Search results

The current study uses an advanced machine learning method and aims to investigate whether auditors perceive financial statements that are principles-based as less risky. More specifically, this study aims to explore the association between principles-based accounting standards and audit pricing and between principles-based accounting standards and the likelihood of receiving a going concern opinion.

The study uses an advanced machine-learning method to understand the role of principles-based accounting standards in predicting audit fees and going concern opinion. The study also uses multiple regression models defining audit fees and the probability of receiving going concern opinion. The analyses are complemented by additional tests such as economic significance, firm fixed effects, propensity score matching, entropy balancing, change analysis, yearly regression results and controlling for managerial risk-taking incentives and governance variables.

The paper provides empirical evidence that auditors charge less audit fees to clients whose financial statements are more principles-based. The finding suggests that auditors perceive financial statements that are principles-based less risky. The study also provides evidence that the probability of receiving a going-concern opinion reduces as firms rely more on principles-based standards. The finding further suggests that auditors discount the financial numbers supplied by the managers using rules-based standards. The study also reveals that the degree of reliance by a US firm on principles-based accounting standards has a negative impact on accounting conservatism, the risk of financial statement misstatement, accruals and the difficulty in predicting future earnings. This suggests potential mechanisms through which principles-based accounting standards influence auditors’ risk assessments.

The authors recognize the limitation of this study regarding the sample period. Prior studies compare rules vs principles-based standards by focusing on the differences between US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) or pre- and post-IFRS adoption, which raises questions about differences in cross-country settings and institutional environment and other confounding factors such as transition costs. This study addresses these issues by comparing rules vs principles-based standards within the US GAAP setting. However, this limits the sample period to the year 2006 because the measure of the relative extent to which a US firm is reliant upon principles-based standards is available until 2006.

The study has major public policy suggestions as it responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US Securities and Exchange Commission (SEC), to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the International Accounting Standards Board (IASB) Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks such as climate change.

The study has major public policy suggestions because it demonstrates the value of principles-based standards. The study responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US SEC, to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information as business transactions and investor needs continue to evolve globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the IASB Andreas Barckow’s recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks like climate change. The study fills the gap in the literature that auditors perceive principles-based financial statements as less risky and further expands the literature by providing empirical evidence that the likelihood of receiving a going concern opinion is increasing in the degree of rules-based standards.

This study aims to compare the value relevance of accounting numbers prepared under the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards with those produced under the International Financial Reporting Standards (IFRS) for Takaful companies (TC).

The authors assess the value relevance of accounting numbers using the Easton and Harris (1991) and Ohlson (1995) return and price models. They also use 54 insurance companies from 10 developing countries in Asia and the Middle East from 2006 to 2015.

The analysis shows that book value is significantly related to stock price under AAOIFI and IFRS. It also shows that TC adopting AAOIFI accounting standards have a more significant effect on stock price. This suggests that AAOIFI standards are more value relevant than IFRS.

TC and their stakeholders can use the findings to determine which accounting standards (IFRS or AAOIFI) produce the more relevant accounting information. This study is useful for investors that consider Islamic ethical practices to make their investment decisions for the standards-setting bodies that focus on establishing accounting standards for the Takaful industry.

The authors investigate a new aspect of the topic of value relevance. To the best of the authors’ knowledge, they believe this is the first paper examining the value relevance of TC’ accounting information prepared under AAOIFI and IFRS.

This chapter explores how network bricolage, as a form of collective entrepreneurship, develops over time and influences the shape and form of an organization. Using a historical organization study of SEUR, a Spanish courier company founded in 1942, the authors show how network bricolage is implemented as a dynamic process of collaborative efforts between bricoleurs who draw on their historical experience to build and develop an organization. Our study offers two main contributions. In combining network bricolage with ideas of collective entrepreneurship, the authors first extend knowledge about the practice of bricolage and the role of the bricoleur in the entrepreneurial context beyond start-up. Second, the authors show that, while entrepreneurs’ decisions are historically contingent, it is how entrepreneurs wed past experience with current context which informs their actions in the present, shaping the enterprise for the future.

T Education is a leading educational science and technology enterprise in China with technology-driven, talent intimacy and quality leadership as the core development objectives. Since its inception, it has been committed to creating better learning experience for children. As the predecessor of T-education, X-education was founded in Beijing in 2003. At first, it mainly provided after-school math counseling for school-age children. Over the past 10 years, its business has been expanding, covering almost every aspect of school-age education. This case studies accounting issues and business ethics challenges that firms may face when they transform from a single (traditional education) line of business to a multiple channel business.