Business Commons^™

Financial Risk Management: Lessons From The Current Crisis ... So Far, Knowledge@Smu

Knowledge@SMU

The current economic recovery looks long and difficult, and makes providing for an ageing population an even greater challenge. Will economies rebound to provide for the health care needs of retirees? At a conference organised in November 2008 by the Sim Kee Boon Institute’s newly launched Center for Silver Security at the Singapore Management University, Todd Groome of the International Monetary Fund spoke on how the ongoing financial crisis could shape retirement risk.

Does Convergence Of Accounting Standards Lead To The Convergence Of Accounting Practices? A Study From China, Songlan Peng, Rasoul H. Tondkar, Joyce Van Der Van Der Laan Smith, David W. Harless

Accounting Faculty Publications

In this empirical study we examine whether China's efforts to converge domestic accounting standards with International Financial Reporting Standards (IFRS) over the past 15 years have resulted in the successful convergence of Chinese listed firms. This study is unique in that we evaluate convergence of firms' accounting practices from three perspectives: (1) the level of compliance with Chinese GAAP and IFRS, (2) the consistency of accounting choices under Chinese GAAP and IFRS, and (3) identification of significant differences in the net incomes produced under Chinese GAAP and IFRS (earnings gap).

Using the 1999 and 2002 annual reports of 79 Chinese …

The Timeliness Of Accounting Disclosures In International Security Markets, C. Mitchell Conover, Robert E. Miller, Andrew Szakmary

Finance Faculty Publications

In this study, we examine financial reporting lags, the incidence of late filing, and the relationship between reporting lags, firm performance and the degree of capital market scrutiny. We use a large sample of firms spanning 22 countries over an eleven-year period. A focal point of our analysis is whether the incidence of late filing, and the relations between reporting days and other variables, differ systematically between common and code law countries. Relative to U.S. firms, we report that the time taken and allowed for filing is usually longer in other countries and that the statutory requirement is more frequently …

Profitability Analysis Of Chinese Listed Firms: 1992-2004, Jianjun Niu, Heng Yue, Guohua Jiang

Research Collection School Of Accountancy

This research collects and analyses the profitability data of Chineselisted companies from 1992 to 2004. Results show that, on average, theprofitability of Chinese listed companies has declined over the period. Post-IPOearnings also exhibit a downward trend. A further analysis reveals that changes inlisted firms’ profitability ratio follow a strong mean reversion pattern.

Quality Control Defects Revealed In Smaller Firms' Pcaob Inspection Reports, Dana R. Hermanson, Richard W. Houston

Faculty and Research Publications

The article reports the study of Public Company Accounting Oversight Board (PCAOB) on the quality control (QC) defects of small audit firms. Topics including the accounting lapses of small auditing firms, tips on complying QC standards and importance of inspection on the auditing industry are discussed. Study reveals that smaller firms have deficient processes in conducting audit quality. The article notes that PCAOB is expected to increase campaign in assisting audit firms while small audit firms are encouraged to address their QC deficiencies.

Component Materiality For Group Audits, Steven M. Glover, Jonathan T. Liljegren, Douglas F. Prawitt, William F. Messier

Faculty Publications

Determining overall group materiality and materiality levels for individual components is becoming more of a hot-button issue as the number and complexity of large and international group audits increases. Auditing standards and other professional materials offer little practical guidance on the topic. Internal and peer reviews and regulatory inspections have revealed a variety of approaches in this area. In some instances, reviews have discovered potentially troubling practices. Our conversations with regulators and practitioners indicate an intense and growing interest in the development of conceptually sound guidance. This article outlines a practical approach that group engagement partners can consider in establishing …

The Viability Of The Fair Tax, Jonathan M. Clark

Senior Honors Theses

This thesis begins by investigating the current system of federal taxation in the United States and examining the flaws within the system. It will then deal with a proposal put forth to reform the current tax system, namely the Fair Tax. The Fair Tax will be examined in great depth and all aspects of it will be explained. The objective of this paper is to determine if the Fair Tax is a viable solution for fundamental tax reform in America. Both advantages and disadvantages of the Fair Tax will objectively be pointed out and an educated opinion will be given …

Thierry Apoteker On The Threat Of Global Stagflation, Knowledge@Smu

Knowledge@SMU

Managing director Thierry Apoteker and his team at French company T-A-C (Thierry Apoteker Consulting) have correctly predicted many of the economic shocks that the world has seen in the past three months. In a recent presentation hosted by the International Trading Institute, Singapore Management University, Apoteker made a convincing case for worldwide inflation and recession, known as stagflation.

