1994; Humphrey and Scapens, 1996). However, their actual researching first depends
upon the particular type of case intended. In this instance that intention can be clearly
stated from the outset. MIS Limited represents a particular type of smaller business,
a mature founder firm, at a particular stage of development. Its breakpoint reveals
much about its underlying organizational character and accountability network,
variously implicating managerial accounting in the process and revoking standard
theories about governance, accountability and enterprise. Given that the boundaries
of governance, accountability and enterprise are already subject to wider debate,
the case will deliberately render these boundaries more visible and track the
consequences of their being variously overreached, transgressed, or else redrawn in
the process. Thus, with respect to enterprise, the case raises questions concerning
success and failure; with respect to accountability, it raises questions concerning
how particular networks implicate managerial accounting; and with respect to
governance, it raises questions concerning legitimacy and regulation.
In being drawn towards these boundaries, and raising these questions, it could
be argued that this is a case at the margins of both accounting and smaller
business research alike. While the value of studying ‘accounting at the margins’
has already been underlined, it is important to recognize that certain approaches to
entrepreneurship and smaller business often emphasized their relative marginality
before. For example, the pathbreaking study of ‘The Enterprising Man’ by Collins
and Moore (1964, 100fn) boldly asserted that:

‘Between the leaving of formal life and formal schooling and the time at which these
men had firmly established themselves in their own businesses falls a period of trials
and training. It is this period that is the true school for entrepreneurs. The curriculum is
rough, and those who successfully graduate from it are men of unusual courage and ability.
Credits are counted by lost jobs, broken partnerships, exploited sponsors, and times in the
bankruptcy courts. As in all schools, men are not required to take work in all subjects.
Candidates may specialize in bankruptcy or in insecure employment. Their major work
may be in the exploitation of sponsors or partners, or it may be in the accumulation of broad
work experience.
There are some exceptions, but in the vast majority of cases men who become successful
entrepreneurs spend considerable time in this school. Many of our men took longer
than 20 years to graduate . . . a successful course in entrepreneurship involves thorough
grounding in the finding of support outside legitimate channels, or in convincing legitimate
financial agencies that theirs is an enterprise in which risk is not present. Such skills are
learned only in the school for entrepreneurs.’
 Smaller business governance 459

Others like Kets De Vries (1996b, 1977) have since taken this psychodynamically
grounded ‘marginal man’ approach towards entrepreneurship still further without
necessarily equating this with smaller businesses per se. Although not without its crit-
ics, and other ways for conceptualizing this problem (Jacques, 1976), this approach
typically explores how far the boundaries of the subjects under study extend, and
how they perform under unusual testing (rather than simply average) circumstances.
In pursuing this issue from different angles, others currently emphasize how fre-
quent, and thus arguably ‘normal’, supposed ‘organizational misbehaviour’ might
be (Ackroyd and Thompson, 1999). Although certain ‘misbehaviour’ might entail, or
even beget, creativity and improvization, rival thinking about business and organiza-
tional deviance contends disturbances might result (Punch, 1996; Haines, 1997; Slap-
per and Tombs, 1999), including ‘networks of collusion’ among smaller businesses
themselves (Barlow, 1993). While theoretical approaches towards dysfunctionality
and deviance are still evolving, and remain potentially contentious, crises could play
an important role as organizations change and develop (Miller, 1990). Any accom-
panying breakpoints have likewise been considered unusually revealing as well as
decisive for their future working (Strebel, 1992).
The study of expressly ‘marginal’ organizations, phases, episodes, and leaders still
poses difficult dilemmas and problems for researchers (Punch, 1994). The very issues
and processes which might yield such exceptional insights paradoxically create
precisely those conditions which make research not just different but difficult to
sustain. Under these circumstances research access alone may prove unusual, if not
unusually sensitive, and further events could potentially threaten both researcher
and researched alike (Renzetti and Lee, 1993), while Baker and Bettner (1997) further
contend that such challenging knowledge cannot readily enter the mainstream.
Not only are the substantive issues raised by the MIS case itself similarly
unusual in these respects, just as importantly for developing understanding of
managerial accounting performance, both the researcher’s own role and actual
research process itself reflect this as well. Most unusually, from an accounting
and smaller business viewpoint, the case was researched full time, from within,
by a managerial accountant (one of the authors), who combined ‘live’ situational
experience with further academic study outside, acting as ‘reflective practitioner’ for
these purposes. Although Dalton (1959, 1964) pioneered similar ‘insider’ research
using unobtrusive/covert methods some time before, here both the research role and
process, as well as the resulting findings, need prior consideration.
The matrix shown in Figure 3 identifies the character of this research process itself.
In principle it differentiates whether the field situation is firstly approached as if from
the inside or outside, and whether the intention is to be interpretive or critical of it,
as Baker and Bettner (op. cit.) described.
Coming from inside, Mode 1 involves researching as if part of the situation
itself, whereas Mode 2 calls for greater realization of, and mutual engagement over,
changing that situation as well. By comparison, by starting from outside instead,
Mode 3 seeks diagnoses which could facilitate deliberate interventions, whereas
Mode 4 remains non-interventionist and only seeks to abstract data for outside
analysis. Researchers may well switch modes while situations themselves evolve
however. Each individual mode has particular strengths and limitations that need
careful consideration. Thus Mode 1 balances insight against partiality; Mode 2
balances being implicated in change with growing detachment about it; Mode 3
460 J. Ritchie and S. Richardson

