Search results

1 – 10 of 501
To view the access options for this content please click here
Article
Publication date: 1 March 2013

Thomas E. Vermeer, K. Raghunandan and Dana A. Forgione

Non-profit organizations constitute an important share of the U.S. economy, and recent audit failures and GAO findings highlight the importance of auditor reporting…

Abstract

Non-profit organizations constitute an important share of the U.S. economy, and recent audit failures and GAO findings highlight the importance of auditor reporting decisions in this sector. In this study, we examine going-concern modified audit opinions for non-profit organizations. Using audit opinion data for 3,567 non-profits exhibiting some signs of financial stress, we find that non-profits are more likely to receive a goingconcern modified opinion if they are smaller, are in worse financial condition, expend less on program-related activities, and have more internal control related audit findings. Our analysis of the subsequent resolution of the going-concern uncertainties suggest that only 27 percent of the non-profits receiving an initial going-concern modified audit opinion filed for dissolution in the subsequent four fiscal years. Our findings fill a gap in an important area that has received little research attention, and provide a useful benchmark for non-profits and their auditors.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 25 no. 1
Type: Research Article
ISSN: 1096-3367

To view the access options for this content please click here
Article
Publication date: 1 March 2009

Thomas E. Vermeer, K. Raghunandan and Dana A. Forgione

Problems with governance at non-profit (NP) healthcare organizations have recently led to legislative scrutiny of their audit committee practices. Using data from a survey…

Abstract

Problems with governance at non-profit (NP) healthcare organizations have recently led to legislative scrutiny of their audit committee practices. Using data from a survey of chief financial officers of NP healthcare organizations and from the GuideStar database, we examine audit committee interactions with external auditors for a sample of 69 NP healthcare organizations. We find that 71% of the audit committees in our sample meet privately with the external auditor and the mean number of such meetings 1.9. Our results also suggest that audit committee interaction with the external auditor varies in response to resource dependencies, existence of debt, audit quality, audit tenure, and organizational size. These findings suggest that NP healthcare organizations respond to monitoring demands by adopting suitable audit committee related interactions.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 21 no. 1
Type: Research Article
ISSN: 1096-3367

To view the access options for this content please click here
Article
Publication date: 1 July 2004

Elizabeth Rainsbury

This study examines factors related to audit committee membership for a sample of large New Zealand listed companies. This study reveals that non‐executive directors who…

Abstract

This study examines factors related to audit committee membership for a sample of large New Zealand listed companies. This study reveals that non‐executive directors who are independent, and directors with financial expertise, are more likely to be members of audit committees. The results are consistent with the New Zealand Securities Commission’s corporate governance guidelines for audit committees of New Zealand listed companies. However, in the current New Zealand regulatory environment, directors with accounting expertise can include non‐executives affiliated with the firm. In these situations the financial expert is not independent. Remuneration committee members are found more likely to be members of the audit committee. This may be a result of their power and influence or be due to the skills they bring. The number of years that directors serve on the board, the number of other directorships they hold, and the number of shares they own in the company are not related to audit committee membership.

Details

Pacific Accounting Review, vol. 16 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

To view the access options for this content please click here
Book part
Publication date: 12 November 2016

Haiyan Zhou, Hanwen Chen and Zhirong Cheng

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Abstract

Purpose

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Methodology/approach

We use Chen, Dong, Han, and Zhou’s (2013) internal control index on the effectiveness of internal control and Dickinson’s (2011) definition on firm life cycle. We use multivariate regression analysis.

Findings

We find that the internal control improves corporate performance. When dividing firm life cycle into five stages: introduction, growth, mature, shake-out and decline, we find that the impacts of internal control on firm performance vary with different stages. The positive impact of internal control on firm performance is more significant in maturity and shake-out stages than other stages.

Research limitations/implications

Our findings would have implications for the regulators and policy makers with regards to the importance of internal control in corporate governance and the effectiveness of implementing standards and guidelines on internal control in public firms.

Practical implications

In addition, our findings on the various roles of internal control at different stages of firm life cycle would help managers and board of directors find more focus in risk management and board monitoring, respectively.

Originality/value

Although the prior literature have examined the link between internal control, information quality and cost of equity capital (Ashbaugh-Skaife, Collins, Kinney, & LaFond, 2009; Ogneva, Subramanyam, & Raghunandan, 2007), our study would be the first attempt to investigate the link between internal control and firm performance during different stages of firm life cycles.