The New Researcher, Graham Bowrey

Faculty of Commerce - Papers (Archive)

Purpose This poem is a reflection of the processes and associated emotions early career academic researchers may experience in preparing, presenting and publishing their research. Design/methodology/approach: Fictional poem Findings: This poem highlights that the processes an early career academic researcher undertakes to publish his/her research isn’t necessarily the hardest lesson to learn. Rather the hardest lesson is learning to cope with the mix of emotions they will experience during the process. Research Implications: Provides early career academic researchers, and their supervisors, a guide of what they can expect to experience during the first few years during their research. Originality/Value A …

Pcaob Inspection Process: An Objective, Comprehensive Assessment Is Justified, Bernard H. Newman, Mary Ellen Oliverio

Faculty Working Papers

The Public Company Accounting Oversight Board (PCAOB) is charged with performing inspections of registered accounting firms. (Sarbanes-Oxley Act of 2002, Section 104) Basically, inspections are to “assess the degree of compliance. . . with the Act, the rules of the Board, the rules of the Commission, or professional standards. The inspection process has many aspects. Matters that have been discussed include timeliness of reports, extent of public disclosure of findings, qualifications of inspections, and the nature of the inspection process. Only the last identified matter, the nature of the inspection process, is the subject of this paper. After a review …

Fair-Value Accounting Provides Much Needed Transparency In Dislocated Markets, Knowledge@Smu

Knowledge@SMU

In the current global financial turmoil, more transparency is needed, not less, say Singapore Management University professor of accounting Andrew Lee and accounting lecturer Lim Chu Yeong. While some critics argue that fair-value accounting is partly to blame and should be suspended, in a recent commentary Lee and Lim made the case for fair-value accounting as having an important role to play in providing timely and relevant information to investors.

Retail Investors And Structured Products: A Case Of 'Buyer Beware'!, Knowledge@Smu

Knowledge@SMU

Across the globe, buyers of structured products linked to Lehman Brothers have seen their investments wiped out. In Singapore, the MAS (Monetary Authority of Singapore) has appointed an independent committee to oversee the review and resolution of customer complaints. Tan Chong Hui, professor of quantitative finance at Singapore Management University, has this advice especially for retail investors of structured products: caveat emptor or ‘buyer beware’.

James, George D., 1871-1940 (Sc 1770), Manuscripts & Folklife Archives

MSS Finding Aids

Finding aid only for Manuscripts Small Collection 1770. Account book of George D. James's grocery store in Brownsville, Edmonson County, Kentucky, 1914-1929, and copy of first bill he received when he opened the store in 1913.

Money Largely Accounts For Increased Unemployment During Stagflation, Shows A Recent Study, Knowledge@Smu

Knowledge@SMU

Is there a relation between money, measured by inflation or interest rates, and unemployment? According to Aleksander Berensten, Guido Menzio and Randall Wright -- co-authors of a recent paper on “Inflation and Unemployment in the Long Run” -- there is a strong positive relation. Wright, who is professor of economics at Wharton, presented a seminar based on their paper at the Singapore Management University’s School of Economics.

Engineering Value Into Enterprise Risk Management; Six Sigma Techniques Can Improve The Quality Of Erm Processes And Enable Organizations To Manage Risks More Successfully, Sridhar Ramamoorti, Marcia Weidenmier Watson, Mark Zabel

Accounting Faculty Publications

Organizations should not only recognize and minimize traditional downside risks, but also embrace upside risks, or opportunities, as a strategy for success. According to a 2005 survey by management consulting firm Booz Allen, 87 percent of the market value lost by large companies with market capitalizations over US $1 billion was the result of strategic and operational blunders. Compliance failure, typically the focus of downside risk, destroyed only 13 percent of market value during the five-year study. Faced with this counter-intuitive finding, companies may wish to pursue a more balanced and positive approach to risk management. Enterprise risk management (ERM) …

Audit Profile: The Auditor-General's Office Of Singapore, Soo Ping Lim

Research Collection School Of Accountancy

No abstract provided.