Inside

Enactment-Actualization Realization-Engagement

1 2

Interpretive Critical

Abstraction-Analysis Diagnostic-Interventionist

4 3

Outside
Figure 3. The research process.

balances the desire to finesse diagnoses with the need to act upon them; and Mode 4
weighs how accurate abstract representations can actually be.
This research began in Mode 1. The researcher began as a management accountant
in March 1990 without fully realizing how MIS had evolved before. The proprietor’s
creation of this role had already caused staff such concern beforehand that some
suspicion and resistance was present from the outset. At the same time few
appeared to understand what any managerial accounting might actually involve.
Not surprisingly the entry process alone made it clear that more such ‘role making’
was essential before managerial accounting could itself develop further. Continuing
intrigue over how MIS was actually managed made this difficult however. ‘Informal
information systems’ competed for attention throughout this time. The proprietor
and his relationships were particular objects for ‘behind the scenes’ speculation
and gossip. The underdevelopment of accounting systems and procedures also
meant that chance discoveries were relatively frequent. Any further transition
into Mode 2 research therefore depended upon developing relationships with
what Dalton (op. cit.) termed ‘intimates’ and ‘informants’. This made it possible
to realize more accounting problems while engaging others about dealing with
them. In the process certain informants resocialized the researcher with varying
stories about how MIS was ‘really’ managed and accounted for. Other staff
changes then enabled further progressing of accounting systems and procedures
themselves. The proprietor’s relationships and intimacies nevertheless continually
intruded upon this developmental process with the result that additional accounting
information was simply ignored and/or bypassed instead. At the time the basic
performance of any managerial accounting role was still notably problematic.
Following Dalton, the researcher accordingly noted the changing feelings and
emotions associated with that performance, as well as issues of a more professional
 Smaller business governance 461

accounting nature. Such issues included the ready interchangeability of assets

such as property where the personal and business interests of the proprietor
were concerned. The transition towards Mode 3 researching brought different
problems. It entailed interfacing with increasingly concerned customer/clients, bank
managers, VAT inspectors, and auditors outside, as well as other staff, all mediated
by the proprietor before. Some simply sought further accounting information for
judging where they stood should MIS become paralysed through further crises.
Since few could actually stop the proprietor making further transgressions, the
accounting role became increasingly fraught and conflicted, bringing the possibility
of ‘whistleblowing’ into consideration. The transition into Mode 4 researching
therefore posed different dilemmas. Although certain intimates were aware of her
research, the proprietor was not. As well as other detailed accounting records, the
researcher had maintained working notes throughout the entire period, at times in
the manner of a forensic investigator at work. In effect she switched between inside
and outside perspectives once she judged the situation so untenable as to leave
without alternative employment in September 1992.
In summary, this experience suggests that neither the understanding nor perfor-
mance of even basic managerial accounting among grown and/or growing smaller
businesses should simply be taken for granted. Rather, both may need to be contin-
ually made and remade as a deliberate ploy before matters really progress. Given
its particular incongruities, managerial accounting became notably personalized, as
well as professionally conflict prone. In view of the latter, other studies of ‘organiza-
tional entry’ have similarly questioned where so-called ‘professionals’ true identifica-
tions and affiliations lie under other self-marginalizing situations like this (Wanous,
1992). Such core dilemmas also permeated the research process itself when the value
of any extra insights gained into smaller business accounting at the margins needed
to be weighed against the dilemmas and conflicts their researching gave rise to. The
substantive findings about MIS now described will underline these problems further.

