Search results

The purpose of this study is to address the question that economic standards, norms and regulations can possess weak spots that might be exploitable for the embezzlement of an organization’s assets with resultant material consequences in money laundering,tax evasion, fraud, corruption and other potential financial crimes.

The author’s methodological approach is to introduce and discuss a new logical-deductive test that the author names “embezzler test”. The author’s test investigates regulatory architectures from the perspective of someone attempting to divert assets from or to an organization. It appraises whether a potential embezzler could divert resources without being detected and sanctioned.

The embezzler test can be applied to a broad range of standards, norms and regulations.

This new test can be improved and further calibrated in future research.

Researchers, regulators and law makers can use the new test to identify and eventually fix weak spots for embezzlement in norms, standards and regulations.

To the best of the author’s knowledge, such a test has never been formulated or applied before to identify weak spots for potential embezzlement in regulatory architectures.

The recent decline in funding levels of defined benefit pension plans (DBPs) has attracted the attention of regulators in Australia and other jurisdictions. In light of such scrutiny, this study provides timely empirical evidence of the economic and regulatory implications of the recent change in the financial position of DBPs sponsored by Australian listed companies. We identify that over the four‐year period from 2000 to 2003 the frequencies of both accrued benefits deficits and vested benefits deficits increased sharply after 2001. Coinciding with the increased incidence of deficits, the time lag in measuring accrued and vested benefits declined significantly. Controlling for firms taking contribution holidays, we find that the market prices vested benefits surpluses and deficits, and accrued benefits deficits, but not accrued benefits surpluses. This asymmetric treatment of firms’ superannuation funding positions is consistent with accounting conservatism theories and, as a consequence, has implications for recent adoption of IFRS accounting standards requiring Australian companies to recognise both accrued benefits surpluses and deficits.

The ownership structure of a corporation can alleviate the agency problem that arises between shareholders and managers of a corporation, which implies that the ownership composition of a firm may infl uence the level of voluntary disclosure. This study investigates whether the ownership structure of U. S. based multinational corporations affects the managerial decision to voluntarily disclose quarterly foreign segment data. The empirical results show that the three ownership variables of interest, institutional stock ownership, managerial stock ownership and outside blockholder stock ownership are inversely related to the level of voluntary disclosure of quarterly foreign segment data. Therefore, it is inferred that an increase in the proportion of outstanding common stock held by these ownership groups is accompanied by a decrease in the probability that a U.S. multinational firm voluntarily discloses quarterly foreign segment data.

The purpose of this paper is to examine the association between corporate governance attributes in the form of board and ownership characteristics and the remediation of internal control material weaknesses (ICMW) reported under Section 404 of the Sarbanes‐Oxley Act (SOX) of 2002.

The paper employs multivariate logistic regression models for a sample of 528 firms having ICMW as per their auditors' attestation reports during the fiscal periods of 2004, 2005 and 2006 to investigate the empirical relationships between board and ownership characteristics, and remediation of control weaknesses in subsequent fiscal years.

The board diligence, CEO‐independent board, and managerial, institutional and dominant shareholdings are all positively and significantly associated with the ICMW remediation of the sample firms in the presence of other firm‐specific variables in the analysis. The results also suggest that, in general, the ownership characteristics play a greater role in the firms' remediation action than the board‐related factors except board diligence. The separate sub‐sample tests demonstrate that board diligence and several stock ownership characteristics are positively and significantly associated with a firm's action to remediate both the systematic and non‐systematic internal control weaknesses though the results are more robust for non‐systematic control weaknesses.

A useful extension is to conduct a detailed analysis of the effect of audit committee characteristics in conjunction with board and ownership characteristics on firms' remediation action in a setting where ICMW firms take such action at a differential pace that may continue over two or more fiscal periods. Further, the present study examines the empirical associations between variables of interest, and does not, by virtue of its results, establish any cause‐and‐effect relationship between governance attributes and timeliness in ICMW remediation. Finally, this research can be extended to a detailed analysis of the types of systematic and non‐systematic control weaknesses, their probable effect on firms' financial reporting process and the role of corporate governance in timeliness of management's remediation action for different types of internal control problems.

The paper adds to the existing literature on corporate governance and financial reporting quality by documenting the association between a firm's board and ownership characteristics and management's immediate action to remediate internal control problems that ultimately impacts the quality of reported accounting information. The study complements prior studies on ICMW remediation and accrual quality by demonstrating that the effective monitoring by board and large, sophisticated shareholders as well as greater alignment of manager‐shareholder interests ensures more timeliness in remediation of internal control weaknesses and improves financial reporting quality.

The purpose of this paper is to examine the empirical association between expected and unexpected audit fees and reported earnings quality for a sample of Big 4(5) client companies over a period from 2000 to 2005.

The paper employs a cross‐sectional multiple regression model for a sample of 1,142 firms (6,852 firm‐years) covering a time period of six years comprising 2000 to 2005 to evaluate the relationship between both expected and unexpected audit fees and performance‐adjusted discretionary accruals that are estimated from the extended version of the modified Jones model.

The paper finds that both expected and unexpected audit fees are associated with an increase in earnings quality, as indicated by the reduction of both absolute and signed discretionary accrual adjustments. Furthermore, in some analyses these associations are found to persist into the post‐Sarbanes‐Oxley Act (SOX) period. The main results hold in sensitivity tests that involve using both the absolute and signed unexpected audit fees as independent variables and in tests that use both the absolute and signed current accruals as dependent variables of interest.

