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Articles 1 - 16 of 16
Full-Text Articles in Business
Evidence On Risk Changes Around Audit Qualification And Qualification Withdrawal Announcements, Neil Fargher, Michael Wilkins
Evidence On Risk Changes Around Audit Qualification And Qualification Withdrawal Announcements, Neil Fargher, Michael Wilkins
Michael S Wilkins
Qualifications to an audit report may provide the basis for an auditor's claim that the user was warned about an unusual risk. If audit qualifications highlight changes in firm risk that are material, then the announcement of a qualification should be associated with an increase in the risk of the affected firm. In this paper, we test this proposition. Our initial tests do not detect a shift in systematic risk around qualification announcements; however, subsequent analysis shows that firms announcing recurring material uncertainties have higher levels of systematic risk than firms announcing initial qualifications. Furthermore, we document a significant decrease …
Competition For Andersen's Clients, Mark Kohlbeck, Brain Mayhew, Pamela Murphy, Michael Wilkins
Competition For Andersen's Clients, Mark Kohlbeck, Brain Mayhew, Pamela Murphy, Michael Wilkins
Michael S Wilkins
We examine competition for Andersen’s public clients during and after its failure in 2002. This setting provides a natural experiment to examine audit market dynamics at the local level. We construct a database documenting Big4 purchases of local Andersen offices. After exploring the factors associated with office purchases, we examine the impact of office purchases on public client market share gains and changes in audit fees. We find that three Big4 firms – Deloitte, Ernst & Young, and KPMG – purchased approximately 60% of Andersen’s offices while PricewaterhouseCoopers did not purchase any. The probability that a firm purchased a specific …
Timely Industry Information As An Assurance Service: Evidence On The Information Content Of The Book-To-Bill Ratio, Neil Fargher, Larry Gorman, Michael Wilkins
Timely Industry Information As An Assurance Service: Evidence On The Information Content Of The Book-To-Bill Ratio, Neil Fargher, Larry Gorman, Michael Wilkins
Michael S Wilkins
Assurance services include independent professional services that improve the quality of information. Once such service is the collection of confidential information from participating firms on behalf of an industry association and the release of summarized information to investors. An example of this type of service is the collection of industry-wide information for the Semiconductor Industry Association. The primary output from this process is the monthly release of a ratio of new orders received to chips shipped, known as the book-to-bill ratio. We evaluate the association between book-to-bill disclosures and common stock prices. Statements in the financial press suggest that the …
Initial Technical Violations Of Debt Covenants And Changes In Firm Risk, Neil Fargher, Michael Wilkins, Lori Holder-Webb
Initial Technical Violations Of Debt Covenants And Changes In Firm Risk, Neil Fargher, Michael Wilkins, Lori Holder-Webb
Michael S Wilkins
The purpose of this paper is to investigate whether initial technical debt covenant violations are associated with significant increases in the equity risk of violating firms. Our results indicate that first-time violations are associated with significant increases in both systematic and unsystematic risk. The increase in systematic risk is attributable primarily to rising levels of financial leverage as opposed to changes in the underlying asset beta. We also find that the change in unsystematic risk experienced by first-time debt covenant violators is a significant predictor of future exchange delisting, even after controlling for other factors typically associated with increasing financial …
An Investigation Of Recent Changes In Going Concern Reporting Decisions Among Big N And Non-Big N Auditors, Linda Myers, Jaime Schmidt, Michael Wilkins
An Investigation Of Recent Changes In Going Concern Reporting Decisions Among Big N And Non-Big N Auditors, Linda Myers, Jaime Schmidt, Michael Wilkins
Michael S Wilkins