4. The MIS limited case

MIS was originally established in 1979 by its proprietor and a brother. A younger
brother joined as a Director in 1981. By 1988, it was trading as three distinct divisions,
each run by a brother, until they decided to break it up. It kept the original company
name and the proprietor took over as sole director and manager of his aspect of
its original business. This provided inspection services to much larger international
company client sites, run from a small head office and administration centre, based
within rented premises (see Figure 4). MIS had few fixed assets, apart from the
Director’s car, office furniture and equipment. A bank overdraft provided its main
source of funding, while turnover was first predicted to be £2.4 million by the
financial year ending 1990.
MIS’s constant liquidity problem, closely associated with appropriation of funds
for personal use, resulted in its proprietor seeking increased overdraft facilities in
March 1990. This was negotiated with a newly appointed bank manager without past
experience of its workings. The facility was renegotiated from £30 000 up to £100 000
with additional conditions attached: Philip had to provide additional security in
the form of the equity in his home plus a charge on the company’s debtors, in
462 J. Ritchie and S. Richardson

Arnold
I Overseas Manager I

N Operations Manager N
Simon
S Philip S
OWNER/MANAGER
P Jenny Mary P
Secretary Clerical Assistant
E E

C Helen C
Bookkeeper
T T
Jim
O External O
Accountant &
R Company Secretary R

S External Auditor Bank Manager S

A major accounting firm Various role players

Figure 4. Key actors at March 1990 (before the new accountant was introduced).

addition to an existing unlimited personal guarantee, while also supplying better

management information. He was encouraged to recruit a full-time managerial
accountant to replace Jim, his external accountant and personal friend, who only
prepared management accounts intermittently.

Change
A female management accountant was duly recruited to improve management
information systems. In the event this highlighted poor pricing and rate setting
practices, as judged by their adverse impacts upon profitability and liquidity. Further
cashflow forecasts and controls likewise highlighted the impact of continual cash
drawings for personal use. However, the proprietor still pursued an expensive
lifestyle which included buying holidays abroad as well as gifts for female friends,
all charged to the company credit card and deciphered by the new accountant to
be ‘personal’ spending, while also transferring funds to a personal bank account to
cover personal debts. His ‘debt’ to MIS grew, with apparently insufficient personal
resources to cover the loan accumulated to it, as evidenced by his declarations that
he needed to sell his current home to raise cash to pay off this loan, along with
his borrowings from associates to pay wages. With its proprietor’s debts rising,
MIS was drained of cash resources, and employees, creditors and state agencies
all sought payments and/or explanations, while outside clients lost faith. The new
accountant was the first target for increasingly acrimonious accountability demands
and struggled in framing accounts to various different parties, feeling caught up in
the conflicting affiliations of being employee, professional and colleague. Figure 5
shows the new actors now in situ after the introduction of the new accountant.
 Smaller business governance 463

OWNER/MANAGER Female friend &

Philip Company Secretary
Tracy

Overseas Manager New Accountant

Arnold
Secretary Bookkeeper Accounts
Zoe Helen Assistant
Laura

Inspectors

External Accountant External Auditor Bank Manager

Jim Sole Practitioner Various role players

Cast Changes:
Simon Left and not replaced
Mary Replaced by Laura as Accounts Assistant
Jenny Replaced by Zoe as Secretary (who also
played Philip's female friend until replaced by Tracy)
Jim Displaced by New Accountant
Displaced by Tracy (Philip's new female friend)
as Company Secretary
A major accounting firm Replaced by a sole practitioner as
Company Auditor
Figure 5. The changing ‘cast’.

In January 1991, a further drama unfolded, since liquidity had not improved,
despite the increased overdraft facility and improved information systems. The
overdraft balance was well beyond its limit, after a number of warnings from the
bank manager, which employees clearly appreciated but felt incapable of acting
upon. As unaudited year end accounts then showed trading losses, the bank
withdrew support and reduced its overdraft facility by £5000 per month indefinitely.
In addition, the proprietor was told to take expert advice as, in its estimation, MIS
was trading insolvent, and needed new capital to eliminate the loss and compensate
for his adverse loan account, while also constantly updating the bank on MIS’s
cashflow. This was in stark contrast to the impression the proprietor had given the
new accountant about the bank’s continuing support after out-of-work socializing
with its latest bank manager.
The bank then instigated controls which, combined with the new internal systems,
addressed the proprietor’s cash-draining activities, but only for a short time. It
continued to reduce the facility monthly to £80 000, at which stage it considered
MIS turned around, and thereafter maintained financial support at that level. The
proprietor’s changed behaviour proved only temporary for, as soon as the bank
loosened control, he immediately reverted back to managing as before. He and
464 J. Ritchie and S. Richardson

