Hofstedes study

According to Hofstede (2011, p. 3), "Culture is the collective programming of the mind that
distinguishes the members of one group or category of people from others". Culture is
unconscious code of conduct found within everything from a small group of two to an entire
ethnic population which is what makes them unique (Young, 2013). It can be passed along
through nationality, generations or written rules (Hofstede, 2011). In the early 1980s, Hofstedes
work had provided culture researchers four manifestations of culture by studying and
evaluating the values of employees which conducted by psychologists at 60 IBM offices around
the world (Yeh, 1988).
Individualism versus Collectivism
According to Radebaugh et al. (2006), Individualism stands for the preference for a loosely knit
social framework in society in which individuals are supposed to look after of themselves and
their immediate families only, whereas, collectivism, stands for the preference for a tightly knit
social framework in which individuals assume their relatives, clan, or other in-group to look after
them in exchange for unconditional loyalty. This dimension addresses the degree of
interdependence a society maintains among individuals.
According to Tamas (2007), in Hofstede's Dimension of Culture Scales, Japan scores 46 on the
Individualism dimension as Japanese shows many of the characteristics of a collectivistic society
such as placing harmony of group above the expression of individual opinions and people have a
strong sense of shame for losing face.

In an individualistic society, people act for their own interests. Thus, more turnovers occur,
which increases the chance of accounting errors and increases the desire to manipulate numbers
to present a positive public image (Young, 2013). In an individualistic culture, the accountant
wishes to satisfy user demands and as a result, cutoff and classification errors also increase. On
the other hand, the collectivistic culture companies stress in-group goals and desire to achieve
those goals before their own (Young, 2013). Hence, accountants will be less likely to distort the
numbers if greater trust is built within this organization.
Based on Hofstedes cultural dimension, collectivism is the cultural characteristics of Japanese
society that makes their accounting system, practices, and organizational culture distinctive. The
Confucianism principle of yin and yang is the last cultural aspect. According to Young (2013)
this is where complementary forces alternate and balance each other to maintain a harmonized
environment. Hence, as long as the harmony of the society is maintained, there is no strict rule
of what is good or bad. In order to keep the necessary balances aligned, the Japanese most likely
to compromise and avoid confrontation (Young, 2013).

As a result, it had impacted the

accounting profession as it compromises judgments and decisions instead of demanding the

independence necessary to uphold the professions reputation (Young, 2013).
In japan, dantai isbiki or group consciousness is what the Japanese refer to as cultural norm.
According to Young (2013), group consciousness is the tendency to see themselves as a group,
depend on upon each other, rather than as individuals. Hence, this permits the workplace to be
concentrated on mutual needs and helps keep disputes from the public (Young, 2013). However,
this had influenced the auditing profession as it is seen as part of the organization and having the
obligation to protect the organizations interest rather than the publics. As a result, according to
Young (2013), the need for independent auditors in the company is a foreign concept and

sometimes this concept is rejected by Japanese companies. Furthermore, in collectivist societies,

companies are more concentrated inwardly which can create secrecy, resulting in less disclosed
information (Young, 2013).
Large versus Small Power Distance
Power Distance is the extent to which the members of a society accept the idea that power in
institutions and organizations is distributed unequally (Radebaugh et al., 2006, p.44). This
affects the behaviour of both the less powerful and more powerful members of society.
According to Radebaugh et al. (2006), people in large power distance societies accept a
hierarchical order in which every person has a place that needs no further justification while
people in small power distance societies strive for power equalization and claim justification for
power inequalities. This dimension addresses how a society handles inequalities among people
when they occur. This has direct consequences for the way people build their institutions and
organizations.
According to Tamas (2007), in Hofstede's Dimension of Culture Scales, Japan scores 54 which is
a mid to high-ranking on Power Distance dimension. This means that employees in Japan are
more likely to listen to their superiors and not question their decisions. Japan is a borderline
hierarchical society. One of the drawbacks for foreigners to do business in Japan is that slow
decision making process as all the decisions must be confirmed by each hierarchical level and
finally by the top management. Japan has always been a meritocratic society therefore, there is a
strong belief that everybody is born equal and anyone can get ahead if he or she put in effort.
According to Young (2013), large power distance society might be discouraged to disclose their
private information with the public whereas, small power distance society tend to have better