Corporate accounting failures and regulatory proceedings that led to the enactment of the Sarbanes-Oxley Act of 2002 (SOX) increased the scrutiny of auditors. We investigate whether these events resulted in a change in auditor behavior with respect to going concern reporting. Generally speaking, we find that non-Big N auditors became more conservative while Big N auditors became more accurate. Specifically, non-Big N auditors issued more going concern opinions to both failing and non-failing clients post-2001, reducing their Type II misclassifications at the expense of increased Type I misclassifications. However, Big N auditors decreased their Type I misclassifications with no corresponding …
The Impact On Ipo Assurance Fees Of Commercial Bank Entry Into The Equity Underwriting Market, Neil Fargher, L. Fields, Michael Wilkins
The Impact On Ipo Assurance Fees Of Commercial Bank Entry Into The Equity Underwriting Market, Neil Fargher, L. Fields, Michael Wilkins
Michael S Wilkins
Changes in the provisions of the United States Banking Act of 1933 have allowed the entry of commercial banks into the initial public offering (IPO) underwriting market. In this paper, we examine the effect of commercial bank equity underwriting on the fees paid to auditors. We predict that IPO assurance fees will be higher for equity offerings underwritten by commercial banks than for offerings handled by traditional underwriters because (1) commercial banks are relatively inexperienced in bringing firms public, requiring additional assistance from accounting firms in the IPO process; (2) new entrants into the underwriting market may manage lower quality …
The Importance Of Call Delays And Cash Flow Positions In Evaluating The Information Content Of Convertible Preferred Stock Calls, L. Fields, Michael Wilkins, Eric Mais
The Importance Of Call Delays And Cash Flow Positions In Evaluating The Information Content Of Convertible Preferred Stock Calls, L. Fields, Michael Wilkins, Eric Mais
Michael S Wilkins
We examine a sample of in-the-money convertible preferred stock calls and find that they are delayed. We find that the length of the call delay does not depend on the relation between the preferred stock dividends and the pro rata common dividends to be paid on conversion. Thus, our evidence suggests that preferred stock calls may be used for signaling purposes. In support of this, we find that only delayed calls (i.e., those with potential signaling elements) are viewed negatively by equity investors. We also show that, in responding to delayed call announcements, investors appear to react to two distinct …
Technical Default, Auditors' Decisions And Future Financial Distress, Michael Wilkins
Technical Default, Auditors' Decisions And Future Financial Distress, Michael Wilkins
Michael S Wilkins
A study was conducted to examine auditors' responses to first-time debt covenant violations and to assess whether these responses can be employed to forecast financial distress. Data were drawn from a sample of 159 companies traded on the NYSE/AMEX or NASDAQ that had initial default dates ranging from 1978 to 1988. The findings reveal that auditors are more likely to need debt reclassification when the violations are not waived by lenders. However, the waiver decision does not seem to significantly affect the auditor's qualification decision. For companies experiencing technical default, the audit option is an important determinant of future financial …
Evidence On The Audit Risk Model: Do Auditors Increase Audit Fees In The Presence Of Internal Control Deficiencies?, Chris Hogan, Michael Wilkins
Evidence On The Audit Risk Model: Do Auditors Increase Audit Fees In The Presence Of Internal Control Deficiencies?, Chris Hogan, Michael Wilkins
Michael S Wilkins
The article discusses the study of determining whether audit risk model is descriptive of what occurs in the auditing practice or if the relationship between fees and internal control deficiencies (ICDs) suggest that audit enterprises exert more effort in auditing firms that impart ICDs. The study examines the internal controls over financial reporting (ICOFR), generally accepted accounting principles (GAAP), audit risk model, audit fees and sections of Sarbanes-Oxley Act. The study found out that audit fees are significantly higher for firms disclosing material weakness.