Tracy began house-hunting, while his current property remained unsold. The first
intimations of this, sent via the contents of a fax revealed by Zoe to the new
accountant and others, certainly stirred MIS administration staff. For example, Helen
commented, ‘Do you think we shall still be here at Christmas?’, whilst Zoe suggested, ‘He
might fold the business to pay for it’, although it appeared impossible to raise the money,
and hence the deal would fall through, in which case Helen suggested, ‘Then Tracy
will leave him—we hope’. The proprietor intended to finance the house deal through
company sources, but this did not materialize, in spite of recruiting both the external
accountant and the new company auditor in support. The new accountant was asked
to produce a number of ‘accounts’ of the potential impact of this venture on the
company balance sheet. The proprietor was optimistic about raising the funds, since
MIS’s financial performance had improved, with recorded end of year profits for 1991
of £85 000 before taxation and audit adjustments. The bank blocked this attempt at
creating ‘illusory’ company assets and he was forced to reconsider. In addition, key
staff were becoming increasingly concerned about the confusion of his personal and
business affairs, which had long been just a matter of rumour and intrigue certainly
before the new accountant joined.
By May 1992 Philip had purchased a £200 000 property (purporting to be
the ‘Southern Office’, located close to his female friend’s mother’s home) by
raising a personal mortgage on the basis of forward profit predictions. Company
sourced funds of over £40 000 financed the necessary deposit, refurbishments and
furniture. The cash thus appropriated was ‘accounted for’ as an addition to the
proprietor’s loan account. Without any formal agreement, MIS was then charged
a ‘rent’ for the ‘southern office’ which covered the proprietor’s personal mortgage
repayments, despite the new accountant’s protestations. Helen had forewarned the
new accountant of this move after suggestions that Philip had reneged on his
promise to share the South American joint venture profits with Arnold and also
make him a director of MIS. This episode, coupled with excessive personal spending,
created further liquidity problems and MIS could not then pay outstanding VAT
commitments of more than £70 000. Having again breached an agreement to pay,
Customs and Excise officials duly threatened to wind up MIS, and the proprietor
was forced to give assurances and negotiate a payment schedule. At this stage the
new accountant felt angry and increasingly demoralized, aware of being bypassed
whenever she might disapprove, or make the consequences of transactions more
visible.
The new accountant suspected that the proprietor was siphoning off cash
from overseas joint ventures not formally accounted for. There were sensitive
rumours of dollars being deposited in his personal account and of mysterious packages
arriving from abroad and innuendoes about their illicit contents now arising from
everyday conversations. Zoe revealed that when she and Philip ‘were very close’, she
accompanied him to deposit ‘a wad’ of dollars (over $80,000) in his personal account
in London and that ‘he said (the South American joint venture partner) gave it to him
when they met in London’. Her only means of gathering formal information about such
issues was through explicit recording systems. A long-outstanding debtor balance
of over £54 000 on the account of a joint venture partner provided the potential
mechanism to hold the proprietor accountable. After much debate between the
proprietor and the overseas manager, £32 000 was to be accounted for by the purchase
of an overseas flat for MIS and expenses incurred by the partner on MIS’s behalf. The
 Smaller business governance 465

proprietor affirmed that the remaining £22 000 was an irrecoverable bad debt. The
auditor appeared to accept this and wrote off £10 000 of this ‘bad debt’ in the accounts
for 1991. The flat did not appear on the audited balance sheet amid suggestions that
it was actually registered in Arnold’s name.
In August 1992, the bank sought to meet Philip, the auditor and the new accountant
to discuss, in particular, why the audited accounts for 1991 did not identify
substantial loans made to the director. The auditor refused to attend and resigned at
the same time as the new accountant planned to withdraw. As accountant she could
have whistleblown to outsiders like the bank manager, yet the end result was likely
to be the same since, if the bank withdrew its support, the creditors would still not get
paid. She chose instead to simply provide whatever information the bank manager
asked for. In the event, the bank manager requested very little and the auditor was
blamed for not disclosing the proprietor’s loan. As the new accountant, she found it
difficult to reconcile this, since the bank had received monthly management accounts
which recorded the increasing level of loan. The proprietor also agreed to appoint
auditors recommended by the bank. Since the bank also required him to repay his
company loan account, he suggested taking out a personal loan as cover. The bank
manager appeared dubious, since he had recently taken out a house mortgage (the
bank manager did not appreciate that MIS was paying rent on this property, sufficient
to cover the mortgage). To ease cashflow problems debt factoring was advised but
dismissed by the proprietor who complained of ‘losing face’ with customers.
In September 1992, the new accountant resigned without sharing her ‘inside’
knowledge, except with intimates. In March 1993 she was contacted by the Inquiry
Branch of the Inland Revenue to meet their representatives. Having sought informal
legal and professional advice beforehand, she had to decide what exactly she
was willing to divulge and duly kept her answers simple, using only verifiable
information. Their questions themselves implied that Revenue officials had kept the
proprietor’s activities under review for some time. Among the issues raised were
how the overseas joint venture and bad debts were written off, the villa and the
cabriolet on the Mediterranean coast accounted for, and how many different bank
accounts existed. In October 1993 MIS went into liquidation and in November 1993
the proprietor began trading again with a newly registered company in the same
business.

