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This study aims to explore the relationship between audit partner and firm industry specialization and board of director independence on the decision by Taiwanese firms to use International Financial Reporting Standards (IFRS) flexibility concerning reporting interest income and expense and dividends received in different sections of the statement of cash flows. This flexibility existed in Taiwan for the first time in 2013, the year that Taiwan switched from its own generally accepted accounting principle to IFRS.

Using 2013 data for a sample of 1,227 firms, 354 of whom changed their reporting classification, this study examined the interaction effect of board independence and partner-level and firm-level auditor industry specialization on the cash flow reporting decision using logistic regression.

The results show there is a substitute relationship between board independence and partner-level industry specialization on the change in cash flow reporting classification, but a complementary relationship between board independence and firm-level auditor specialization. Further, both partner-level and firm-level auditor industry specializations have a complementary (but negative) relationship with board independence as to whether the firm is likely to report interest expense paid in the operating or financing activities sections.

An important implication is that knowing the levels of audit firm and partner specialization and how independent the board is, is useful for researchers and regulators in investigating auditor-client relationships and understanding the influences of variables investigated here on the outcome(s) of accounting policy and regulatory changes.

This study improved the field’s understanding of the impacts of audit partner and firm specialization, board independence and relevant interactions on cash flow reporting choices.

The purpose of this study is to examine whether the required disclosure and the high frequency of key audit matters (KAMs) are likely to moderate the effect of higher credit risk on earnings quality.

This study uses 15,106 Taiwanese firm-year observations to explore the relationship between earnings quality and credit risk during the 2011 to 2020 period. We use the two-stage least squares method to test whether the presence of KAM disclosures moderated the association between earnings quality and credit risk and also to examine whether higher KAM frequency moderates the association between earnings quality and credit risk.

Our results provide evidence that the presence of a KAM disclosure requirement moderates the impact of firms with higher credit risk on earnings quality. In addition, there is significant evidence that the higher the frequency of KAM disclosures the greater the moderation impact that is found.

This research investigates whether the disclosure and high frequency of KAMs moderates the effect of credit riskiness on earnings quality. This study improves our understanding of whether more KAMs disclosures would improve earnings quality of firms with higher credit risk. In addition, we also use Beneish M-SCORE, as an alternative earnings quality proxy, to reinforce our empirical results. This markedly differentiates this paper from other studies.

The purpose of this study is to investigate the decision usefulness of key audit matters (KAMs) disclosures from the perspective of financial analysts.

Using data from two groups of Chinese-listed firms subject to different audit standards, the authors use a quasi-natural experiment and the difference-in-differences approach to examine the impact of KAMs on analyst forecasts. The authors also conduct a textual analysis on management disclosures as well as on the content of KAM disclosures.

The results of this study show that both forecast errors and dispersion have significantly declined for the firms disclosing KAMs compared to the firms without such disclosures. Further analysis presents evidence that KAM disclosures have resulted in simultaneous increase in management disclosures and audit quality. In addition, auditor characteristics, such as auditor’s dependence on client fees and its industry specialization, and firm’s characteristics, such as its ownership structure and its social connection with the auditor, appear to affect the informativeness of KAM disclosures. The authors also perform content analysis of KAMs to provide additional insight.

As AH firms are required to adopt the expanded audit report one year before A shares firms, by design, there is only one year in which these two types of companies differ. Therefore, the results without overgeneralizing the impact of KAM disclosures should be interpreted. In addition, this study involves the Chinese market alone and, therefore, may be affected by factors peculiar to the functioning of the Chinese economy and financial markets.