relationship with users and hence, they are more likely to disclose their financial information
publicly. Furthermore, in terms of auditing in a large power distant society, the auditors might be
pressured with the obligations to satisfy the authority or a powerful client and save face to
avoid public embarrassment rather than keeping the rules of the profession.
Companies are more inclined to be centralized in a large power distant society because the
greatest amount of authority resides with a small few in power. On the other hand, centralized
management opts to use accounting to present a positive image and may overrule basic
accounting rules to do so which in turn will result to a greater risk for material misstatement. In
addition, in this type of culture, subordinates are more likely to be less educated which could
lead to a higher number of GAAP, classification and professional judgment errors (Chan, Lin, &
Lai Lan Mo, 2003). As for small power distant society, the companies are decentralised. Hence,
power and knowledge are evenly distributed throughout the organization. As a result, financial
statements are expected to have lower chance of material misstatements. Since Japanese has a
mid to high- ranking power distance, therefore there is a likelihood that most of the Japan
companies are centralised.
Strong versus Weak Uncertainty Avoidance
Based on Radebaugh et al. (2006, p.44), uncertainty avoidance is the degree to which the
members of a society feel uncomfortable with uncertainty and ambiguity. Uncertainty
Avoidance has consequences for the way people form their institutions and organizations
(Hofstede, 2011). Uncertainty avoiding cultures try to curtail the possibility of such
circumstances by stringent behavioural codes, laws and rules, disapproval of deviant opinions,
and a belief in absolute Truth; 'there can only be one Truth and we have it' (Hofstede, 2011).

Hence, the strong uncertainty avoidance societies maintain firm codes of belief and behaviour
and are intolerant of different persons and ideas whereas the weak uncertainty avoidance
societies maintain a more peaceful atmosphere in which practice counts more than principles and
deviance is more easily tolerated (Radebaugh et al., 2006). This dimension addresses how a
society reacts to the fact that time only runs one way and that the future is undefined, and
whether it tries to control the future or just follow the flow. According to Hofstede (2011), in his
research, it has shown that people in uncertainty avoiding countries are also more emotional
while the uncertainty accepting cultures are more tolerant of opinions different from what they
are used to.
Based on Tamas (2007), in Hofstedes Dimension of Culture Scales, Japan scores 92 for
Uncertainty Avoidance dimension which is one of the most uncertainty avoiding countries on
earth. This is mainly due to the fact that Japan is constantly threatened by natural disasters from
earthquakes, tsunamis, typhoons to volcano eruptions. As a result, Japanese learned to prepare
themselves for any indefinite situation. In the corporate world, Japanese spend a lot of time and
effort into feasibility studies and all the risk factors must be worked out before any project can
start (Young, 2013). Therefore, decision making is slow in Japan because the managers ask for
all the detailed facts and figures before taking any decision. This high need for Uncertainty
Avoidance is one of the reasons why changes are so difficult to realize in Japan (Young, 2013).
According to Young (2013), cultures of strong uncertainty avoidance tend to disclose less
information to the public and more to private entities such as banks and financing companies
where they can maintain more secure relationships whereas weak uncertainty avoidant cultures
tend to publicize their financial positions as they do not depend on on preserving steady

relationships as does their counterpart. Since Japanese has strong uncertainty avoidance, hence
they tend to disclose less information to the public.
Masculinity versus Femininity
According to Radebaugh et al. (2006, p.44), masculinity stands for the preference in society for
achievement, heroism, assertiveness, and material success. While, femininity stands for the
preference for relationships, modesty, caring for the weak, and the quality of life (Radebaugh et
al., 2006). This dimension addresses the way in which society assigns social roles to the sexes.
According to Hofstede (pg12, 2011) , the IBM studies revealed that (a) women's values differ
less among societies than men's values; (b) men's values from one country to another contain a
dimension from very assertive and competitive and maximally different from women's values on
the one side, to modest and caring and similar to women's values on the other. Hence, the
women in feminine countries have the same modest, caring values as the men, however in the
masculine countries they are rather assertive and competitive, but not as much as the men, so that
these countries show a gap between men's values and women's values (Hofstede, 2011).
According to Tamas (2007), in Hofstede's Dimension of Culture Scales, Japan scores at 95 for
Masculinity dimension. However, you do not see assertive and competitive individual behaviours
in Japanese as there is a combination of their mild collectivism. The drive for excellence and
perfection in every aspect of life such as in their material production, services and presentation
such as gift wrapping and food presentation as an expression of Masculinity in Japan. Another
expression of masculinity in Japan is workaholism. According to Young (2013), masculine
companies tend to share more information with the public as masculine societies seek to compete
and achieve, building relationships with other companies and constituents in order to do so.

