Search results

The use of choice-based, matched, and other stratified sample designs is common in auditing research. However, it is not widely appreciated that the data analysis for these studies has to take into account the non-random nature of sample selection in these designs. A choice-based, matched or otherwise stratified sample is a nonrandom sample that must be analyzed using conditional analysis techniques. We review five research streams in the auditing area. These streams include work on determinants of audit litigation, audit fees, auditor reporting in financially distressed firms, audit quality and auditor switches. Cram, Karan, and Stuart (CKS) (2009) demonstrated the accuracy of conditional analysis, compared to unconditional analysis, of nonrandom samples through the use of simulations, replications, and mathematical proofs. Papers since published have continued to rely upon questionable research, however, and it is hard for researchers to identify what is the reliability of a given work. We complement and extend CKS (2009) by identifying audit papers in selected research streams whose results will likely differ if the data gathered are analyzed using conditional analysis techniques. Thus research can be advanced either by replication and reanalysis, or by refocus of new research upon issues that should no longer be viewed as settled.

This paper aims to examine whether Andersen’s audit quality in the five years preceding its collapse lagged that of other Big-Five auditors.

This paper compares Andersen’s audit quality and the other Big-Five auditors using five methodologies, namely, earnings response coefficients, magnitudes of abnormal accruals, propensities to issue going-concern opinions, usefulness of going-concern opinions in predicting bankruptcy and the frequency of Accounting and Auditing Enforcement Releases. The comparisons are based on both pooled samples of all observations and propensity-score-based matched-pairs.

The preponderance of evidence shows that Andersen’s audit quality did not differ materially in audit quality from other Big-Five auditors prior to its failure. However, it was found that Andersen’s independence was compromised in the year leading to its collapse (2000), as indicated by the lower likelihood to issue going-concern opinions.

This paper complements and improves on Cahan et al. (2011) by using more measures of audit quality, as no one measure is perfect, showing that their results using discretionary accruals are sensitive to the model used and showing that there is a more powerful direct measure of audit quality, namely, going-concern opinions.

Makes a contribution to the debate surrounding the characteristics of “non‐exporting” (n = 203 firms) and “exporting” (n = 64 firms) new manufacturing and “producer services” small firms in Great Britain. It was appreciated that sample differences may overwhelm the exploratory analysis. Consequently, in order to overcome this potentially distorting influence a “matched pairs” methodology was also utilized. Forty‐two matched pairs of non‐exporting and exporting firms were identified (by age of the business, industry and location type). In total, data were collected on 146 variables covering the firm, the founder and the environment. Dichotomizing between the two types of firms the univariate analysis of the “matched samples” identified statistically significant differences with regard to only 14 variables (10 per cent). Additional multivariate analysis was conducted. Results from a logit regression model of the “matched samples” suggests new firms are “pushed” into “exporting” their sales abroad due to perceived shortages of local resources as well as intense local competition. Discusses the policy implications of the survey findings.

Companies that adopt lean operations and lean accounting ultimately should achieve better profitability and cash flows than similarly situated companies that do not adopt lean operations and lean accounting.

Archival data is analyzed through Wilcoxon signed-ranks, matched-pairs tests.

Lean companies had greater returns on net operating assets (RNOA), returns on total assets (ROA), operating cash flows, and cash-adequacy ratios than Non-Lean companies. These results were driven by the larger Lean companies. The profit margins and financing-assets ratios also were marginally better for the Lean companies than the Non-Lean companies.

Lean companies have achieved benefits proposed by the proponents of lean operations. The present study provides a starting point for further research on the financial performance of Lean companies using archival data.

There is limited research on the financial performance of Lean companies that is based on archival data. The present study fills a void in the academic literature. This study measures RNOA, which does not confound operating and financing activities. Additionally, this study utilized a methodology that provides reasonable assurance of the identification of both Lean companies and Non-Lean companies from publicly available data.

This paper aims to examine whether firms in polluting industries improve their environmental performance to effectively repair their financial reputation in the aftermath of an accounting restatement – a financial reputation-damaging event.

The authors test their hypotheses using multiple regression analysis of a sample of firms listed in International Financial Reporting Standards (IFRS)-adopting countries. They use a comparative empirical design in which a sample of firms that underwent a restatement (henceforth, restating firms) are compared with control groups of pair- and multiple-matched firms that did not undergo restatements (non-restating firms).

The study finds that restating firms have higher environmental performance in the aftermath of restatement events. Additionally, the authors demonstrate that this environmentally based reputation repair positively influences the financial reputation of the firms, as measured by analyst coverage and recommendations and which previously decreased because of the restatement event.

Because environmental levers are a substantial contextual factor in polluting industries, shifting the stakeholder debate to firms’ environmental commitment can improve financial stakeholders’ opinions and favour the repair of the multifaceted reputation of the financially damaged firm.