The main contribution of this study lies in highlighting the salience of KAM context in shaping the relationship between auditors, managers and analysts and its collective impact on information environment. The findings of this study are significant in that they help establish the importance of KAM disclosures in helping to assure that higher quality financial information is available to capital markets, as well as information that is otherwise unavailable given disclosure mandates in China. This study adds to the literature on the importance of providing additional means of safeguarding auditor independence and on the value of auditor expertise in providing useful content in audit disclosures. Moreover, the findings suggest that the expanded audit report can help reduce the level of asymmetric information, especially for state-owned entities. They provide insight on how the new audit rule influences managers and auditors communicating complex accounting matters as well as the moderating effect of the social connections between auditors and firm executives.

The purpose of this paper is to examine the impact of non-staggered voting for members of the board of directors on earnings quality and the value relevance of earnings and book value.

The authors used a sample of Taiwanese firms whose board was elected as a whole every three years from 2003 to 2013. The authors used multiple regression analysis to test whether board of directors elections and corporate governance affected earnings quality and the value relevance of earnings and book value.

The authors found that elections led to lower earnings quality, but better corporate governance led to greater earnings quality. In the presence of board elections, earnings have reduced value relevance but book value had increased value relevance. Finally, given board elections, the relative value relevance of earnings and book value on stock price was not fully moderated by strong corporate governance.

The results presented here indicate the importance of better corporate governance in diffusing suspicions of management occasioned by the use of discretionary accruals in years in which board elections take place. Better corporate governance regimes led to a more positive relationship of discretionary accruals to earnings persistence, even in the presence of directorial elections. Similarly, better corporate governance regimes led to a more positive relationship between earnings per share and stock prices. Limitations include the restriction of the testing locale to Taiwan. That said, many companies around the globe use non-staggered board elections. Accordingly, these results suggest issues of importance to corporate governance advocates beyond Taiwan as well.

This study deepens the field’s understanding of the impact of corporate governance arrangements and schedules for electing board of directors’ members on issues of interest to stockholders.

The public accounting sector of the accounting profession has long been very concerned with the problem of employee recruitment and retention. As early as the 1970s, the then Big 8 firms funded extensive studies of the determinants of employee turnover. The problem is no less real today. Indeed, much has been written about the problem of the vanishing accounting student. If reducing employee turnover and dissatisfaction becomes important in order for the public accounting firms to fulfill their mission of helping to assure the quality of information that investors receive, then having tools that foster an understanding of the determinants of employee dissatisfaction, stress, and turnover is vital. Sheds light on these issues by demonstrating how sophisticated statistical techniques can illuminate the underlying determinants of employee turnover and other important job attitudes. Applies structural equation modeling to Collins and Killough's dataset in order to demonstrate how it can provide important additional substantive insights about relationships between the stressors and job outcomes in public accounting. This important interpretive information is not available, or is available in only limited fashion, in the comparison method of canonical correlation analysis.

The pace of organizational and environmental change seems to demand that such professional organizations as CPA firms become learning organizations in order to compete adequately with other firms. The flattening out of traditional hierarchical structures within organizations argues that traditional mentoring and supervisory structures may be inadequate for fostering needed individual learning and personal learning. One effect of the lack of such learning may be increased role stress, job burnout, loss of commitment to the organization, intention to leave, and diminished job satisfaction. Using a sample of 440 accounting professionals from major CPA firms in several regions of the USA, studies the ability of team social interaction processes within work teams to foster the personal, organizational, and team‐source learning, and also to influence attitudinal outcomes directly and indirectly. Also examines whether personal learning, organizational socialization and team‐source learning mediate the impact of team social interaction process on attitudinal outcomes. Uses a hierarchical regression‐based test to evaluate our hypotheses. The results supported our expectations. A structural equation modeling test of the model showed that organizational and personal learning mediated the relationship between team social interaction processes and the attitudinal outcomes, but team‐source learning did not.

