bluuebunny/crossref_metadata_2025_split huggingface dataset:
Auditor Tenure and Audit Reporting Failures
Authors: Geiger Marshall A. , Raghunandan K. 
Published: April 2008

Recently, the SEC has called for research regarding the relationship between audit tenure and audit failures. In this study, we address this issue by examining prior audit reports for a sample of companies entering into bankruptcy during the period 1996–1998. We use a multivariate analysis to test for the association between the type of audit opinion issued on the financial statements immediately prior to bankruptcy and the length of auditor tenure.
Our results indicate that there were significantly more audit reporting failures in the earlier years of the auditor/client relationship than when auditors had served these clients for longer tenures. The results do not support the arguments of those who propose mandatory auditor rotation and suggest that, contrary to the concerns expressed by the SEC, there is an inverse relationship between auditor tenure and audit reporting failures.
A Multistage Approach to External Auditors' Evaluation of the Internal Audit Function
Authors: Krishnamoorthy Ganesh 
Published: April 2008

External auditors are continually facing intense pressure to be more efficient in conducting audits without compromising quality and effectiveness. Optimal utilization of internal audit work can improve both the efficiency and the effectiveness of external audits and can enhance the value of internal auditors to the client organization.
The objective of this study is to understand how the three factors (objectivity, work performance, and competence of the internal auditors) identified by auditing standards and by prior research interact in determining the strength of the internal audit function. Most prior studies have attempted to understand external auditors' rank ordering of the importance of the three factors, without an explicit attempt to model the interactions among the factors. The results from these studies are mixed and inconclusive. Hence, prior studies have not produced a consensus about how external auditors seem to weight and combine these factors in order to make assessments relating to the strength of the internal audit function.
This study employs analytical methods based on Bayesian probability to model external auditors' evaluation of the internal audit function. Specifically, models based on multistage (cascaded) inference theory are developed and analyzed using numerical sensitivity analysis. The modeling contribution is significant in the sense that it is the only study that provides a theoretical model for the decision process. Results reveal that the importance of the three factors varies with the type of evidence (convergent or conflicting) observed and is contingent on the interrelationships among the three factors. A major conclusion of this study is that in the Bayesian context, it is futile to attempt a ranking of the factors since no single factor will dominate under all conditions. The study also provides avenues for future research and for improving the guidance provided by professional auditing standards that relate to the evaluation of internal audit work.
Review Partners' Reactions to Contact Partner Risk Judgments of Prospective Clients
Authors: Ayers Susan , Kaplan Steven E. 
Published: April 2008

As a part of their risk management strategy, large audit firms have established a second partner review process during client screening. It is unclear, however, whether review partners are biased by the engagement risk assessment that is provided to them by a contact partner as a part of this process. Of particular interest are cases where the contact partner's engagement risk assessment is overly favorable when compared to the underlying evidence. We report the results of an experiment where approximately one-half of the review partners received an engagement risk assessment that was overly favorable when compared to the underlying evidence, while the other half of the review partners received an assessment that was more consistent with the client data provided. We examined the effect of this manipulated difference on review partner engagement risk assessments, acceptance judgments, fee judgments, and justification activity.
Results from a sample of 78 audit partners reveal that, on average, they were not influenced by differences in the contact partner's assessment when rendering their own engagement risk assessments. However, the acceptance and fee judgments of the partners who received overly favorable risk assessments were more conservative than those of the partners who received a more consistent assessment. In addition, justification activity was greater for the group who received overly favorable judgments. These results imply that a second partner review appears to aid auditing firms in avoiding overly risky clients during the acceptance process.
Audit Fees, Nonaudit Fees, and Auditor Reporting on Stressed Companies
Authors: Geiger Marshall A. , Rama Dasaratha V. 
Published: April 2008

The SEC and legislators have expressed concerns that independence may be negatively impacted if auditors perform significant nonaudit services for their audit clients, and that providing lucrative nonaudit services to clients may make it more likely that auditors will “see things the client's way.” Such concerns are particularly salient in the context of issues that involve significant auditor judgment, as in the case of reporting decisions related to going-concern uncertainties for financially stressed clients.In this study we examine the association between the magnitude of audit and nonaudit fees and auditor report modification decisions for financially stressed manufacturing companies. In our analysis we control for financial stress, company size, reporting lag, default status, audit committee effectiveness, and management plans. The results indicate a significant positive association between the magnitude of audit fees and the likelihood of receiving a going-concern modified audit opinion, but we find no significant association between nonaudit fees and audit opinions. Additional analyses also find no significant relationship between the ratio of nonaudit service fees to audit fees and reporting decisions, and indicate that our results are robust across alternative model, variable, and sample specifications. We also control for the potential endogeneity of audit opinions, audit fees, and nonaudit fees, and find the same positive association of audit fees with opinions, but no association between nonaudit fees and audit opinions. Overall, we find no evidence of a significant adverse effect of nonaudit fees on auditor reporting judgments for our sample of distressed companies.
Audit Committee Characteristics and Restatements
Authors: Abbott Lawrence J. , Parker Susan , Peters Gary F. 
Published: April 2008