The results suggest that audit efforts consistent with client‐specific business attributes and reflected in expected audit fees mitigate financial reporting biases, the effect of which is incrementally observable to some extent in the post‐SOX period as well. Unexpected audit fees, a proxy for fee surprise arising out of auditor‐client‐specific contractual situations, are also associated with an increase in earnings quality. The association is, in some analyses, significant for the post‐SOX years. The test results do not exhibit any evidence of auditor independence problems associated with high expected and unexpected audit fees; a result that supports the “reputation protection” argument for auditors' reporting decisions.

In a time period surrounding the introduction of SOX when nonaudit consulting services have severely been restricted, and the audit fee growth for publicly traded companies have been dramatic, an analysis of this nature potentially produces valuable insights into the auditors' fee decision, audit efforts, and auditor independence issue. The study looks into a new perspective concerning the relationship between audit fees and financial reporting practice over the two regulatory regimes, pre‐ and post‐SOX.

The purpose of the paper is to examine the association between the corporate ownership characteristics and the timely remediation of internal control weaknesses over financial reporting under Section 404 of the Sarbanes‐Oxley Act (SOX) of 2002.

The paper employs both ordered and binary logistic regression models for a sample of 695 US firms who reported internal control weaknesses for the first time, pursuant to SOX Section 404, and evaluates the impact of the stock ownership characteristics on the timeliness in remediation of their control weaknesses.

The test results show that the corporate ownership characteristics, as a part of governance mechanism, play an incrementally critical role to influence firms' decisions to promptly remediate their internal control problems and improve the reliability of financial information. In addition, it was also found that a corporate board independent of its CEO is effective in monitoring timely remediation of control problems. Sub‐sample analyses for the company‐level and account‐specific internal control weaknesses produce similar results in support of the effect of corporate stock ownership characteristics on the timely remediation of internal control weaknesses.

First, the paper adds to the literature by demonstrating the incremental effect of the stock ownership characteristics on a firm's timeliness in remediation of control weaknesses, even after controlling the effect of audit committee and board characteristics in the analysis. Second, the paper shows that even in the post‐SOX years with enhanced regulatory oversight in corporate affairs, the effect of corporate ownership attributes as a part of governance is incrementally observable in a situation that calls for prompt managerial action to ensure the reliability of financial information. Third, for the first time, the study makes a separate detailed analysis on the association between the stock ownership attributes and the remediation of company‐level and account‐specific control weaknesses. The results provide valuable insights into the ownership governance effect on the remediation of the two types of control weaknesses that have different rigor, auditability (more or less auditable), and effects (pervasive or non‐pervasive) on financial reporting quality. Fourth, the study further enhances one's understanding of several important governance factors that help achieve a sound financial reporting system and restore investors' confidence in the system.

The purpose of this paper is to examine the intellectual capital reporting (ICR) practices of listed non‐financial companies in Bangladesh as an example of a South Asian developing country, and to empirically investigate some company characteristics as determinants of such practices.

This is an empirical study of ICR by 90 listed companies in Bangladesh in 2008‐2009 using content analysis of annual reports. The study uses a weighted disclosure index and ordinary least squares regression analyses to test the association between company characteristics and the extent of ICR.

The study finds that despite the stock market growing significantly during the recession period, there is a tendency of companies not to disclose IC. The study also confirms that size and industry are important attributes to explain the IC disclosure (ICD) issues in Bangladesh. Unlike prior studies, the study finds that the IT sector does not tend to disclose more extensively, and that companies currently fail to disclose many important items such as patents, trademark and copyrights. The result is an indication that companies in Bangladesh are reluctant to disclose IC. The study is also similar to Abeysekera and Guthrie, who found that Sri Lanka is a proactive rather reactive country in terms of ICR. The study also finds ICR depends on the self‐interests of the company.

The scope of this study is limited to single year, 2008‐2009. It would be interesting to replicate this study in other developing countries or a group of developing countries in South Asia that have many similarities to the Bangladesh socio‐economic environment. Nevertheless, the study incorporates the current level of ICR transparency in Bangladesh.

Unlike previous studies, the present study is based on a developing country where the capital market is growing significantly during the recession years. The study also develops a weighted disclosure index in a developing country context, based on the extensive literature of ICD and some new characteristics, namely non‐family ownership, audit committee and liquidity risk.

This study investigates the impact of the enhanced continuous disclosure regime introduced in December 2002 on several measures of information risk in NZX‐listed stocks. We employ two microstructure models and an intraday data set to measure information risk in a sample of 71 stocks. Our empirical results show that the reforms enacted in December 2002 had no significant effect on either the level of information‐based trading or the adverse selection component of market spreads in our sample of NZX‐listed stocks.

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

This study reviews the existing literature on the U.S. peer review system and the Public Company Accounting Oversight Board (PCAOB) inspection system to assess our knowledge of audit regulation. The traditional self-regulatory system of the accounting profession came to an end, in 2002, when the PCAOB was established to oversee the audit firms of publicly traded companies. This paper contributes to the controversial debate about self-regulation versus independent regulation by analyzing, categorizing, and comparing the research findings on the peer review system and the PCAOB system along three dimensions: the validity of peer reviews and PCAOB inspections, the recognition of reviews and inspections by decision-makers (e.g., investors, bankers, committees), and the effect of reviews and inspections on audit quality. Synthesizing the research on the regulatory regimes suggests that the notion of external quality control, both through peer reviews and government inspections, is positively linked with an improvement of audit quality. At the same time, the analysis indicates that external users do not seem to recognise peer review and PCAOB reports as very useful instruments for decision-making, which is in line with an identified rather skeptical perception of the audit profession on reviews and inspections. Overall, this study reveals that although the academic literature on peer review and PCAOB inspection is extensive it has not produced definitive conclusions concerning various aspects of audit regulation. This paper shows how this blurred picture is due to conflicting research findings, the dominance of the quantitative research paradigm, and unchallenged assumptions within the literature, and concludes by proposing research opportunities for the future.