Business Law, Public Responsibility, and Ethics Commons^™

How Corporate Culture Impacts Unethical Distortion Of Financial Numbers, Joseph F. Castellano, Kenneth Y. Rosenzweig, Harper A. Roehm

Accounting Faculty Publications

The recent accounting scandals have highlighted the critical role that investor confidence in the accuracy and lack of distortion of accounting data plays in the health of capital markets and, indeed, the whole economy. The legal and moral culpability of top-level company managers (as well as auditors) is an issue that will be addressed by the nation in the coming months. Whether or not legal sanctions are imposed on managers, it would be well to examine some of the reasons managers may feel compelled to distort accounting numbers as well as engage in other actions that damage the interests of …

Procurement Fraud & Data Analytics, Sridhar Ramamoorti, Scott Curtis

Accounting Faculty Publications

The purpose of this article is to bolster the government auditor's ability to detect procurement fraud through the use of information technology (IT) tools in performing more sophisticated data analytics and effective audit testing. The article primarily focuses on fraud detection. The government auditor should customize the application of general fraud detection principles to specific facts and circumstances and use sound professional judgment. Procurement fraud detection tests may help identify fraudulent activity and also inefficiencies, waste and abuse.

Why Toyota And Honda Topped The 2002 J.D. Power Quality Study, Susan Lightle, Kenneth Yale Rosenzweig, John Talbott

Accounting Faculty Publications

Toyota again topped the annual J. D. Power and Associates quality study released in late May of 2002. Toyota scored the highest mark ever with l 07 defects per l 00 vehicles, while Honda came in second with 113 defects. The study was based on responses of approximately 65,000 new car owners queried during their first 90-days of ownership.

These results do not surprise us, as we have been fortunate to make numerous sojourns to the Toyota plant in Georgetown, Kentucky, and observe the manufacturing processes. These trips were normally facilitated by a former Japanese student of ours, Minako Yanke, …

Research Opportunities In Internal Auditing, Sridhar Ramamoorti

Accounting Faculty Publications

Focuses on the book Research Opportunities in Internal Auditing, edited by Andrew D. Bailey Jr., Audrey A. Gramling and Sridhar Ramamoorti. History, evolution and prospects of internal auditing; Internal audit function; Auditing risk assessment and risk management processes.

Audit Committee Effectiveness: A Synthesis Of The Empirical Audit Committee Literature, F. Todd Dezoort, Dana R. Hermanson, Deborah S. Archambeault, Scott A. Reed

Accounting Faculty Publications

The empirical audit committee literature is both diverse and expansive, with rapid growth in recent years based on increased concerns about corporate governance and the quality of financial reporting. Our objective in this paper is to synthesize empirical literature on audit committee effectiveness to guide future thinking and research on audit committees. To organize our review, we focus on four components that we believe contribute to audit committee effectiveness (ACE) - audit committee composition, authority, resources, and diligence.

Qualitative Materiality In Government Audit Planning, Sridhar Ramamoorti, Andrea Lee Hoey

Accounting Faculty Publications

The political sensitivity of the area under audit to adverse media exposure and litigation concerns the nature rather than the size of an amount, such as illegal acts, bribery and corruption, related party transactions, snowballing patterns of error and other risks that grow over time. Qualitative materiality considerations should not be ignored-they can and frequently do influence the nature and scope of governmental audits. Financial Accounting Standards Board Concepts Statement No. 2 defines materiality as the magnitude of an omission or misstatement that would influence the decisions of a user of financial statements. Audit planning needs to incorporate considerations of …

Decision Framing And Efficiency/Effectiveness Trade-Offs In Auditors' Planning Materiality Judgments, Sridhar Ramamoorti

Accounting Faculty Publications

The exercise of judgment is not only essential to the practice of disciplines such as law, medicine and accounting, but is also what distinguishes these domains as professions (Boritz, Gaber & Lemon, 1987, cited in Gibbins & Mason, 1988). Recent advances in cognitive psychology research have given an impetus to research focusing on the nature of professional judgment, expert-novice cognition, heuristics and biases in decision making as well as decision strategies, the acquisition of knowledge and the effects of experience, and the development of expert/decision support systems (Ashton, 1982a; Smith & Kida, 1991; Chi, Glaser & Farr, 1988). The central …

Earnings Manipulation: A Report By Robert Lavine On The Business Ethics Research Of Kenneth Rosenzweig And Marilyn Fischer, Kenneth Yale Rosenzweig, Marilyn Fischer

Accounting Faculty Publications

This column by Robert LaVine in the Chartered Accountants Journal of New Zealand reports on the research of University of Dayton professors Kenneth Rosenzweig and Marilyn Fischer, "Is Managing Earnings Ethically Acceptable? Surveys Show Age and Seniority Affect Attitudes on Earnings Management," >>> published in the journal Management Accounting.