Sox Section 404 Material Weaknesses Related To Revenue Recognition, Dana R. Hermanson, Daniel M. Ivan, Susan H. Iva

Faculty and Research Publications

The article analyzes disclosures of material weaknesses in internal control after the implementation of U.S. Sarbanes-Oxley Act of 2002 (SOX) 404 and summarizes the efforts of firms to remediate such material weaknesses. According to SOX section 404, management must issue a report on the effectiveness of the internal control of the firm over financial reporting. It notes that a report must be issued by the external auditor expressing an opinion on the effectiveness of internal control over financial reporting.

Making Sense Of Fair-Value Accounting, Chu Yeong Lim, Tong Kin Andrew Lee

Research Collection School Of Accountancy

No abstract provided.

Manning, Allen, 1864-1950 (Sc 1762), Manuscripts & Folklife Archives

MSS Finding Aids

Finding aid only for Manuscripts Small Collection 1762. Journal of farm work done by Allen Manning and his co-workers for Mrs. Underwood of Warren County, Kentucky. He makes note of the weather and its effect on the crops.

Preparing Accountants For Today’S Global Business Environment: The Role Of Emotional Intelligence In Accounting Education, G. E. Jones, A. Abraham

Faculty of Commerce - Papers (Archive)

The tasks and skills that are required of accounting practitioners in today’s global business environment have changed significantly since the early 1990s. Accounting practitioners are no longer merely required to undertake the tasks necessary for information provision, such as bookkeeping, data analysis and tax preparation. Instead, their roles are now extended to encompass information facilitation, thus repositioning them as knowledge professionals rather than accounting technicians. This includes a greater emphasis on the components of emotional intelligence. However, accounting students are generally not aware of this expanded role. Thus students who are attracted into accounting courses may not possess the appropriate …

Quantifying Audit Quality: A Proposal Inspired By Recent Initiatives, Mary Ellen Oliverio, Bernard H. Newman

Faculty Working Papers

Audit quality has gained intensive attention since the cascade of audit failures in the concluding years of the last century and the first few years of our new century. The Sarbanes-Oxley Act of 2002 [hereafter identified as the Act] introduced a new oversight strategy to enhance the quality of audits. To assure the performance of quality audits, the PCAOB was charged with responsibility for inspecting registered public accounting firms that perform financial audits for publicly-owned companies in the United States. To date, however, this process has not resulted in measurement of audit quality.

Since 2002, there have been two additional …

Deficiencies Noted In Pcaob Inspections: Implications For Auditing Instruction, Bernard H. Newman, Mary Ellen Oliverio

Faculty Working Papers

The Public Company Accounting Oversight Board (PCAOB) has responsibility for monitoring public accounting firms that provide audits for publicly owned companies. Among the duties assigned to the PCAOB was “conducting inspections of registered public accounting firms.” A strategy for such inspections was developed that includes reporting deficiencies judged to be significant for supporting conclusions made.

This paper presents a content analysis of deficiencies disclosed in the nine inspections (during three years) of three accounting firms, along with the largest four firms, that are inspected each year. Also discussed are the general implications for auditing teaching in colleges/universities and in continuing …

Digital Storytelling Engages Tech-Savvy Accounting Students, Knowledge@Smu

Knowledge@SMU

Singapore has ambitions to become a global hub for `digital economy’ services. In September 2008, Singapore’s National Library Board, National Book Development Council and The Arts House are hosting the inaugural Asian Digital Storytelling Congress, Beyond Words 2008. Themin Suwardy, accountancy professor and associate dean at Singapore Management University, is one of the key speakers at the congress. His topic: Academic Learning through Digital Storytelling.

