Accounting Commons^™

Factors Affecting The Outcomes Of Legal Claims Against Auditors, Karen D. De Meyst, D. Jordan Lowe, Mark E. Peecher, Jeffrey Pickerd, Andrew Reffett

Faculty Publications

Maksymov, Pickerd, Lowe, Peecher, and Reffett (2020b) draw insights based on interviews with 27 prominent audit litigation attorneys about the factors affecting the initiation of legal claims against auditors and how such factors affect settlement outcomes. We summarize their key findings and discuss important implications for audit practitioners. Specifically, we focus on the key factors that affect plaintiff attorneys’ willingness to pursue legal claims against auditors, including the merits of the claim, size of alleged economic damages, auditors’ ability to pay, and the expected cost to pursue the claim. We also discuss the reasons why most audit disputes settle (as …

Not-For-Profit Entities Industry Developments - 2021; Audit Risk Alerts, American Institute Of Certified Public Accountants (Aicpa)

Industry Guides (AAGs), Risk Alerts, and Checklists

No abstract provided.

Aicpa Technical Questions And Answers, 2021, American Institute Of Certified Public Accountants (Aicpa)

Guides, Handbooks and Manuals

No abstract provided.

Codification Of Statements On Standards For Accounting And Review Services, Numbers 21-25, As Of January 2021, American Institute Of Certified Public Accountants (Aicpa)

AICPA Professional Standards

No abstract provided.

Codification Of Statements On Auditing Standard, Numbers 122 To 133 (Pre-Sas No. 134), As Of January 2021, Volume 2, American Institute Of Certified Public Accountants (Aicpa)

AICPA Professional Standards

No abstract provided.

Codification Of Statements On Auditing Standard, Numbers 122 To 143, As Of January 2021, Volume 1, American Institute Of Certified Public Accountants (Aicpa)

AICPA Professional Standards

No abstract provided.

Proposed Quality Management Standards, American Institute Of Certified Public Accountants. Auditing Standards Board

Exposure Drafts, Comment Letters, and Statements of Position

No abstract provided.

Perceive It Or Not: Information Quality And The Investors’ Response To Earning Surprises Of Technologically Advanced Companies, Aliza Rotenstein, David Gelb, Abraham Fried, Shoshana Altschuller

Journal of International Technology and Information Management

One of the primary measures of information systems (IS) success that has been the subject of much investigation in a variety of contexts is information quality (DeLone & McLean, 1992; 2003). This paper hones in on the impact of perceived information quality in the context of the financial markets, where quality of accounting information is particularly important, as it informs investment decisions and impacts stock prices. In particular, seminal accounting research has consistently found that earnings announcements possess informational value (information content) based upon which the market reacts (Beaver, 1968). Market reaction to surprises in earnings announcements has long been …

Mapping The Knowledge Of Islamic Accounting Studies On Shariah Audit: A Bibliometric Analysis, Luqman Hakim Handoko, Sepky Mardian

Library Philosophy and Practice (e-journal)

The issues of shariah audit appeared more than three decades ago along with the progress of the Islamic financial industries. But it is challenging to obtain a study explaining the current state of shariah audit research to date. Therefore, it is necessary to assess the research on the Shariah audit. Thus, this study aimed to analyze and visualize the current state of shariah audit using a bibliometric approach. The bibliometric analysis was conducted by using VOSviewer software. To fulfill this goal, the keywords such as shariah audit, shariah auditing, and its variations were searched from the Scopus database. The articles …

Accounting Quality And Debt Concentration, Ningzhong Li, Yun Lou, Clemens A. Otto, Regina Wittenberg-Moerman

Research Collection School Of Accountancy

We examine the relation between accounting quality and debt concentration in corporate capital structures (i.e., firms’ tendency to rely predominantly on only a few types of debt). Motivated by theoretical and empirical research that supports a strong link between debt concentration and creditors’ coordination costs and the importance of accounting quality in reducing these costs, we hypothesize that firms with higher accounting quality have less concentrated debt structures. Measuring accounting quality with a comprehensive index based on the occurrence of material internal control weaknesses, accounting restatements, SEC AAERs, and firms’ reliance on small auditors, we find that higher accounting quality …

How Do Accounting Practices Spread? An Examination Of Law Firm Networks And Stock Option Backdating, Patricia M. Dechow, Samuel T. Tan