Report Earnings Accurately, Kenneth Yale Rosenzweig, Marilyn Fischer

Accounting Faculty Publications

As authors of the March article, “Is Managing Earnings Ethically Acceptable?,” we wish to thank Alfred M. King for his letter in the April issue questioning some of the contentions in our article. In a time when corruption seems to be rampant in many aspects of our national life, it is important for accountants to discuss openly what are their ethical responsibilities, and what are the limits to those responsibilities. The credibility of accounting numbers is vital to our success as a profession and as individual accountants. There will be no demand for accounting service if accounting information is not …

Is Managing Earnings Ethically Acceptable? Surveys Show Age And Seniority Affect Attitudes On Earnings Management, Kenneth Yale Rosenzweig, Marilyn Fischer

Accounting Faculty Publications

Is managing earnings through accounting methods ethically acceptable? That's the question we recently asked a sample group of management accountants. The response to the survey was enlightening. Our survey was designed as a follow-up and extension of the research done by Bruns and Merchant and published in Management Accounting in August 1990. They found that managers disagreed considerably on whether earnings management is ethically acceptable. They also found that in general the respondents thought manipulating earnings via operating decisions was more ethically acceptable than manipulation by accounting methods. Bruns and Merchant were disturbed by these findings. They were concerned that …

Managing The Cost Of Federally Sponsored Research At Educational Institutions, Mary J. Brown, Kenneth Yale Rosenzweig

Accounting Faculty Publications

In an era of weak economic ·growth, budget deficits and government spending reductions, limited government resources must be utilized in a manner that maximizes the public welfare. One major use of such resources in recent years has been to fund research and other activities at universities. To shed light on this important area, this article examines current practice in government contracting with educational institutions, reviews recent governmental efforts to control contract costs and investigates ramifications for the affected educational institutions.

The Pricing Decision: Balancing The Cost-Based And Market-Based Approaches In Different Industries, Shawn M. Kain, Kenneth Yale Rosenzweig

Accounting Faculty Publications

The objectives of this paper are to discuss cost estimating and pricing issues in four different industries, to analyze methods and strategies that are used in the costing and pricing of products in those industries, and to make general comparisons about costing and pricing techniques.

Accurate projection of costs is essential to the survival of any firm because cost estimates often determine whether a project will be authorized to begin or continue, the amount of resources that will be allocated to a particular product or product line, the prices of products, and the firm's and product line's profitability. Many management …

Education, Certification, And The Earnings Of Industrial Accountants, Kenneth Yale Rosenzweig, Lawrence Hadley

Accounting Faculty Publications

Utilizing a model of the relationship between skill accumulation and earnings known as human capital theory, we analyzed the incremental earnings associated with various educational and professional credential for a sample of members of the National Association of Accountants (NAA). Data were collected by means of a questionnaire survey of NAA members and were analyzed utilizing a multiple regression technique. Earnings is regressed on various education and certification variables. Employment characteristics and personal characteristics of the respondents are included as control variables.

Our analysis documents positive earnings increments for the bachelor’s and MBA degrees and the CPA certificate. For the …

Company Resistance To Complex Fasb Statements: The Case Of Sfas 33, Kenneth Yale Rosenzweig

Accounting Faculty Publications

Over the past fifteen years, the Financial Accounting Standards Board (FASB) has issued numerous pronouncements designed to narrow the differences in accounting practice and thereby increase the usefulness of financial statements by making them more comparable among different enterprises. Though questions have often been raised over the years about the complex and prescriptive nature of these pronouncements, Statement of Financial Accounting Standards No. 33, “Financial Reporting and Changing Prices” (SFAS 33), has perhaps been the most controversial. The above statement required subject companies to generate and publish information that was radically different from that produced in accordance with conventional financial …

User-Friendly Financial Statements: A Proposed Model, Kenneth Yale Rosenzweig, Andrew A. Fioriti

Accounting Faculty Publications

In contrast to early bookkeeping systems whose only role was to assist the resident owners, financial reporting today serves to protect various nonresident parties with interests in the enterprise, such as absentee shareholders. It provides them with information useful for monitoring the operations of the enterprise and for making decisions concerning it.

The Financial Accounting Standards Board (FASB) formalized this concept of usefulness when it stated:

• Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. The information should be comprehensible to those who …

Companies Are Not Using Fas 33 Data, Kenneth Yale Rosenzweig

Accounting Faculty Publications

How is price-adjusted information required by FAS 33, “Financial Reporting and Changing Prices,” being used for management decision-making purposes? I mailed a questionnaire survey to the controllers of all companies in the FASB's Statement 33 bank to find out the answers and to examine the company characteristics associated with such use. The questionnaire was designed to find out the extent of use and reporting of FAS 33 information for internal company purposes such as management decision making and the factors that might be associated with that use and reporting.

The controllers were asked about the extent of internal use and …

Some Simpler Methods Of Accounting For The Effects Of Changing Prices, Surendra P. Agrawal, Kenneth Yale Rosenzweig

Accounting Faculty Publications

The complexities of accounting for the effects of changing prices on financial statements could be lessened with the use of simpler accounting methods. Because of existing complexities, even industrialized countries require only their larger business entities to provide inflation-adjusted information. Such information is prepared by making numerous adjustments to the traditional, historical cost-based data. For example, in the United Kingdom, inflation-adjusted income is calculated in two stages: operating profit and profit attributable to shareholders. These calculations are based on the concept of value to the business and require complicated adjustments with respect to cost of goods sold, depreciation, monetary working …