Long Term Orientation versus Short Term Orientation

This is the fifth dimension in Hofstedes study. According to Radebaugh et al. (2006, p.45), this
dimension is referred as Confucian because the values involved appear to be identifiable with the
teachings of Confucius such as thrift, persistence, having a sense of shame, and ordering
relationships. Confucian work dynamism refers to dedicated, motivated, responsible, and
educated individuals with a sense of commitment and organizational identity and loyalty.
As mentioned in Young (2013), the long-term orientation highlights on the adaptation of
traditions to meet modern requirements such as a respect for social status obligations within
limits, a thrifty and sparing attitude towards to resource and large savings levels and funds
available for investment, perseverance toward achieving gradual results, a willingness to
outranked personal interests to achieve purpose; and a concern for a virtuous approach to life. On
the other hand, the short-term orientation highlights on the respect for tradition such as social and
status obligations regardless of cost, small saving levels and lack of money for investment, a
concern to get quick results; a concern for appearances; and a concern for truth rather than virtue
(Young, 2013).
According to Tamas (2007), in Hofstede's Dimension of Culture Scales, Japan scores 80 for
Long Term Orientation dimension. Japanese people live their lives guided by virtues and
practical good examples. In addition, Japanese companies constantly invest highly on R&D even
in economically difficult times, higher own capital rate, priority to steady growth of market share
rather than to a quarterly profit. Therefore, Japanese main goals are not only making money for
every quarter for the shareholders but to serve their stakeholders and society at large for future
generations.

Culture is considered a crucial element in the framework for understanding how social
systems transform because culture influences norms and values and group behaviour within and
across systems (Gray, 1988). According to Gray (1988), there is a theoretical framework
incorporating culture

could be used to explain and predict international differences in

accounting systems and to identify patterns of accounting development internationally. Hence,

he proposed the classification of four accounting values which had been derived from a review
of accounting literature and practice (Gray, 1988).
Professionalism versus Statutory Control
According to Radebaugh et al. (2006, p. 45), this value reflects a preference for the exercise of
individual professional judgment and the maintenance of professional self-regulation as opposed
to compliance with prescriptive legal requirements and statutory control.
In the accounting perspective, this value dimension is significant because accountants are
supposed to adopt independent attitudes and to exercise their individual professional judgments,
to a greater or lesser extent, throughout the world (Radebaugh et al., 2006). In addition, the
accountants responsibility is to make independent legal and ethical decisions in any practice. An
individualistic and weak uncertainty avoidant society consistently shows its tendency toward
professional judgment (Young, 2013). On the other hand, in a culture with small power distant
accept professional judgment easily (Young, 2013). Japan is more inclined towards statutory
control according to Gray (1988) classification of accounting values. This is due to cultures
background in Confucianism, the Japanese perceive life as the ruler and the ruled. Hence,
one of the cultural characteristic is that Japanese views the government as the highest authority,
even over professional standard boards (Young, 2013). According to Young (2013), the