Research Collection School Of Accountancy

We hypothesize that one way accounting practices spread is through law firm connections. We investigate this prediction by examining companies that avoided reporting compensation expense by engaging in stock option backdating. We hypothesize that executives engaged in backdating because they were desensitized to its inappropriateness when they learned through their legal counsel that other companies were engaging in this practice. We identify backdating companies through backdating-related restatements of earnings. Using network analysis, we find that backdating companies are highly connected with other backdating companies via shared law firms. Logistic regressions reveal that the odds of a company backdating are 53 …

Stock Market Volatility And Business Cycle: Exploring Cross-Country Spillovers, Nufazil Altaf

DLSU Business & Economics Review

This study explores the impact of the financial crisis on the relationship between stock market volatility and the business cycle. In addition, the possible spillover effects within a cross-country framework are also examined. The study is based on secondary macroeconomic data of monthly frequency for the time period of 1991:01 to 2012:12. Bivariate and multivariate causality techniques are used to arrive at results. Results of the study provide fresh evidence for the existence of strong bidirectional causality between stock market volatility and the business cycle for all sample countries. In fact, this bidirectional causality was found to be strong when …

The Prospect Of Indonesian Government Retail Sukuk: From The Perspective Of Sharia Financial Knowledge, Education, And Behavior, Fajri Adrianto

DLSU Business & Economics Review

As a source of government financing, the Indonesian government’s retail Sukuk is still not as popular as conventional government bonds. The Indonesian government has issued serial retail Sukuks with the code SR to get funds from retail investors, especially those concerned with Sharia values. Sharia financial literacy is expected to determine the success of this Sukuk. This study fills the gap of previous research on financial literacy by investigating the Sharia financial literacy in the investment decision. This study investigates the descriptive analysis of Sharia financial literacy in Indonesia and its relationship with the prospect of retail Sukuk issued by …

Reinforcing The Role Of Intellectual Property In The Battle Against The Pandemic: The Vowel Framework, Daniel S. Hofilena

DLSU Business & Economics Review

The intellectual property (IP) system plays a vital role in public health crises as everyone should have access to medicines and equipment to protect themselves. Thus, the State can utilize the system for the greater good. An IP-centric approach can be summarized using the simple letters of the vowels: Awareness – for the populace to respect IP rights, they must first be educated as to its value; Enforcement – for infringers to be discouraged, IP holders should have an avenue for the easy enforcement of their rights; Incentivize – for businesses to be encouraged to invest in certain forms of …

Gilti Regulations: The Intended Effects Compared To The Actual Results, Carson Lee Ehrenberg

Honors Program Theses

In this thesis, the proposed effects of GILTI have been analyzed and compared to the true effects of GILTI. Research has been done to see if GILTI is actually influencing firm’s choices on investment location, if companies are involving themselves in even more creative tax 2 planning, or if firms are simply absorbing the cost. This research will be important to show whether or not the current U.S. tax system is achieving its proposed goals. This research will also be useful for those that are looking to assess the success of Congress’ actions when it comes enacting new tax legislation. …

Fraud And Covid-19: An Unintended Downside Of Government Aid During The Pandemic, Derek Labarge

Honors Program Theses

Last year, COVID-19 brought an unprecedented global crisis to the world. As experts continue to analyze the virus itself, it is also necessary to study the aftermath of the pandemic. This includes any unforeseen consequences from the actions taken by people and governments trying to navigate their way through the chaos. This project aims to focus on one of these consequences: fraud. Past disasters and crises have unfortunately shown that these times of need for people are often when third parties, businesses, or even victims themselves take advantage of the situation for personal gain, often at the expense of those …

Consideration Of The Ethical Implications Of Artificial Intelligence In The Audit Profession, Marcy Kim Uglum

Honors Program Theses

Given its burgeoning development and powerful use of data interpretation and analyses, AI is important to the future of the auditing profession. These new and emerging tools are needed to increase the efficiency and effectiveness of tasks (Baldwin, Brown, & Trinkle, 2007). Firms that provide these auditing services are looking for ways to use AI to assess the risk of unstructured and semi-structured, repetitive, decisions. Although AI is currently playing a prominent role in various aspects of our modern society, the use of this technology is still in the earlier stages of development for the auditing profession. Therefore, this research …

