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Article
Publication date: 3 January 2017

Fengchun Tang, Lijun Ruan and Ling Yang

The practice of management having control over auditor appointment and compensation is believed to be a fundamental cause for the lack of auditor independence. While…

Abstract

Purpose

The practice of management having control over auditor appointment and compensation is believed to be a fundamental cause for the lack of auditor independence. While researchers propose alternative auditor appointment procedures to improve auditor independence, there are a few settings that allow researchers to examine alternative auditor appointment procedures such as regulator designation of auditors. This research aims to investigate the effects of regulator designation of auditors and litigation risk on auditor independence in a Chinese setting

Design/methodology/approach

This study adopts a 2 × 2 between-subjects experimental design. A total of 110 surveys were sent out and 81 were collected from eastern China.

Findings

The results of an experiment with 81 Chinese auditors indicate that regulator designation of auditors improves auditor independence. In particular, auditors designated by the regulator feel less pressure from the audited company, perceive themselves to be more independent and are more willing to challenge the audited company’s aggressive financial reporting compared with those directly hired by the company. In addition, litigation risk moderates the effect of regulator designation of auditors on auditor independence such that regulator designation of auditors has a stronger impact on auditor independence when the litigation risk is low.

Research limitations/implications

This study is also subject to limitations. First, regulator designation of auditors in China was examined. While regulator designation of auditors seems to improve auditor independence in the Chinese context, it is unclear if the same results will be observed in other economies, as China is a unique setting. For example, the majority of listed companies in China are under the control of government-related agencies. Consequently, the government has significant power in influencing auditor appointment policy. In contrast, the majority of other economies are more market-oriented with less government influence. Future studies in other markets will further enrich the understanding on regulator designation of auditors. Second, only regulator designation of auditors for state-owned enterprises was examined. It is unclear how regulator designation of auditors would affect non-state-owned enterprises. Moreover, future research could investigate the designation of auditors in other forms such as the designation of auditors by investors. Third, auditor appointment procedure may affect perceived risk of loss of client which in turn influences auditor independence. Future research could further investigate the mechanism through which regulator designation of auditors affect auditor independence.

Originality/value

Results of an experiment with 81 Chinese auditors show that regulator designation of auditors can improve auditor independence. In a decision context where auditors must provide judgments relating to a proposed audit adjustment that is quantitatively material and will affect the client’s ability to meet debt covenants, auditors designated by the State-Owned Assets Management Bureaus are more resistant to management pressure and are less willing to accept the management’s aggressive financial reporting practice than those directly hired by the company.

Details

Managerial Auditing Journal, vol. 32 no. 1
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 1 March 1997

Patricia M. Myers and Audrey A. Gramling

Describes a study conducted to obtain empirical evidence with respect to the nature of the perceived benefits of the Certified Internal Auditor (CIA) designation as they…

Abstract

Describes a study conducted to obtain empirical evidence with respect to the nature of the perceived benefits of the Certified Internal Auditor (CIA) designation as they relate to career advantages and perceived competences. A survey comprising 24 questions was mailed to the director of internal audit, the chief financial officer, and a member of the board of directors at each of 200 sample firms. Reveals that CIA designation is perceived to be indicative of a significant level of competence and to provide career advantages in internal audit positions, but generally not important in line management’s acceptance of internal auditors’ recommendations; nor in providing career advantages in non‐internal audit positions.

Details

Managerial Auditing Journal, vol. 12 no. 2
Type: Research Article
ISSN: 0268-6902

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Book part
Publication date: 9 December 2020

Zhan Furner, Keith Walker and Jon Durrant

Krull (2004) finds that US multinational corporations (MNCs) increase amounts designated as permanently reinvested earnings (PRE) to maximize reported after-tax earnings…

Abstract

Krull (2004) finds that US multinational corporations (MNCs) increase amounts designated as permanently reinvested earnings (PRE) to maximize reported after-tax earnings and meet earnings targets. We extend this research by examining the relationship between executive equity compensation and the opportunistic use of PRE by US MNCs, and the market reaction to earnings management using PRE designations. Firms use equity compensation to incentivize executives to strive for maximum shareholder wealth. One unintended consequence is that executives may engage in earnings management activities to increase their equity compensation. In this study, we examine whether the equity incentives of management are associated with an increased use of PRE. We predict and find strong evidence that the changes in PRE are positively associated with the portion of top managers' compensation that is tied to stock performance. In addition, we find this relationship to be strongest for firms that meet or beat forecasts, but only with the use of PRE to inflate income, suggesting that equity compensation incentivizes managers to opportunistically use PRE, especially to meet analyst forecasts.