5. Exploring proprietorial accountability

This section uses the accountability matrix introduced in Figure 1 to explore the
performance of proprietorial accountability at MIS acted out by the key players and
identified in Figure 6. Using the matrix in Figure 6, it then provides additional data
to illustrate each type of accountability performed.

Female friend and staff

During the existence of MIS a number of younger female friends were (or became)
‘employed’ by the company, and accessed various expensive holidays, gifts, meals,
accommodation, transport and entertainment through company funds. He talked
and appeared increasingly detached from the company, except when he was
obliged to be involved, as if he valued his outside lifestyle more. To his staff he
466 J. Ritchie and S. Richardson

Strong
Accountability

E Inland Revenue Bank manager

Customs and Excise Sole Practitioner
R [DTI, etc] Auditor

T
External Accountant
I JIM

C Key customers
Inspectors
A Suppliers Staff
Other customers Girlfriend
L Employed new
accountant

Weak H O R I Z O N T A L Strong
Accountability Accountability
Figure 6. The proprietor’s accountability matrix.

became increasingly unpredictable and even hostile when questioned. However, his
persistent relationship with one younger female friend, Tracy, led to inclusion on the
payroll, while MIS also financed her car, which was eventually located at his former
Mediterranean villa, itself ‘accounted for’ as MIS property. His accountability to her
was of a Type 4 nature, where she could command strong relational accountability
and apply powerful personal sanctions if her requests were not met, while other staff
felt they had much weaker Type 4 sanctions.

New accountant
The new accountant did not anticipate a rising need to detect and control his less
responsible behaviour and, in effect, represent and defend other staff interests.
The unrelenting liquidity problem was a major source of concern to contain irate
creditors and clients and ensure payments were received when due, while also
providing constant bank updates. As a relative newcomer being socialized into the
situation she could increasingly identify problems without having the power to act
upon them. Once the bank’s controlling influence lifted enough for the proprietor
to revert back, this action paralysis effectively intensified. In different interfaces
with the bank, the Inland Revenue and Customs and Excise, the auditor, creditors,
employees and clients, there were possible opportunities to verbally account for his
behaviour. However, she refrained, and let others infer the story from the formal
‘accounts’ prepared for the bank and the auditor, which clearly identified the root
cause of the liquidity problem. For example, between November 1990 and September
1991, a period in which the company’s survival was seriously threatened by close
 Smaller business governance 467

bank monitoring and reduced support, the proprietor withdrew £56 000 for personal
use. By September 1992, he withdrew a further £100 000, yet all these other actors
either failed to detect this, or chose not to, and did not ask the new accountant to
‘account’ for this either. The new accountant used her role in the proprietor’s Type 2
accountability processes to try to effect real accountability from him to the bank and
auditor. The alternative was to ‘whistleblow’. However, the Type 4 sanctions upon
her within MIS, the ‘profession’ and society at large were apparently too strong.