Blockchain Technology: A Survey Of Croatian Business Leaders, Dražen Zec, William G. Heninger

Faculty Publications

Blockchain or distributed ledger technology emerged over ten years ago as the underlying technology of bitcoin. Blockchain is a special kind of database with individual records or blocks linked together in a sequential list called chain of blocks. These records are validated by multiple nodes in peer-to-peer networks and they are immutable. It is a decentralized system, with no need for intermediaries where all decisions are made using different consensus mechanisms. High expectations from blockchain technology, combined with a lack of deeper knowledge about the technology are expressed in the results from the survey conducted on a sample of Croatian …

Measuring Credit Risk Using Qualitative Disclosure*, John Donovan, Jared Jennings, Kevin Koharki, Joshua A. Lee

Faculty Publications

We use machine learning methods to create a comprehensive measure of credit risk based on qualitative information disclosed in conference calls and in management’s discussion and analysis section of the 10- K. In out-of-sample tests, we find that our measure improves our ability to predict future credit events (future bankruptcies, future interest spreads, and future credit rating downgrades) relative to existing credit risk measures developed by prior research (e.g., z-score). We also find our measure based on conference calls explains within-firm variation in future credit events; however, we find little evidence that the existing measures of credit risk developed by …

Beyond Borders: Uncertainty In Supragovernmental Tax Enforcement And Corporate Investment, Zackery D. Fox, Martin Jacob, Jaron H. Wilde, Ryan J. Wilson

Faculty Publications

Amid growing globalization, many countries have offered tax incentives to attract corporate investment. Prior research studies the role such incentives play in firms’ location and investment choices. However, we have limited evidence on the role that uncertainty about the intensity of future tax enforcement plays in those decisions. In 2013, the European Commission (“E.C.”) abruptly began investigating tax ruling practices of several countries in response to allegations that certain firms received preferential tax treatment (“state aid cases”). We use this setting to study the economic consequences of increased uncertainty about future tax enforcement. We find evidence consistent with significant reductions …

How Do Team Workloads And Team Staffing Affect The Audit? Archival Evidence From U.S. Audits, Brant E. Christensen, Nathan J. Newton, Michael S. Wilkins

Faculty Publications

We use U.S. data from a global accounting firm to investigate how two key elements of audit teams eworkloads and staffing continuity e affect the audit. We find that heavier team workloads are associated with lower audit quality, particularly when team members have lower performance ratings or have total workloads that exceed 60 h per week. In addition to finding evidence of employee burnout, we also document an incremental distraction effect. Specifically, we find that audit quality on the primary client suffers when team members spend more time during busy season on other concurrent clients. Regarding continuity, we find that …

Prepare For Takeoff: Improving Asset Measurement And Audit Quality With Drone-Enabled Inventory Audit Procedures, Margaret H. Christ, Scott A. Emett, Scott L. Summers, David A. Wood

Faculty Publications

Auditors increasingly employ technologies to improve audit quality. Using a design science approach, we examine whether using drones and automated counting software can improve audit quality and thereby improve financial reporting. We assess three dimensions of audit quality—efficiency, effectiveness, and quality of audit documentation. We provide evidence that auditors can perform inventory counts with these technologies much more efficiently than they can with manual techniques, decreasing count time in our study from 681 hours to 19 hours. At the same time, auditors can maintain or improve audit effectiveness with these technologies, decreasing error rates in our study from 0.15% to …

Analyst Non-Gaap Reporting: When Do Equity Analysts Adjust Gaap Earnings – An Application Of Text Based Firm Complexity, Patrick Chen

CMC Senior Theses

Equity analysts adjust GAAP earnings to report non-GAAP figures that they believe better represent a firm’s current and future performance. The importance of such non-GAAP(street) figures has been determined and accepted by the literature, but the process in which analysts arrive at such figures is less understood. I apply a newly defined measure of firm complexity using text based analysis of firm annual reports and investigate its effect. When complexity increases, it becomes harder to individuate different components of a system. When that system is a firm, complexity then increases the difficulty in determining an accurate measure of performance. The …