Auditor Perceptions Of Audit Workloads, Audit Quality, And The Auditing Profession, Julie Persellin, Jaime Schmidt, Michael Wilkins
Auditor Perceptions Of Audit Workloads, Audit Quality, And The Auditing Profession, Julie Persellin, Jaime Schmidt, Michael Wilkins
Michael S Wilkins
In this study, we use a survey instrument to obtain perspectives from over 700 auditors about present-day audit workloads, the relationship between audit workloads and audit quality, and auditing as a career. Our findings indicate that auditors are working, on average, five hours per week above the threshold at which they believe audit quality begins to deteriorate and often 20 hours above this threshold at the peak of busy season. We find that auditors perceive workload fatigue as having the largest negative impact on morale, and understaffing and staff turnover as being two of the biggest impediments to delivering a …
Internal Control Disclosures, Monitoring, And The Cost Of Debt, Dan Dhaliwal, Chris Hogan, Robert Trezevant, Michael Wilkins
Internal Control Disclosures, Monitoring, And The Cost Of Debt, Dan Dhaliwal, Chris Hogan, Robert Trezevant, Michael Wilkins
Michael S Wilkins
We test the relationship between the change in a firm's cost of debt and the disclosure of a material weakness in an initial Section 404 report. We find that, on average, a firm's credit spread on its publicly traded debt marginally increases if it discloses a material weakness. We also examine the impact of monitoring by credit rating agencies and/or banks on this result and find that the result is more pronounced for firms that are not monitored. Additional analysis indicates that the effect of bank monitoring appears to be the primary driver of these monitoring results. This finding is …
Bringing Darkness To Light: The Influence Of Auditor Quality And Audit Committee Expertise On The Timeliness Of Financial Statement Restatement Disclosures, Jaime Schmidt, Michael Wilkins
Bringing Darkness To Light: The Influence Of Auditor Quality And Audit Committee Expertise On The Timeliness Of Financial Statement Restatement Disclosures, Jaime Schmidt, Michael Wilkins
Michael S Wilkins
This study investigates whether auditor quality and audit committee expertise are associated with improved financial reporting timeliness as measured by the duration of a financial statement restatement’s ‘‘dark period.’’ The restatement dark period represents the length of time between a company’s discovery that it will need to restate financial data and the subsequent disclosure of the restatement’s effect on earnings. For a sample of dark restatements disclosed between 2004 and 2009, we find that companies that engage Big 4 auditors have shorter dark periods than companies that do not engage Big 4 auditors. We also find that companies with more …
An Investigation Of The Pricing Of Audit Services For Financial Institutions, L. Fields, Donald Fraser, Michael Wilkins
An Investigation Of The Pricing Of Audit Services For Financial Institutions, L. Fields, Donald Fraser, Michael Wilkins
Michael S Wilkins
In this paper we investigate audit pricing for financial institutions. We modify the standard audit fee model for industrial companies by incorporating measures of risk and complexity that are either unique to or more relevant for banks, and that are used by bank regulatory agencies. For a sample of 277 financial institutions in fiscal 2000, we find that audit fees are higher for banks having more transactions accounts, fewer securities as a percentage of total assets, lower levels of efficiency, and higher degrees of credit risk. Higher fees also obtain for savings institutions, for banks that are more involved in …
An Empirical Investigation Of Stock Dividends-In-Kind, L. Fields, Michael Wilkins
An Empirical Investigation Of Stock Dividends-In-Kind, L. Fields, Michael Wilkins
Michael S Wilkins
We investigate share price reactions to announcements of dividends payable in the common stock of corporations different from the issuing firm. We find that firms that declare these dividends (typically investment companies) experience positive abnormal returns upon announcement. We also find that such dividends are more likely to be declared when the shares to be distributed have peaked in value. Consistent with this finding, we document negative announcement-period abnormal returns for firms having their shares distributed. Additional tests reveal that prices respond more negatively when the information signal is strongest, when outside ownership is more dispersed, and when management is …
Does A Lack Of Choice Lead To Lower Quality?: Evidence From Auditor Competition And Client Restatements, Nathan Newton, Dechun Wang, Michael Wilkins
Does A Lack Of Choice Lead To Lower Quality?: Evidence From Auditor Competition And Client Restatements, Nathan Newton, Dechun Wang, Michael Wilkins
Michael S Wilkins
We examine the relationship between auditor competition and the likelihood of financial restatements that occur as a result of failures in the application of GAAP. Policy makers and audit market participants have expressed concern that the current level of auditor competition is low, resulting in a negative impact on audit quality. However, we find that restatements are more likely to occur in metropolitan statistical areas (MSAs) that have higher auditor competition. The association between audit market competition and restatements is statistically and economically significant. Our finding that audit quality is higher when auditor competition is lower suggests that at least …
The Incremental Information Content Of Sas No. 59 Going-Concern Opinions, Lori Holder-Webb, Michael Wilkins
The Incremental Information Content Of Sas No. 59 Going-Concern Opinions, Lori Holder-Webb, Michael Wilkins
Michael S Wilkins
The purpose of this paper is to evaluate whether the expanded requirements of SAS No. 59 (A/CPA [1988]), which requires auditors to actively evaluate and report on a client's going-concern status for the coming year, have allowed investors to make more accurate ex ante assessments of firms that eventually file for bankruptcy. We extend Chen and Church [1996] (hereafter CC), who conclude that SAS No. 34 (AICPA [1981]) "subject to" going-concern opinions have information value because they reduce the surprise associated with bankruptcy announcements. We hypothesize that if SAS No. 59 has achieved what was intended, going-concern opinions issued under …