Auditor succession and the bank manager role

The relationship between Philip and Jim was of a long-standing, combined personal-
cum-working nature, stemming originally from when the former was first in business
with his brothers. After the creation of MIS, the proprietor retained selected staff,
appointed Jim as Company Secretary and used his services, whilst they socialized
together regularly. Jim ran a small practice and advised the proprietor on business
issues and prepared monthly management accounts for MIS, based on information
variously provided by Mary, Helen and Philip himself. These accounts were intended
primarily to satisfy the bank’s monitoring of ongoing performance and were not
usually timely. In addition, he loaned MIS £20 000 during the financial year of 1988/9,
for which no interest had either been accrued or paid. After the arrival of the new
accountant, they both decided to convert this into a personal loan to the proprietor,
reducing his liability for drawings which were recorded as a current asset (director’s
loan) in the management accounts.
When the new accountant first joined, the proprietor had Jim prepare head office
staff salaries to establish out-of-office confidentiality. He also continued to prepare
management accounts for a further nine months. Despite only token support from the
proprietor, she challenged this and, in December 1990, informed Jim that she would
be ‘taking over’. Nevertheless, the proprietor had him prepare final accounts for the
year end September 1990, ready for audit by the new auditor. Having judged the
current auditors’ (one of the then ‘Big Six’) too expensive, the proprietor appointed
Bob, a sole practitioner, to conduct the audit for a set fee of £2000, having been
introduced by a friend and business associate. He informed the new accountant
that he intended to appoint the external accountant as the company auditor for
the following year, once distanced from MIS. To this end, Jim then retired from his
role of Company Secretary, and the new accountant was asked to replace him, but
refused, counter-suggesting his new female friend, who was then duly appointed.
The appointment of another auditor (Type 2) changed the nature of the accountability
relationship between the proprietor and the audit function. Although the new
auditor was still influenced by professional rules, the relational aspects appear to
have been grasped by the proprietor. Thus, his decisions may have been more greatly
influenced by the proprietor’s assertions than by accepted accounting practice and
accounting records.
In addition, the company auditor had either failed to recognize or ignored the
proprietor’s dubious ‘accounts’ provided about the joint venture and adopted an
inferior role in the purchase of the new property known as the ‘southern office’, as
well as not pushing annual audit investigations through. (Type 2).
During this period, MIS’s bank managers changed. On each changeover the
proprietor had a ‘get to know each other’ session, which promoted particular
out-of-work socializing. The proprietor accordingly told the new accountant that
468 J. Ritchie and S. Richardson

meetings with the bank manager were mostly favourable. After Jim left, the new
accountant provided further information to the bank manager and constructed
forecasts of expected performance and cashflows, sometimes at daily, even hourly,
intervals. This required rescheduling payments to suppliers and employees and
considerable interaction with clients to assure cash would be forthcoming. This
time-consuming routine was closely related to the company’s accountability to the
bank. As the accountant, she was continuously embarrassed and compromised
by the proprietor’s unpredictable cash withdrawals, which both undermined her
projections and reflected back on the bank manager’s view of her accounting
ability. Nevertheless, when asked for explanations, (which offered opportunities for
revealing the ‘truth’) she avoided detailed comment (Type 2), while the proprietor
likewise avoided direct contact with the bank at difficult times, saying ‘I don’t know
why they want to speak to me. I haven’t got any information. You know all about it’.
The proprietor’s accountability to the bank manager and auditor was of a Type 2
nature. It was strongly rule-based through an obligation to produce formal ‘accounts’
for legal, taxation and bank funding purposes, and strongly relational where
‘accounts’ through internal management information and social contact provided
further detail. Interestingly, the relational ‘accounts’ appeared to be most influential
in both the bank manager’s and the auditor’s decision-making processes.
A further issue between Jim, the proprietor and the new accountant concerned the
£20 000 loan. Jim began to pressure the proprietor for repayment plus interest. Since
he apparently lacked personal resources, the proprietor siphoned off payments to
him from MIS’s account, side-stepping the cashflow projections and creating further
problems. The proprietor’s relationship with Jim changed. Prior to the introduction
of the new accountant, Jim, as company secretary and ‘investor’ was an insider,
commanding strong mutual ties with the proprietor of a Type 4 nature. Once he
resigned as Company Secretary to stand ‘in the wings’ until an ‘auditor’ role could be
taken up, this became a Type 2 relationship, Jim outside MIS pressing the proprietor
to be accountable for his loan (now a personal liability) whilst still maintaining strong
social and professional ties and acting as intermediary in accounting for the new
property. Jim, as insider/outsider, had sufficient information and opportunity to
whistleblow, but considered himself embroiled in the situation.

State agencies
The new accountant’s role as gatekeeper and transmitter of formal information
to government departments (Type 1) created less problems than the uncertainty
surrounding the proprietor’s activities. Any negotiations for delay in payments
were always tenuous, since the reason for delaying was usually connected with the
proprietor’s misuse of company funds, so that any agreements might be revoked by
another unpredicted act, while the proprietor’s adverse loan account clearly had tax
implications. The new accountant latterly estimated that the proprietor’s tax liability
was sufficient to terminate MIS, assuming the Inland Revenue was suitably alerted by
the new auditors, who had been appointed on the bank’s recommendation (Type 2).
Customs and Excise officers had not raised any concerns.