This study addresses the impact of certain audit committee characteristics identified by the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees (BRC) on the likelihood of financial restatement. We examine 88 restatements of annual results (without allegations of fraud) in the period 1991–1999, together with a matched pairs control group of firms of similar size, exchange listing, industry and auditor type.
We find that the independence and activity level (our proxy for audit committee diligence) of the audit committee exhibit a significant and negative association with the occurrence of restatement. We also document a significant negative association between an audit committee that includes at least one member with financial expertise and restatement. To test the robustness of the results we also consider a sample of 44 fraud and no-fraud firms and arrive at largely similar findings. Our results underscore the importance of the BRC's recommendations as a means of strengthening the monitoring and oversight role that the audit committee plays in the financial reporting process.
The Comparative Impact of an Audit Report Standard and an Audit Going-Concern Standard on Going-Concern Disclosure Rates
Authors: Citron David B. , Taffler Richard J. 
Published: April 2008

There was a significant increase in going-concern opinions in the U.K. during the 1990s despite a strong economy. This paper tests the impact of a new audit report standard versus an enhanced audit procedures standard in explaining this change.
We find the increased going-concern modification rate among financially distressed firms is directly associated with the introduction of the less confrontational audit report standard: SAS No. 600. On the other hand, the going-concern procedure standard (SAS No. 130) had no impact on our results. We interpret this finding as highlighting the importance of audit report presentation for standard setters when seeking to enhance disclosure.
The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management
Authors: Be´dard Jean , Chtourou Sonda Marrakchi , Courteau Lucie 
Published: April 2008

This study investigates whether the expertise, independence, and activities of a firm's audit committee have an effect on the quality of its publicly released financial information. In particular, we examine the relationship between audit committee characteristics and the extent of corporate earnings management as measured by the level of income-increasing and income-decreasing abnormal accruals. Using two groups of U.S. firms, one with relatively high and one with relatively low levels of abnormal accruals in the year 1996, we find a significant association between earnings management and audit committee governance practices.We find that aggressive earnings management is negatively associated with the financial and governance expertise of audit committee members, with indicators of independence, and with the presence of a clear mandate defining the responsibilities of the committee. The association is similar for both income-increasing and income-decreasing earnings management, suggesting that audit committee members are concerned with both types of earnings management and do not exhibit an asymmetric loss function similar to that of auditors.
An Examination of Internal Auditor Objectivity: In-House versus Outsourcing
Authors: Ahlawat Sunita S. , Lowe D. Jordan 
Published: April 2008

The internal audit function is evolving from its traditional oversight function to one that includes a wider spectrum of activities that add value to their organizations. In addition, economic pressures have forced many companies to consider outsourcing as an alternative. These ongoing changes have caused some concern regarding the potential lack of objectivity and independence for internal auditors. This exploratory study examines whether outsourcing of the internal audit function is susceptible to client advocacy vis-a`-vis in-house auditing, which itself may be sensitive to an employer advocacy
Sixty-six practicing members of the Institute of Internal Auditors (IIA) completed a case study involving a corporate acquisition scenario. Of the 66 participants, 35 were from corporations (in-house), while the remaining 31 were from the Big 4 accounting firms (outsource). Advocacy was manipulated by asking participants to assume the role of internal auditor for either the buyer or the seller of a target division. Result s indicate that significant advocacy existed in the judgments of both in-house and outsource internal auditors. However, the extent of advocacy was less severe in the case of outsource auditors.
Mitigating the Common Information Sampling Bias Inherent in Small-Group Discussion (Retracted)
Authors: Hunton James E. 
Published: April 2008

