The theoretical framework of this p

The theoretical framework of this paper builds on the institutional perspective. The institutional perspective literature outlined three areas of institutional economic namely: old institutional economic, new institutional economic and the socialist institutional economic. Ahmed and Scapens (2000) distinguish three broad forms of institutionalism which have impacted, to different degrees, on accounting research: new institutional economic (NIE), new institutional sociology (NIS), and old institutional economics (OIE). OIE approach provides a useful basis for under-standing the institutionalized character of organizational routines and ruled-based behavior (Hodgson, 1988; Scapens, 1994). The OIE framework emphasizes the interplay between institutions and actions in economy and society and brings into focus both the enabling and constraining qualities of institutional (Nelson and Winter, 1982; Hodgson, 1988). In this case, whilst, existing routines and institutions may constrain individual action, by establishing more or less fixed patterns of human actions. They provide information, which enables actors in a highly complex world (Scapens, 1994). Burns and Scapens (2000) differentiate between rules and routine. The rules are formalized statement of pro-cedures and normally changed only at discrete intervals, where as routines are the procedures actually in use and have the potential to be a cumulative process of change as they continue to be reproduced. Internal control policies and procedures constitute organizational rules and routines, which represent the structuring properties of institutions and the day to day actions and thoughts of organizational members. In order to understand the practices of accounting control policies and procedures, the institutional character is used to explain these practices. Although such an approach may be able to explain certain practices, it may not assist our understanding of how these practices come to be used in organizations, or the nature of resistance to their use. However, the extent to which specific routines are modified may depend on other rules and routines, including control procedures. In this study, the rules are defined as the formal accounting control policies and procedures, as they are set out in the manual procedures. Whiles routines are the management practices actually in use. It is assumed that management practices in use may not actually replicate the system set out in the policies and procedures manual as demonstrated by Roberts and Scapens (1985). The new institutional sociology (NIS) approach explo-res the process through which organizations and social agencies initiate and design structures, political and procedures in order to demonstrate conformity with institutionalized rules, value and expectations (DiMaggio, 1988; Scott, 1995; Ahmed and Scapens, 2000). NIS approach has been used to explain: (1) The role of these broader institutions in shaping organizational accounting practices (Mezias, 1990; Covaleski et al. (1993), (2) the success and survival of the firms (Ahmed and Scapens, 2000). While NIS approach explains how the institu-tionalized rules and values and expectations influence the firm and the design of its accounting system, it does not explore how the latter shape the institutionalized rules and values and expectations (Ahmed and Scapens, 2000). The new institutional economics (NIE) approach focus on the analysis of market and individual rationality, and based on Williamson transaction cost approach and the two core assumptions of neoclassical economics: the rational maximizing economic agent and the general equilibrium of market forces (Scapens, 1994). While the NIE approach seeks to broaden the domain of economic analysis by examining the transactions and governance structures internal to the firm, it is used to explain the choice and use of management accounting control systems (Scapens and Arnold, 1986; Scapens, 1994; Spicer and Ballow, 1993; Colbert and Spicer, 1995). However, NIE approach is criticized by not recognizing the impact of the broader economic, political, and social institutions, which can be important in understanding the development of accounting practices. The complex set of relationships between economic, political and social institutions is grounded in the specific context and history of the company, and this lead to limit the use of NIE model to focus on the study of accounting history and management choices within the framework of neoclassical economics approach (Ahmed and Scapens, 2000). Thus the NIS approach demonstrates the impact of external forces on the organizational norms and practices, and control and structure. Due to the complex set of the relationship between accounting, routines and institutions, the focal point of this study is limited to OIE and NIS approaches. The NIS approach considers the external macro-focus while the OIE focus on intra-organizational behaviors. This study focuses on both approaches in order to understand: (1) the conformity with institutionalized rules and values and expectations (NIS); and the institutionalized character of organizational routines and ruled-based behavior (OIE). Subsequently, the study presents (1) the research Al-Hazmi 287 method and data collection, (2) a description of the control environment, the accounting information system, and the control policies and procedures operating of both revenue and expenditure cycles, and (3) findings, limitations and conclusions.