This study examines whether a regulation on mandatory disclosure of financial forecasts since June 1991 and further sanction imposition since March 1998 contribute to lower IPO firms’ initial and aftermarket returns, and shorten honeymoon periods. The study is based on 423 IPO firms after the regulation required them to disclose their forecasts and 53 IPO firms prior to the regulation. The findings report that initial and aftermarket returns are lower, and honeymoon periods are shorter in the post‐regulation period than those in the pre‐regulation. The findings also report that initial and aftermarket returns are relatively smaller, and the honeymoon periods are shorter after the March 1998 regulatory sanction was imposed after controlling other variables. These results document that the financial forecasts disclosure regulation evidently contributes to mitigating information asymmetry.

The purpose of this paper is to examine the determinants of internal control weakness remediation revealed under Sarbanes‐Oxley (SOX) section 404 reporting requirements.

Data on firms that reported internal control weaknesses for fiscal year 2004 are collected, and determined whether these weaknesses still existed in their 2005 filings. Logistic regression is used to examine the impact of corporate governance, resource, impediments (e.g. severity of weakness), and Big 4 auditor status on remediation completion.

Resources (e.g. size, ROA) were positively associated with remediation. Use of Big 4 auditor, more audit committee meetings, more business segments, and filing lag were negatively associated with remediation, as were number and type of internal control weaknesses.

First, the paper sheds light on the individual firm factors that influence corporate response to the legal and social (e.g. public pressure) environment facing firms. Understanding this should better enable policy makers and regulators to foresee where potential lags in firm implementation of regulations may occur, and why. Second, it believes that the paper also sheds light on the relative value of different corporate governance structures in meeting investor concerns for proper stewardship of their investments. Finally, this paper provides information of use to other corporate governance researchers in that the results suggest the overwhelming importance of the legal and social environment in influencing corporate behavior. However, this paper does not address the contribution of national culture, financial and audit‐related reporting requirements, and differences in firm resources, to corporate behavior.

The paper deepens the field's understanding of the determinants of internal control weakness remediation, furthering regulators' understanding of SOX's impact.

The purpose of this paper is to investigate the impact of corporate internationalization, governance structures, and legal protections on the foreign earnings response coefficient (FERC). The FERC is a measure of the value‐relevance of foreign earnings.

Data were collected on 3,653 Taiwanese firms which had overseas investments. The authors examined the impact of the site of their overseas investments and the nature of the legal code of the investee country on the investor perceptions of firms' reported foreign and domestically‐generated earnings. Also examined was the impact of corporate governance arrangements (e.g. the difference between the owners' cash flow and voting rights) on the same components of the firms' earnings.

The empirical findings suggest that an aggressive internationalization strategy (foreign direct investment) has positive effects on the value relevance of foreign earnings, but that this strategy is impacted by the firm's own corporate governance arrangements and the target of its overseas investment efforts. While foreign investments bring about growth and profits, they expose the investors to the risk of expropriation by investee countries and corporate insiders.

The importance of the findings is that they should help regulatory agencies – and firms themselves – to better understand factors that can promote the global expansion of domestic enterprises.

Prior literature provides clear evidence that the judgments of experts differ from those of non‐experts. For example, Smith and Kida concluded that the extent of common biases that they investigated often are reduced when experts perform job related tasks as compared to students. The aim in this theoretical study is to examine whether “heuristic biases significantly moderate the understanding of experts versus novices in the going concern judgment?”

The authors address the posited question by marshalling extant literature on expert and novice judgments and link these to concepts drawn from the cognitive sciences through the Brunswick Lens Model.

The authors identify a number of heuristics that may bias the going concern decision, based on the work of Kahneman and Tversky among others. They conclude that experience mitigates the unintentional consequences played by heuristic biases.

The conclusions have implications for the education and training of auditors, and for the expectation gap. They suggest that both awareness of factors that affect understanding of auditing reports and greater attention to training are important in reducing the expectation gap.

This paper develops additional theoretical understanding of factors that may impact the expectation gap. While there has been limited prior discussion of the impact of cognitive factors on differences between experts and novices, the paper significantly expands the range of factors discussed. As such, it should provide a stimulus to new research in this important area.