Details

The Political Economy of Chinese Finance
Type: Book
ISBN: 978-1-78560-957-2

Keywords

To view the access options for this content please click here
Article
Publication date: 4 November 2014

Damon Fleming, Kevin Hee and Robin N. Romanus

– The purpose of this paper is to investigate the association between auditor industry specialization and audit fees surrounding Section 404 implementation.

Abstract

Purpose

The purpose of this paper is to investigate the association between auditor industry specialization and audit fees surrounding Section 404 implementation.

Design/methodology/approach

With a sample of 1,006 industrial firms over the 2003-2005 reporting periods, an ordinary least square regression model was used to regress change in audit fees on auditor specialization measure and other control variables.

Findings

It was found that auditor industry specialization is negatively related to the change in audit fees during the first year of Sarbanes–Oxley Act (SOX) compliance (2003-2004). It was also found that there were no significant cost savings associated with auditor industry specialization in the second year of SOX compliance (2004-2005).

Practical implications

These results suggest that industry-specific expertise may enable auditors to adapt more efficiently to new significant audit standards and regulations, but that such efficiencies are likely to be most pronounced during the initial implementation year.

Originality/value

Auditor competition and auditor specialization are at the forefront of today’s ever-changing accounting industry. Analysis of a contemporary auditing issue (auditor specialization) in the context of major legislation (SOX) provides a research setting that gives both academics and practitioners valuable insight toward how future legislation can impact current accounting industry issues such as the increasing need to have more expertise.

Details

Review of Accounting and Finance, vol. 13 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Article
Publication date: 28 October 2007

Hassan R. HassabElnaby, Amal Said and Glenn Wolfe

In this study we examine the oversight responsibilities of audit committees in the post Sarbanes‐Oxley Act of 2002 (SOX) era. The results show that audit committee…

Abstract

In this study we examine the oversight responsibilities of audit committees in the post Sarbanes‐Oxley Act of 2002 (SOX) era. The results show that audit committee oversight responsibilities assigned and disclosed in proxy statements expanded post‐SOX compared to pre‐SOX. We design a survey instrument to measure the difference between the perceived oversight responsibilities of audit committee members and the oversight responsibilities actually assigned in the proxy. Our results indicate that although audit committees made a substantial commitment to increase their assigned responsibilities over the period of 2001 to 2004, they still need to do more to meet the many additional challenges facing them in a post‐SOX environment. Overall, our results suggest that the intent of SOX‐for audit committees to be more involved and active in the oversight role of an organization‐is becoming institutionalized. These results should be interesting to policy makers, a variety of interest groups, and accounting researchers.

Details

American Journal of Business, vol. 22 no. 2
Type: Research Article
ISSN: 1935-5181

Keywords

To view the access options for this content please click here
Article
Publication date: 19 April 2011

Samer Khalil

The purpose of this paper is to test whether firms audited by the same Big 4 audit firm (Big 4 continuing clients) are more/less likely to report material weaknesses…

Abstract

Purpose

The purpose of this paper is to test whether firms audited by the same Big 4 audit firm (Big 4 continuing clients) are more/less likely to report material weaknesses (systemic material weaknesses) in internal controls over a financial reporting than those audited by the same Non‐Big 4 audit firm (Non‐Big 4 continuing clients) over the period 2005‐2008. It also investigates whether the number of material weaknesses and that of systemic material weaknesses varies among the two groups.

Design/methodology/approach

Logistic regression and count regression analysis for panel data tests the hypotheses using all firms that had SOX 404 filings and that were audited by the same auditor over the period 2005‐2008 (1,668 firms; 6,672 firm‐year observations).

Findings

Findings document that Big 4 continuing clients are less likely to report material weaknesses and systemic material weaknesses than Non‐Big 4 continuing clients, especially during the first two years of investigation. Results also demonstrate that the number of material weaknesses and that of systemic material weaknesses reported by Big 4 continuing clients is significantly lower than that reported by Non‐Big 4 continuing clients, primarily for the years 2005 and 2006.

Originality/value

Findings support the risk avoidance perspective where large audit firms avoid riskier clients due to potential litigation costs and/or due to potential sanctions by the Public Company Accounting Oversight Board (PCAOB). Results also suggest that smaller audit firms did not extensively test the quality of internal controls prior to the year 2004. They highlight that the enactment of SOX 404 and the establishment of the PCAOB heightened audit firms focus on internal controls and raised their sensitivity to audit risk arising from weaknesses in internal controls over financial reporting.