government remains the greater influence on accounting laws and standards, despite of the
existence of independent accounting professional boards.Even though the Japanese Institute of
Certified Public Accountants (JICPA) states that it is independent body but in daily practice, the
government appears to be the controlling JICPAs actions (Young, 2013). Based on the example
given by Young (2013), it is the government that authorizes, denies and revokes C.P.A. licenses
and not JICPA.
Uniformity versus Flexibility
Based on Radebaugh et al. (2006, p. 45), this value reflects a preference for the enforcement of
uniform accounting practices between companies and for the consistent use of such practices
over time, as opposed to flexibility in accordance with the perceived circumstances of individual
companies.
In accounting perspective, this value dimension is significant because of attitudes about
uniformity, consistency, or comparability is fundamental features of accounting principles
worldwide (Radebaugh et al., 2006). According to them, collectivistic and strong uncertainty
avoidant society also has a preference for uniformity. As a result, there is a concern for law and
order and rigid codes of behaviour, need for written rules and regulations, respect for conformity,
and search for ultimate, absolute truths and values (Radebaugh et al., 2006). Furthermore, there
also seems to be a connection between uniformity and power distance as uniformity is more
easily facilitated in a large power distance society in that the imposition of laws and codes
endorsing uniformity are probable to be accepted (Radebaugh et al., 2006). Based on the result of
Hofstedes Dimension on Culture, Japan is collectivistic society with strong uncertainty avoidant

and high power distant. Hence, Japan is more inclined towards uniformity as proven in Gray
(1988) classification of accounting values.
Conservatism versus Optimism
As mentioned by Radebaugh et al. (2006, p.45), this value reflects a preference for a cautious
approach to measurement that enables one to cope with the uncertainty of future events as
opposed to a more optimistic, laissez-faire, risk-taking approach.
In accounting perspective, this value dimension is significant because conservatism is one of the
most pervasive principles of accounting valuation (Radebaugh et al., 2006). Conservatism or
prudence in asset measurement and the reporting of profits is perceived as a fundamental attitude
of accountant worldwide (Radebaugh et al., 2006). Japanese accountant has a strong
conservative approach. According to Gray (1988) classification of accounting values, Japan is
more inclined towards conservatism. Strong uncertainty avoidant society has a preference for
more conservative measures of profits and assets because society in this culture concern for
security and the need to adopt a cautious methodology to deal with the uncertainty of future
events (Young, 2013). Besides that, long- term orientation society where conserving resources
and investing for long-term results is more of an optimistic approach while an expectation for
quick results in short-term orientation is a less conservative approach (Young, 2013).
Secrecy versus Transparency
Based on Radebaugh et al. (2006, p. 45), this value reflects a preference for confidentiality and
the disclosure of information about the business only to those who are most closely involved with
its management and financing as opposed to a more transparent, open, and publicly accountable
approach.

In accounting perspective, this value dimension is significant because of the influence of

management on the quality and quantity of information disclosed to outsiders (Radebaugh et al.,
2006). As mentioned in Young (2013), secrecy, or confidentiality, in business affairs is
nonetheless a fundamental accounting attitude. According to Young (2013), secrecy also seems
to be closely associated to conservatism. Secrecy relates to the disclosure dimension and
conservatism relates to the measurement dimension; however both values imply a prudent
approach to corporate financial reporting (Young, 2013).
Strong uncertainty avoidant society has a tendency for secrecy which is mainly due to the need to
restrict the disclosure of information to outsiders to avoid conflict and competition and to uphold
security (Radebaugh et al., 2006). Besides that, a high power distance societies are expected to
be characterized by the restriction of information to preserve power inequalities (Young, 2013).
On the other hand, a long-term orientation also has a preference for secrecy that is consistent
with the need to safeguard resources within the firm and to make sure that funds are available for
investment relative to the demands of stakeholders for higher payments (Young, 2013). However,
transparent cultures more incline to feministic as they are more caring and put more importance
on being open with people (Young, 2013). This dimension is a difficult dichotomy in accounting
as a company wants to preserve their security from the competitors and yet there is a need to
remain transparent and accountable to the public (Radebaugh et al., 2006). Based on the result of
Hofstedes Dimension on Culture, Japan has strong uncertainty avoidant, high power distant and
incline towards long-term orientation. Hence, Japan is more inclined towards secrecy as proven
in Gray (1988) classification of accounting values.
References

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Gray, S. (1988). Towards a theory of cultural influence on the development of accounting
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Radebaugh, L. H., Gray. S. J., & Black, E. L. (2006). International Accounting and Multinational
Enterprises, 6th Edition. USA: John Wiley and Sons, Inc.
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