Gathering problem-relevant information through small-group discussion is one method for initial decision making. A collective information sampling (CIS) model offered by Stasser and Titus (1987) suggests that two inherent biases, the common information sampling bias and a related recency effect, act in concert to suboptimize the efficacy of group discussion. The objectives of this exploratory study are to refine the predictive validity the CIS model and test a group intervention technique designed to mitigate the common information sampling and recency biases.
Analysis of the evidence from a laboratory and field experiment suggests that the refined CIS model accurately predicted the distribution of information items entered into group discussion. While the control groups exhibited both the common information sampling bias and primacy effect, these biases were mitigated in the treatment groups after receiving an intervention technique called Shared Cognition Awareness Training (SCAT). Results obtained from this exploratory research indicate that the refined CIS model can offer researchers a useful prediction tool and the SCAT intervention technique presents a relatively straightforward means of invoking a more complete exchange of potentially valuable information during small-group discussion.
The Effects of Flexible Work Arrangements on Stressors, Burnout, and Behavioral Job Outcomes in Public Accounting
Authors: Almer Elizabeth Dreike , Kaplan Steven E. 
Published: April 2008

The majority of public accounting firms now offer flexible work arrangements to their professional employees. Presumably these arrangements help accommodate employee needs to manage work and family demands, while also improving job satisfaction and retention. The ability of flexible work arrangements to achieve these goals has received little attention. The current paper addresses this issue by reporting the results of a survey of CPAs working under a flexible work arrangement and a similar group of CPAs working under a standard arrangement but who appear to be plausible candidates for a flexible work arrangement. The survey elicited information about several key employment variables: job-related stressors (e.g., role conflict, role ambiguity, and role overload), burnout tendencies (e.g., emotional exhaustion, reduced personal accomplishment, and depersonalization) and behavioral job outcomes (e.g., job satisfaction and turnover intentions).
Results show that CPAs on flexible work arrangements report higher job satisfaction and lower turnover intentions than those on a standard work arrangement. CPAs on flexible work arrangements generally have lower levels of burnout and stressors, though the reduced personal accomplishment burnout dimension may be conditioned upon whether the CPA has a mentor. Finally, for professionals switching to a flexible work arrangement, respondents indicated a significant improvement in job satisfaction and turnover intentions as well as some decline in burnout and stressors.
An Investigation of the Theory of Planned Behavior and the Role of Moral Obligation in Tax Compliance
Authors: Bobek Donna D. , Hatfield Richard C. 
Published: April 2008

In this study, Ajzen's (1991) Theory of Planned Behavior is used as a theoretical framework to extend prior research examining taxpayers' compliance intentions. Specifically, moral obligation is added to the theory's explicit constructs: attitude, subjective norms (i.e., peer influence), and perceived behavioral control. Moral obligation was expected to be a moderating influence (Reckers et al. 1994), and therefore interaction effects were hypothesized.
The study was conducted in two phases. In the first phase, a procedure was used to determine the outcome beliefs that underlie taxpayers' attitudes. These beliefs were incorporated into an attitude measure used in the second phase in which subjects responded to two of three tax-compliance scenarios. The data from phase two were analyzed using multinomial logistic regression. The results indicate that the model including moral obligation, provides a significant explanation of tax noncompliance in the three different scenarios. However, the interaction effect of moral obligation appears to be more complex than the relationship suggested by Reckers et al. (1994).
The Effects of Hurdle Rates on the Level of Escalation of Commitment in Capital Budgeting
Authors: Cheng Mandy M. , Schulz Axel K-D. , Luckett Peter F. , Booth Peter 
Published: April 2008

This study proposes that organizations should consider project hurdle rates, as part of their control system design, to reduce escalation of commitment behavior in managers. In particular, we empirically examined the escalation of commitment tendencies in managers receiving organization-set, self-set, and no hurdle rates.Consistent with prior expectations, we found self-set hurdle rates to be an effective control mechanism resulting in significantly lower levels of escalation of commitment. Contrary to expectations, however, organization-set hurdle rates were not effective. Self-set hurdle rates also resulted in significantly higher cut-off rates compared to the average return of the investment portfolio held by the managers.As escalation of commitment has been recognized as a serious potential problem in organizations, the use of self-set hurdle rates is a step toward reducing the level of escalation tendencies in managers.
The Role of Social Influences in Using Accounting Performance Information to Evaluate Subordinates: A Causal Attribution Approach
Authors: Xu Yin , Tuttle Brad M. 
Published: April 2008