Details

Managerial Auditing Journal, vol. 26 no. 4
Type: Research Article
ISSN: 0268-6902

Keywords

To view the access options for this content please click here
Article
Publication date: 28 October 2002

Uma V. Sridharan, Lori Dickes and W. Royce Caines

Between October and November 2001 the world witnessed the collapse of Enron, a major US publicly traded corporation with global operations. The Enron case highlights the…

Abstract

Between October and November 2001 the world witnessed the collapse of Enron, a major US publicly traded corporation with global operations. The Enron case highlights the impact corporate failure has on American society and capital markets and underscores the need for better enforcement of regulations and ethical business behavior. This paper discusses the role played by Enron’s senior management, its board of directors, Enron’s auditors, consultants, bankers, Wall Street and the government, in the spectacular rise and fall of this corporate giant. It also examines the impact of Enron’s failure on its employees, the employees of Andersen, and on thousands of ordinary Americans who invested in the stock via their pensions and mutual funds. This paper highlights the conflicts of interest that pervade the financial system and discusses the social and financial impact of a combined business and oversight failure. Students and teachers of finance, corporate governance, and business strategy may be interested in this paper as a pedagogical tool to teach undergraduate finance, business ethics, business strategy, and corporate governance.

To view the access options for this content please click here
Article
Publication date: 26 October 2012

Matthew J. Keane, Randal J. Elder and Susan M. Albring

The implementation of compliance procedures associated with the Sarbanes‐Oxley Act of 2002 came at a great cost to most publicly‐traded firms, largely due to the internal…

Abstract

Purpose

The implementation of compliance procedures associated with the Sarbanes‐Oxley Act of 2002 came at a great cost to most publicly‐traded firms, largely due to the internal control disclosures required by Section 404 of the Act. The purpose of this paper is to contribute to the inquiry on internal control effectiveness by examining the impact of the type (same or different) and number of internal control weaknesses on audit fees. The paper also examines whether firms that remediate continue to incur higher audit fees compared to firms that never disclosed a weakness.

Design/methodology/approach

The authors evaluate the impact of internal control weaknesses and their remediation on audit fees using ordinary least squares regression for 9,122 firm year observations (3,096 unique firms) over the time period 2004‐2007.

Findings

The authors find: an incremental impact on audit fees of additional material weakness disclosures; firms that report the same material weakness pay higher fees than firms reporting a different material weakness in consecutive years; and audit fees remain high one, two, and three years following remediation compared to a firm that never disclosed an internal control weakness.

Originality/value

In contrast with prior studies, the sample includes firms that remediated weaknesses, firms that failed to remediate weaknesses, and firms that did not have prior weaknesses. The results suggest that the failure to remediate has greater risk implications than new weaknesses and that material weaknesses are associated with higher audit fees several years after remediation.

Details

Review of Accounting and Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Article
Publication date: 1 March 2005

Susan Parker, Gary F. Peters and Howard F. Turetsky

When making going concern assessments, Statement on Auditing Standards No. 59 (Auditing Standards Board 1988) directs auditors to consider the nature of management's plans…

Abstract

When making going concern assessments, Statement on Auditing Standards No. 59 (Auditing Standards Board 1988) directs auditors to consider the nature of management's plans and ability to mitigate periods of financial distress successfully. Corporate governance factors reflect attributes of control, oversight, and/or support of management's plans and actions intended to overcome financial distress. Correspondingly, this study investigates the impact of certain corporate governance factors on the likelihood of a going concern modification. Using survival analysis techniques, we examine a sample of 161 financially distressed firms for the time period 1988–1996. We find that auditors are twice as likely to issue a going concern modification when the CEO is replaced. We also find that going concern modifications are inversely associated with blockholder ownership. We also confirm Carcello and Neal's (2000) findings with respect to the association between an independent audit committee and an increased likelihood of modification. In a repeated events setting, we find that insider ownership and board independence are inversely associated with repeated going concern modifications. Our study concludes by proposing implications for the current financial reporting environment (including the Sarbanes‐Oxley Act of 2002) and future research avenues.

Details

Review of Accounting and Finance, vol. 4 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

1 – 10 of 501