Search results

This research provides accounting-ethics authors and administrators with a benchmark for accounting-ethics research. While Bernardi and Bean (2010) considered publications in business-ethics and accounting’s top-40 journals this study considers research in eight accounting-ethics and public-interest journals, as well as, 34 business-ethics journals. We analyzed the contents of our 42 journals for the 25-year period between 1991 through 2015. This research documents the continued growth (Bernardi & Bean, 2007) of accounting-ethics research in both accounting-ethics and business-ethics journals. We provide data on the top-10 ethics authors in each doctoral year group, the top-50 ethics authors over the most recent 10, 20, and 25 years, and a distribution among ethics scholars for these periods. For the 25-year timeframe, our data indicate that only 665 (274) of the 5,125 accounting PhDs/DBAs (13.0% and 5.4% respectively) in Canada and the United States had authored or co-authored one (more than one) ethics article.

The typical unqualified audit report of publicly traded firms in the United States indicates the nature of the audit and an opinion that the firm’s financial statements fairly present the financial position and the results of operations of the audited company. Accordingly, some users of the financial statements, including investors, do not consider the unqualified opinion to be very useful in providing other informational value about the particular audit. In this paper, the authors examined the views of two stakeholders in the US financial reporting system, auditors in large public accounting firms and Chief Financial Officers (CFOs) in the Fortune 1000. The authors elicited their perceptions involving a Public Company Accounting Oversight Board (PCAOB) proposed auditing standard commonly referred to as “the other information standard.” This standard, if adopted, would require the auditor to evaluate information other than the audited financial statements and the related audit report for (1) a material inconsistency, (2) a material misstatement of fact, or (3) both, and if they exist, communicate them in the auditor’s report. The authors developed their research instrument based upon its perceived potential effects on the audit if adopted, some of which were referenced in the exposure draft of the proposed standard (PCAOB, 2013). They found that a majority of each groups believed, among other effects, that the proposed standard would increase audit costs, subject both the auditor and the reporting firm to increased litigation risk, and that its implementation costs by affected firms would exceed any benefits to financial statement users created by the standard.

A decade ago, we conducted a study (reported inMartens McEnroe, 1992) with the result that auditors neglected substance over form and perceived little exposure to litigation in doing so. The theoretical basis of the previous paper was implicit contract theory. We have had occasion to change our analysis since the previous work; in this paper we focus on the commodification of audits, and trace the neglect of substance over form to that commodification. We present evidence that recent actions by the SEC have altered the perception of auditors that the letter of GAAP (Generally Accepted Accounting Principles) is an aegis against litigation, and that audits which do not opine on substance over form are perfectly marketable commodities. We find, however, that audits which do not opine on substance vs. form are extant, and we cannot conclude that a change in the conditions of production of the audit commodity has occurred or is imminent.

The Dodd–Frank Wall Street Reform and Consumer Protection Act calls for substantially increased government regulation. Whether those regulations are, in some sense, appropriate is a function of whether the benefits of the increased regulation exceed the costs. Those costs and benefits, however, are probably impossible to measure, at least at this early stage of the implementation of the Dodd–Frank reforms. On the other hand, financial professionals who regularly deal with governmental regulations probably have a good sense of the costs and benefits based on their own experience with other similar regulations. This chapter reports the result of a survey of high-level auditors and CFOs regarding their perceptions of the costs and benefits of the main parts of the financial regulatory reform incorporated into the Dodd–Frank legislation. It concludes that there is support among these individuals for some aspects of Dodd–Frank, but no consensus.

The integrity of audited financial statements has been widely criticized, especially over the last decade. Arthur Levitt, then chairman of the Securities Exchange Commission (SEC), brought widespread attention to the practice of earnings management in a speech he delivered in 1998 (Levitt, 1998). His successors in the SEC have also focused on the issue. The business media has also devoted much coverage to the topic and criticized the creative accounting practices of many well-known companies. These factors, in conjunction with the collapse of Enron and WorldCom, have probably engendered a loss of confidence in the credibility and transparency of audited financial statements. Two months after the Enron accounting irregularities became public, a Wall Street Journal article attributed a 250-point decline in the Dow Jones Industrial Average to concerns over widespread accounting misconduct (Browning & Weil, 2002). These same concerns were cited as a significant factor for the downward trends in the equity markets almost a year later (Browning & Dugan, 2002). The business media has offered numerous opinions such as these as to how investor confidence in audited financial statements has declined. However, a review of the literature found no corresponding empirical study conducted subsequent to the Enron and WorldCom revelations. Accordingly, this study examines the extent to which individual investors’ perceive that their attitudes involving the quality and usefulness of the information in audited financial statements have changed as a result of these events. The results indicate that investors perceive that a notable decrease of confidence in various dimensions of the quality and usefulness of this information has occurred. The findings indicate that accounting regulators and other parties should undertake actions to help restore investor confidence.