One important role of accounting information is to provide objective information to assist decision makers in evaluating the performance of their subordinates. Yet whether decision makers use accounting data in an objective fashion, independent of interpersonal factors, is an open question. The purpose of this study is to investigate whether similarities in work style (innovator versus adaptor) between a manager and a subordinate influence the manager's causal attributions and subsequent performance evaluation for the subordinate, given accounting performance indicators.
The study is conducted in an experimental setting and the research analysis used is developed within the framework of a structural equation model. The results of the study provide initial evidence that interpersonal factors such as work style similarity and personal liking moderate how supervisors use accounting information when they make performance evaluation decisions. The more similar work style between supervisor and subordinate, the more the supervisor likes the subordinate. This, in turn, directly influences what the supervisor believes is the cause of the subordinate's performance.
Processes Implemented for AACSB Accounting Accreditation and the Degree of Faculty Involvement
Authors: Sinning Kathleen E. , Dykxhoorn Hans J. 
Published: April 2008

As of November 15, 2000, 370 domestic educational institutions achieved AACSB accreditation of their business programs. Approximately 40 percent (149) of those institutions also earned elective accounting accreditation. Preparing for accreditation may entail implementing many changes and developing processes to guide and manage those changes. This paper presents the results of a survey conducted to (1) determine the types of processes the accounting units (departments, divisions, and schools of accountancy) have implemented to achieve accounting accreditation and (2) ascertain the degree of faculty involvement in those processes. A questionnaire was sent to the administrators of the 133 schools or departments of accounting that had received accounting accreditation as of February 1999, the date the survey was mailed. Sixty-eight useable surveys were returned, resulting in a response rate of 51 percent.
The results show that accounting units that have achieved accounting accreditation have developed a variety of processes to write missions and goals, design the curriculum, develop faculty, improve instruction, evaluate outcomes, and assure continuous improvement. The study also found that accredited accounting units involve faculty extensively in the processes and must devise ways to maintain their long-term commitment to the processes. The paper discusses the revisions in the accounting accreditation standards that were approved in April 2000 and, based on the results of the survey, suggests additional processes that units may have to develop to meet the changes in the standards. Institutions considering accounting accreditation can use the results of this study to help prepare for accreditation.
Challenges to Audit Education for the 21st Century: A Survey of Curricula, Course Content, and Delivery Methods
Authors:   The 2000–2001 Auditing Section Education Committee American Accounting Association
Published: April 2008

This paper reports the results of a survey of auditing and assurance courses in the U.S. and several other countries conducted during 2000–2001. The survey, commissioned by the Auditing Section of the American Accounting Association, yielded data on a total of 285 auditing and assurance courses taught at 188 colleges and universities in the United States, Canada, and several other countries. The syllabi data were analyzed on a number of dimensions and the results compared to two prior surveys of auditing courses (Frakes 1987; Groomer and Heintz 1994).
Our findings document substantial changes in content (e.g., new or expanded coverage of fraud, information technology, and assurance services) and pedagogy (e.g., increased use of team projects, student presentations, cases, and the Internet) in both introductory and advanced auditing courses over the past several years. These changes are discussed in the context of events that significantly impacted auditing education and practice from the late 1980s through the end of the 1990s.
The REA Modeling Approach to Teaching Accounting Information Systems
Authors: McCarthy William E. 
Published: April 2008

The REA model was first conceptualized in a paper for the 1982 The Accounting Review as a framework for building accounting systems in a shared data environment, both within enterprises and between enterprises. The model's core feature was an object pattern consisting of two mirror-image constellations that represented semantically the input and output components of a business process. The REA acronym derives from that pattern's structure, which consisted of economic Resources, economic Events, and economic Agents.
Simultaneous with its research publication, REA began to be used as a framework for teaching accounting information systems (AIS), originally at Michigan State University and then gradually at other colleges and universities. In its extended form, the REA model integrates the teaching of accounting transaction structures, commitment and business policy specification, business process engineering, and enterprise value chain construction. As of 2003, REA modeling is used in a variety of AIS courses and featured in a variety of AIS textbooks, both in the United States and internationally.
Behind Closed Doors at WorldCom: 2001
Authors: Zekany Kay E. , Braun Lucas W. , Warder Zachary T. 
Published: April 2008

WorldCom was a large telecom company that enjoyed an almost meteoric rise during the 1990s but ran into trouble in the early 2000s. 2001 was particularly difficult. This case gives future generations of accountants the opportunity to study the largest accounting scandal in history from an internal financial accounting perspective. To the extent possible, this case uses the actual “voices” of participants to gain an understanding of their viewpoints and motives. We get a chance to see some participants at their best and others at their worst.
While our primary focus throughout this case is on the financial accounting issues, we also briefly touch on some of the safeguards available in preventing accounting fraud: internal controls, internal audit, external audit, and the Audit Committee. Throughout this case, you should ask yourself, “How would I respond if I were the corporate decision maker?”