Further, we provide evidence that investors react negatively to beating analysts' forecasts with the use of PRE, suggesting that investors find this behavior opportunistic and not fully convincing. This chapter makes an important contribution to what we know about the joint effects of tax policy, generally accepted accounting principles, and incentive compensation on the earnings reporting process.

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Article
Publication date: 10 April 2017

Adamantios Diamantopoulos, Marc Herz and Nicole Koschate-Fischer

Drawing from the entitativity theory, the purpose of this paper is to focus on the European Union (EU) as a superordinate entity and investigate the extent to which a…

Abstract

Purpose

Drawing from the entitativity theory, the purpose of this paper is to focus on the European Union (EU) as a superordinate entity and investigate the extent to which a “Made-in-EU” designation leads to superior/inferior brand evaluations and through them to higher/lower purchase intentions than different country-specific designations.

Design/methodology/approach

Prior literature and qualitative interviews with consumers are used to generate several propositions regarding the role of the EU as a brand origin. These are subsequently tested in a series of four experimental studies using a common design but different country-specific origins as stimuli.

Findings

While a “Made-in-EU” designation is interpreted as a quality signal, linking a brand to the EU fails to generate positive affective associations. Furthermore, the exact impact of a “Made-in-EU” brand designation very much depends on the standard of comparison, that is, the specific country against which the EU is evaluated.

Research limitations/implications

Superordinate designations such as the EU can indeed represent distinct entities in consumers’ minds which strongly impact their perceptions and intended behavior.

Practical implications

Moving from a “home country” label to a “Made-in-EU” label is not advisable for owners of domestic brands. For foreign brands from EU countries with an unfavorable country image, adopting a “Made-in-EU” label is worth considering since it can strengthen quality perceptions. However, any quality advantage might be offset by weaker brand affect perceptions.

Originality/value

The concept of entitativity introduces a new conceptual lens in the context of origin research which – almost exclusively – has previously focused on the individual country as the unit of analysis.

Details

International Marketing Review, vol. 34 no. 2
Type: Research Article
ISSN: 0265-1335

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Article
Publication date: 1 January 1984

H. FARRENY and H. PRADE

This paper deals with a problem encountered in natural language generation which seems to have been largely ignored in the literature, that of generating non‐ambiguous…

Abstract

This paper deals with a problem encountered in natural language generation which seems to have been largely ignored in the literature, that of generating non‐ambiguous (i.e. discriminating) designations of objects in a given context, from a knowledge basis, which associates the properties and relations, concerning the objects present in the environment, with their respective formal labels. A search algorithm of type A is proposed, which always generates a discriminating designation when such a designation exists in terms of the available knowledge; for the evaluation the algorithm uses a subjective length function which takes into account the “intelligibility” of the designation. This work takes place in the SYROCO system, a dialogue interface for limited domains of discourse; the sentence interpretation as well as the sentence generation in SYROCO are briefly presented in the first part of this paper.

Details

Kybernetes, vol. 13 no. 1
Type: Research Article
ISSN: 0368-492X

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Article
Publication date: 6 April 2012

Henry A. Davis

The purpose of this paper is to provide summaries of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in…

Abstract

Purpose

The purpose of this paper is to provide summaries of selected Financial Industry Regulatory Authority (FINRA) regulatory notices and disciplinary actions issued in October, November, and December 2011.

Design/methodology/approach

The paper provides Regulatory Notice 11‐49, October 2011, Advertising Regulation; Regulatory Notice 11‐52, November 2011, Senior Designations; Regulatory Notice 11‐54, November 2011, Branch Office Inspections; and the description of one disciplinary action in which a firm was sanctioned and an individual fined.

Findings

Notice 11‐49: to inform firms of recent developments regarding the application of rules governing communications with the public, FINRA is proving guidance to firms on communication with the public regarding exchange‐traded products, treasury inflation‐protected securities (TIPS), use of “FINRA” in firm trademarks, and identification of related prior filings when submitting new filings for review. Notice 11‐52: FINRA reminds firms of their supervisory obligations regarding the use of certifications and designations that imply expertise, certification, training or specialty in advising senior investors. Notice 11‐54: FINRA and the Securities and Exchange Commission's Office of Compliance Inspections and Examinations provide broker‐dealer firms with information on developing effective policies and procedures for branch office inspections and remind firms of supervisory requirements under FINRA's supervision rule and notes common deficiencies and strong compliance practices. Trade Reporting Notice on TRACE Reporting Issues: FINRA answers selected member firm detailed questions on reporting issues related to The Trade Reporting and Compliance Engine (TRACE), the vehicle developed by FINRA to facilitate the mandatory reporting of over the counter secondary market transactions in eligible fixed income securities. All broker/dealers who are FINRA member firms have an obligation to report transactions in corporate bonds to TRACE under an SEC approved set of rules.

Originality/value

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends.