Customers and inspectors

MIS’s customers were major corporations. Contracts gained by tendering consisted
of either regular maintenance inspection work (tendered on a yearly basis) or new
 Smaller business governance 469

construction inspection projects (tendered on an ad hoc basis). The inspectors worked

on customers’ sites and organized ‘the job’ from that position, developing close
relationships with their on-site representatives. Consequently, when salaries or sub-
contract accounts and site expenses were not paid on time, they alerted customers’
representatives. On one such occasion, an inspector informed the new accountant,
‘[the representative] says if you don’t pay me on time then he will see to it that you don’t get
any more work from them’. Their representatives then regularly intervened in payment
negotiations and pressured the proprietor to ‘pay up’. This intervention created
further problems for cash projections whenever he made unscheduled payments. The
‘insider’ information which the customers accessed, was also detrimental to MIS’s
reputation and questioned its ability to fulfil contracts. The new accountant was
forced to negotiate with customers to ensure prompt payment, knowing MIS had
little leverage in these negotiations, which made relationships with their accounts
staff particularly important. Through these relationships, a degree of reciprocity
developed, where assurances of forthcoming payments were reasonably relied
upon. This reliability was essential at critical cashflow periods as the information
was passed to the bank. In this instance, the new accountant was acting as an
intermediary on behalf of the proprietor in establishing stronger relational ties with
customers of a Type 4 nature, so that contractual terms (Type 3) might be waived to
his advantage.
The new costing system helped negotiate and justify improved rates for regular
contracts. By ‘accounting’ for the proprietor’s past decisions on rate setting, the
system also imposed reciprocal ‘accountability’ (Type 4) upon him so that, rather
than quoting ‘off the top of his head’, he used such information in calculations. The
employed and subcontracted inspectors tended to build relationships with repre-
sentatives that made them more ‘accountable’ to the customer than the proprietor
per se. Timesheets which recorded site work actually done were authorized on site
by representatives. These formed the basis of salary or invoice payments from MIS
to the inspectors and MIS sales invoicing back to customers. Site expenses were
negotiated between the proprietor and inspectors, who accounted for their claims
through receipts, or by reference to terms of employment, as kept in office files. On
occasion, the proprietor showed little apparent concern about reneging upon con-
tractual obligations to inspectors, except when he was personally (face-to-face or by
telephone) made to ‘account’ to them or, in some cases, customer site representatives
acting on their behalf, over late payments (Type 4). Rather than personally account
for the situation, he would often express surprise, and verbally blame his own staff.
These confrontations generally resulted in the inspector being paid, regardless of
the impact on cashflow, and were usually accompanied by tirades against his staff.
Thus, the intermediary roles played by customers and inspectors resulted in stronger
relational accountability of a Type 4 nature being imposed upon the proprietor by
key customers, in spite of their assumed Type 3 weak accountability status, whilst
his accountability to inspectors (Type 4) was also strengthened by their intervention.

Other suppliers
Other suppliers to MIS gained little leverage despite a constant stream of written and
verbal requests for payment and threats to withdraw equipment (Type 3). Generally,
they probed the new accountant in search of reliable information about the release
of payments. Unfortunately, because the proprietor’s unpredictability resulted in
470 J. Ritchie and S. Richardson

unforeseen shortages of cash, the new accountant found it difficult to keep promises
about payments and reciprocal trust soon disappeared.