Anonymous Equity Research, Travis Dyer, Eunjee Kim

Faculty Publications

Crowdsourced financial information platforms often allow content contributors to publish equity research anonymously. This study examines whether investors value or discount information in anonymous equity research. In the short window around research releases, we find that investors’ stock price reaction to anonymous research is muted in comparison to nonanonymous research. Consistent with credibility concerns influencing investor response, we document that this discount to anonymous research dissipates as the monitoring of content contributors intensifies and as authors develop a reputation for high-quality reporting. In addition, we perform a content analysis on the research reports and find that the muted market reaction …

Intellectual Capital's Impact On Corporate Performance During The Age Of Digitalization And The Covid-19 Pandemic, Chance Sears

CMC Senior Theses

The purpose of this paper is to examine the relationship between intellectual capital and firms’ financial and market performance during the peak levels of digitalization, focusing on the COVID-19 Pandemic. Utilizing the recently validated Value Added Intellectual Coefficient (VAIC), alongside its necessary controls, I conduct an empirical analysis on North American firms over the period of 2010-2020 using fixed effects and pooled ordinary least squares analysis. Findings from the empirical analysis provide evidence that intellectual capital is a driving factor in enhancing firms’ financial and market performance. Additionally, results indicate that the COVID-19 pandemic increased the impact of intellectual capital …

Implications Of Fraud Detection Decisions, Marie Rice

Graduate Theses, Dissertations, and Problem Reports (ETD)

This dissertation is comprised of three studies that examine the implications of fraud detection decisions. The first study examines whether auditors’ mindfulness practices influence their ability to accurately detect fraud risk factors. The second study evaluates whether organization type influences whether and how perpetrators are punished. The third study evaluates whether management’s decision to increase controls when fraud occurs has unintended negative consequences for other employees. Together, these studies contribute to accounting literature related to fraud detection.

Exploring The Impact Of Incentives On Management Behavior, Chen Zhao

Graduate Theses, Dissertations, and Problem Reports (ETD)

This dissertation is comprised of three studies that examine the impact of incentives on management behavior to complement agency problems literature. The first paper studies whether incentives associated with firm life cycle stages impact management disclosure quality. The second paper explores these incentives more deeply and investigates whether the likelihood of fraud is different across life cycle stages. The third paper examines whether rating agencies play a role in alleviating agency problems in nonprofit organizations by increasing public exposure and reducing information asymmetry.

Study one examines the relationship between firms’ life cycle stages and disclosure quality. Life cycle stages are …

Reliance On Algorithmic Evidence: The Joint Influence Of Measurement Uncertainty And Algorithm Adaptability, Jenny Ulla

Theses and Dissertations--Accountancy

Artificial intelligence (AI) systems’ capability is rapidly expanding to perform complex tasks once reserved only for humans. With machine learning algorithms, AI can learn and adapt as it encounters more data, which has enabled these systems to improve the quality of accounting estimates that traditionally have been more difficult for humans. Although AI systems’ capability to adapt has potential benefits, these systems also have become increasingly complex, making it difficult for individuals to understand the processes or algorithms these systems use to produce advice. Practitioners worry that when algorithms behave like “black boxes” this opacity may lead to a lack …

Earnings Conference Calls And Lazy Prices, Chuancai Zhang

Theses and Dissertations--Accountancy

Changes to the language and construction of financial reports are indicative of firms’ future returns and operations. Investors, however, are often inattentive to these changes; consequently, price reactions to these changes are delayed—resulting in “lazy” prices. This study explores two possible channels through which earnings conference calls may mitigate lazy prices: (1) the topic overlap channel and (2) the comparison language channel. Specifically, I examine whether the topic overlap between conference call transcripts and 10K/10Q filings or the comparison language used on earnings conference call transcripts helps investors understand the nature of the overlapped topics and triggers investors’ attention to …

Critical Audit Matters Requirements And Auditor Reporting Behavior: Early U.S. Evidence, Valbona Sulcaj

Theses and Dissertations--Accountancy

In this study, I examine two research questions related to the reporting requirements of critical audit matters (CAMs) introduced in the Audit Standard (AS) 3101. First, I examine whether auditor’s perceived litigation risk and client’s financial reporting quality are associated with the number and textual attributes of CAMs. Second, I examine whether the number and textual attributes of CAMs are associated with audit effort and costs.

Consistent with the litigation hypothesis (Skinner, 1994), I find a positive association between litigation risk and the number of CAMs in the audit report, suggesting that auditors try to preempt negative consequences from shareholder …