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Article
Publication date: 1 January 2001

Soon Suk Yoon, June‐Bok Wee, Chang‐Hyun Baik and Gary A. Miller

We examine whether audit regulations by the Financial Supervisory Services of Korea for initial public offering (IPO) firms prevent them from managing earnings. We…

Abstract

We examine whether audit regulations by the Financial Supervisory Services of Korea for initial public offering (IPO) firms prevent them from managing earnings. We investigate eighty‐three IPO firms after the introduction of the auditor designation system, which applies regulatory‐body auditor assignments, in 1995 and compared them with three control samples. We document that the auditor designation system successfully reduces the earnings management practices by IPO firms. Compared to the control samples, the IPO firms, in general, have smaller accruals, stronger correlation coefficients between cash from operations and net income, and lower ratios of sign‐changes reporting positive earnings when cash from operation is negative or vice versa. The regression analysis also reveals that the IPO sample is less prone to manage earnings. In sum, the results are consistent across different test methods in supporting the effectiveness of the auditor designation system in deterring IPO firms from taking income‐increasing strategies.

Details

Pacific Accounting Review, vol. 13 no. 1
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 22 March 2011

Felice Adinolfi, Marcello De Rosa and Ferruccio Trabalzi

Within a competing global food market marketing strategies become ever more important; in Italy an important marketing strategy in the wine sector focuses on the so‐called…

Abstract

Purpose

Within a competing global food market marketing strategies become ever more important; in Italy an important marketing strategy in the wine sector focuses on the so‐called designations of origins (Appellations). This paper aims to analyse the public perception of regional wines with designation of origins.

Design/methodology/approach

A semi‐structured questionnaire was administered to a sample of wine consumers in national wine shows in Rome and the provinces. The questionnaire aimed at testing consumers' knowledge and preferences toward wines with a designation of origin produced within the Lazio region. A multivariate analysis has clustered consumers according to their behaviors in relation to wines with a designation of origin. A perception analysis relative to the knowledge and meaning of designations of origins was further performed. The latter has made it possible to rank regional wines and to establish the market effect of designations of origin.

Findings

With regard to behaviors toward wines with a designation of origin, the data suggest three ideal‐types of customers: “sensible” (i.e. customers knowledgeable of the meaning of designations of origins); “indifferent”; and “thrifty” (i.e. customers who understand the importance of designation of origins but are also conscious of price). The conclusions indicate that a designation of origin is a necessary but not a sufficient factor for having a good market performance.

Research limitations/implications

Implications in terms of marketing strategies are evident: wine production is characterized by different worlds of production and marketing strategies should be consequential.

Originality/value

The enthusiasm towards designations of origin is not always justified: the proliferation of designations of origin can de‐sensitize consumers with dramatic effects on rural territories whose economy rotates around the production of quality wines. Organizational adjustment and more efficient communication strategies are indeed necessary complements to obtaining an appellation.

Details

British Food Journal, vol. 113 no. 3
Type: Research Article
ISSN: 0007-070X

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Book part
Publication date: 16 October 2007

Mark L. Plummer

Elegant multi-market models and intricate discounting methods are difficult, at times impossible to utilize in the real world because the necessary data just are not…

Abstract

Elegant multi-market models and intricate discounting methods are difficult, at times impossible to utilize in the real world because the necessary data just are not available. While there is no perfect substitute for adequate data, there are good ones that are capable of improving policy decisions. This paper describes one such substitute by way of an example: the designation of critical habitat under the Endangered Species Act for West Coast salmon and steelhead. The example shows how a cost-effectiveness approach can mitigate (to some extent) the effects of poor data on the monetary benefits of regulatory actions.

Details

Research in Law and Economics
Type: Book
ISBN: 978-1-84950-455-3

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Article
Publication date: 6 February 2017

Clive M.J. Warren, Peter Elliott and Jason Staines

Focusing on the externality effects of historic districts, this paper aims to assess and compare the impact of historic district designation on the value of residential…

Abstract

Purpose

Focusing on the externality effects of historic districts, this paper aims to assess and compare the impact of historic district designation on the value of residential vacant land property.

Design/methodology/approach

Hedonic regression is used to analyze data from 4,233 residential vacant site transactions to measure the influence of historic district designation on the price of residential vacant site properties.

Findings

Results support established theory and research on other residential property types, showing a significant and positive relationship between designation in a historic district and property prices. Residential vacant sites located in a designated historic district sold at a 10-11 per cent premium compared to similar vacant sites not located in a historic district.

Originality/value

This is the first empirical study of the influence of historic districts on residential vacant land property. The paper extends limited previous literature on the externality effects of historic districts through detailed analysis of a large Australian housing market (Brisbane).

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 1
Type: Research Article
ISSN: 1753-8270

Keywords

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