Individual Taxation Report, Annette M. Nellen, E. Cook, D. Neuschwander, S. Q. Covington, J. Horn, M. Musacchio, J. Walloch

Faculty Publications

Recent developments affecting taxation of individuals, including legislation, regulations, and IRS guidance, are presented in Code section order.

Positive And Negative Information Transfers From Management Forecasts, Yongtae Kim, Michael Lacina, Myung Seok Park

Accounting

We examine positive and negative information transfers associated with management earnings and revenue forecasts. Positive information transfers are due to industry commonalities whereas negative information transfers are caused by competitive shifts. We argue that positive and negative intra-industry information transfers offset each other and lead to an overall finding of no information transfers even though they exist. We also conjecture that the type of information transfers from the same management forecast can be positive or negative based on the characteristics of the information receiver. We hypothesize positive information transfers to non-rival firms and negative information transfers to rivals. Consistent with …

Earnings Restatements, Changes In Ceo Compensation, And Firm Performance, Qiang Cheng, David Farber

Research Collection School Of Accountancy

Prior research finds that earnings restatements are linked to CEOs' excessive option-based compensation and equity holdings. In this paper, we investigate whether firms that experience earnings restatements recontract with their CEOs to reduce their option-based compensation and if so, whether this leads to improved firm performance. Based on 289 restatement firms over the period 1997–2001, we find that the proportion of CEOs' compensation in the form of options declines significantly in the two years following the restatement. Furthermore, we document that this reduction is accompanied by a decrease in the riskiness of investments, as reflected in lower stock return volatility …

Analyst Coverage And The Cost Of Raising Equity Capital: Evidence From Underpricing Of Seasoned Equity Offerings, Robert M. Bowen, Xia Chen, Qiang Cheng

Research Collection School Of Accountancy

Theorists have long recognized that information asymmetry among investors adversely affects the cost of raising equity capital (e.g., Diamond and Verrecchia 1991). When there is information asymmetry, relatively uninformed investors are reluctant to trade because of higher potential loss from transacting with informed investors (e.g., Glosten and Milgrom 1985; Kyle 1985). To trade, uninformed investors demand compensation for the risks of trading with informed investors (O’Hara 2003). In the case of issuing new equity, firms must issue shares at a discount to overcome the reluctance of uninformed investors. Such discounting leads to smaller proceeds to the firm and a higher …

The Asian Banker: From Trade Journal To Industry Benchmark Setter, Knowledge@Smu

Knowledge@SMU

Emmanuel Daniel is founding president and editor-in-chief of The Asian Banker, one of the region’s leading consultancies in financial services research, benchmarking and intelligence. A trade publisher should provide leadership and not be a follower of the industry that it covers, believes Daniel, who spoke recently at a Masters Seminar on benchmarking and measuring IT performance in banks organised by the School of Information Systems, Singapore Management University.

Does Earnings Quality Affect Information Asymmetry: Evidence From Trading Costs, Nilabhra Bhattacharya, Hemang Desai, Kumar Venkataraman

Research Collection School Of Accountancy

The adverse consequences of poor earnings quality have been the subject of significant debate among academics, practitioners and regulators. However, the empirical evidence on pricing implications of earnings quality is sparse and controversial. We examine one potential consequence of poor earnings quality - its impact on information asymmetry. We document that poor earnings quality increases the adverse selection risk as manifested in trading costs and lowers liquidity in financial markets. Both innate and discretionary components of earnings quality contribute significantly to information asymmetry. Further, poor earnings quality exacerbates information asymmetry around earnings announcements, especially for firms where earnings represent the …

The Effect Of The Form Of Tax Incentives On Individuals' Savings Decisions, Julia M. Camp, David S. Hulse, Cynthia Vines

School of Business Faculty Publications

Congress and the media have both expressed concerns about Americans’ low savings rates. We address these concerns by investigating the extent to which the form of an investment’s tax preference affects individuals’ willingness to choose a tax-preferred vehicle over a less restrictive, but non-tax-preferred, investment. Specifically, we tested the extent to which subjects chose a traditional savings plan versus an investment resembling either a traditional IRA, Roth IRA, or government matching program. We find that subjects are not as sensitive to the form of the tax preference as they are to restrictions on their ability to withdraw funds. This suggests …