6. Discussion

Using certain specific constructs developed earlier in the paper about smaller
business governance, accountability and enterprise, the MIS case is a vehicle for
exploring how far their respective boundaries might legitimately stretch, and for
revealing the consequences of their being overreached and/or transgressed at the
margins. Although this case was expressly considered to lie at those margins
discussed before, these findings exposed how certain types of accountability
network ultimately implicate managerial accounting performance. At MIS any such
performance was so problematic from the outset that it was first necessary to develop
the managerial accounting role itself before progressing other matters further. Even
then its actual performance was not without its ironies and paradoxes however. In
the event it proved particularly ironic that a mature founder firm with commonly
supposed ‘enterprising’ potential should become so possibly mismanaged, and
ultimately misgoverned, that the very actors who first conceived this managerial
accounting role then so undermined its actual performance that, however else they
might have benefited, some potential stood virtually liquidated thereafter. Although
‘personalism’ has been considered a marked feature of smaller business management
in general, its possible down/darker side had important business implications as
well. Although one particular research tradition from Collins and Moore (op. cit.)
through to Kets De Vries (op. cit.) among others, exposes such ‘vicious circles’
as leading smaller business (and other) counter-development syndromes, here this
could point the way for further study of the potential for ‘managerial misaccounting’
as well. Indeed, Clarke et al. (1997) suggest that at the margins there is scope for
both ‘creative’ accounting, where ‘a practice entirely within the framework of the law and
Accounting Standards, but with intention to defeat the spirit of both’ can be used to ‘offset
otherwise bad news’ (p22) and ‘feral’ accounting, where ‘the use of a specific accounting
practice with the intention to mislead’ (pxiii) underpins managerial action.
The case further demonstrates the importance of shifting casts of actors and
interests among not just grown, but also potentially further conflict-prone, and even
self-marginalizing smaller businesses like MIS. This became most apparent during
its later critical stages when control traversed different organizational boundaries.
By then the full extent of its ultimate accountability network had finally revealed
itself. This further exposed the working of other ‘collusive networks’ (Barlow
op. cit.) which in effect threatened to immobilize rigorous corrective action. In
the process of interfacing with the range of increasingly concerned actors and
interests outside MIS proper, the managerial accountant came to find the strength
of affective/relational ties, and others’ fear of being publicly exposed over errors
and condonements, could potentially outweigh actual accounting information itself.
Given how such smaller businesses become progressively more ‘networked’ into
other firms, alongside family and friends, important features of their accounting are
thus likely to be contingently performed within similar contexts, making the margins
of accountability and enterprise more liable to shift and vary, repudiating widely
assumed myths about such businesses’ singular, stereotypical form.
 Smaller business governance 471

A number of different interests besides those of the proprietor finally mediated

managerial accounting at MIS itself. Indeed, his growing loss of control, and resort to
manipulative tactics, marked its eventual downward spiral. To certain staff even the
bank’s increasing—at times almost daily—shadowing of events was not necessarily
considered intrusive in this respect. However, other (including verbal) ‘accounts’
were deliberately ‘passed off’ to inspectors, suppliers, and even state agencies, as
both the number and form of everyday explanations for MIS’s troubled position
increased. In this case even smaller practitioner auditing became embroiled with
this process, while inability to decipher the significance of the Director’s loan both
implicated its bank manager and afforded another opportunity for the proprietor to
truncate accepted margins of accountability and enterprise once again.

7. Conclusion
A perennial object for reformers, the whole concept of governance stands invigo-
rated, giving particular impetus to corporate governance and its reform. With cor-
responding formal legal codes, and their accompanying accounting and auditing
mandate, thereby rendered more open to question, the balance between accountabil-
ity and enterprise in smaller business governance has received particular attention.
While any conceptual basis for their very distinction clearly needs thoroughly think-
ing through, this paper deliberately explores their respective boundaries with respect
to how, if at all, they operate at/across the margins. Until now much accounting and
smaller business research could almost be considered relatively separate and dis-
tinct fields. However any further insights yielded through cases like MIS, along with
other emerging studies, together suggest that, by rendering certain smaller business
workings more visible, managerial accounting can also reveal more about smaller
businesses themselves. In this case some considerable methodological improvization
proved necessary before the researcher, as ‘reflective practitioner’, could eventually
discover and reveal more about how MIS worked from the margins, in ways which
those simply researching from outside could potentially miss, given the more limited
time and specific methods at their disposal. The limits to this methodological im-
provization were themselves revealed during later critical stages however, when the
deeper difficulties of researching such smaller businesses were themselves exposed,
their invidiousness making the researcher withdraw from the situation altogether.
The paper has sought greater conceptual clarity about accountability and enter-
prise in smaller business governance as it now stands. It has furnished an individual
case study to that particular effect. As a consequence of this, their boundaries have
been rendered more visible, and margins for manoeuvre exposed, in ways which
may concern those seeking to redraw them by official, legal, and other means. By
applying its own particular models of accountability and enterprise, it has demon-
strated how differently accountabilities may configure, influence, and implicate the
actual role and work of managerial accounting among smaller businesses. It could
therefore claim further implications for both the problematization of leading issues
for further research and the selection and development of methodologies appropriate
to it. However, by first approaching the study of accountability and enterprise from
the margins, it may cast some further light upon other centrally grounded issues,
but cannot itself determine these alone and needs to be seen alongside other related
research as well.
472 J. Ritchie and S. Richardson

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