With a worldwide growing attention to environment there is a critical need for understanding how polluting firms integrate sustainability and financial reputation. We demostrate that polluting firms recover from a financial failure pursuing their environmental performance.

Contributing to the behavioural theory of reputation repair and in line with the legitimacy perspective in environmental disclosure research, this paper shows that polluting firms recover from a loss to their financial reputation by diverting stakeholders’ attention towards the environmental field, thus restoring their financial reputation, as financial analysts value environmental performance improvement – a substantial contextual factor of polluting firms’ reputation repair process.

This study examines companies that separated or integrated the tax and audit functions subsequent to the passage of the Sarbanes‐Oxley Act (SARBOX). While the provision of tax services is not currently prohibited by SARBOX, some companies have separated these two functions. An examination of the relationship between tax function separation (integration) and proxies for audit quality, tax advocacy and audit fee is performed for a matched sample of companies that made the decision to separate or integrate during the period following the passage of SARBOX. In addition, we survey CFOs of both types of companies to determine the motivations behind the separation/integration decision. Our results indicate separation firm CFOs perceive benefits associated with auditor independence as their main reason for separating, while integration firm CFOs perceive cost savings and knowledge spillover as benefits of integration. The matched‐pair analysis suggests that both cost‐savings and tax‐savings are present in the year the tax and audit function is integrated, a benefit not enjoyed by their separation firm peers.

This chapter investigates whether earnings management activities increase the likelihood of receiving a qualified audit report. We have carried out this study with a sample of Spanish companies for the period 2001–2009. Previous research on the issue is not only scarce but also suffers from methodological pitfalls. In all cases, researchers have followed a matched sample approach without considering the implications of such approach for the statistical analysis. Despite its great popularity among researchers in accounting, the use of matched-based sampling is susceptible to produce technical errors in the statistical analysis. The main problem consists in the generalization of results obtained with a nonrandom sample to the whole population of firms. Our results do not show a significant relationship between EM and qualified audit reports. We have also addressed whether the international financial crisis has affected our results and concluded that Spanish companies seem to have used EM during the crisis to push down earnings, probably expecting to take advantage of the positive earnings surprises during the postcrisis period. Nevertheless, the financial crisis has not changed the nature of the EM-qualified opinions relationship.

The purpose of this paper is to examine whether and how firm's agency costs played a role in the voluntary adoption of the eXtensible Business Reporting Language (XBRL) under the SEC's voluntary filing program (VFP) that encouraged the voluntary adoption of the XBRL.

This study employs a logistics regression and a sample of 140 firms that voluntarily participated in the VFP during its entire existence in the United States, and 140 matched-pair counterparts that did not voluntarily adopt the XBRL to investigate the role of agency costs in the voluntary adoption of XBRL-based financial reporting.

We find evidence consistent with the conjecture that a firm's low magnitude of agency costs plays a significant motivating role in the voluntary adoption of XBRL-based financial reporting. Our results continue to hold after using an alternative measure of agency costs and conducting two-stage least squares regressions. Supplementing these results, the study also shows that the level of agency costs of voluntary XBRL adopters remains statistically unchanged after the adoption while the level of agency costs associated with the firms that did not participate in SEC's VFP significantly decline after the adoption during the XBRL mandate.

The findings of this study suggest that based on a firm's level of agency costs, regulators and policymakers, especially those in countries that are yet to mandate XBRL reporting, can, in advance, identify firms that are more likely to comply with their new financial reporting initiatives.

This paper provides first evidence on the role of agency costs in the voluntary adoption of XBRL using data from the United States.

Matching relevant ontology data for integration is vitally important as the amount of ontology data increases along with the evolving Semantic web, in which data are published from different individuals or organizations in a decentralized environment. For any domain that has developed a suitable ontology, its ontology annotated data (or simply ontology data) from different sources often overlaps and needs to be integrated. The purpose of this paper is to develop intelligent web ontology data matching method and framework for data integration.

This paper develops an intelligent matching method to solve the issue of ontology data matching. Based on the matching method, it also proposes a flexible peer‐to‐peer framework to address the issue of ontology data integration in a distributed Semantic web environment.

The proposed matching method is different from existing data matching or merging methods applied to data warehouse in that it employs a machine learning approach and more similarity measurements by exploring ontology features.

The proposed method and framework will be further tested for some more complicated real cases in the future.

The experiments show that this proposed intelligent matching method increases ontology data matching accuracy.

The purpose of this paper is to test the fundamental purpose of the 1992 Small Business Incentive Act (SBIA) to reduce the regulatory burden for small firms to raise public equity capital.

Our research compares initial public offerings (IPOs) that filed with the newer SB‐2 program to benchmark firms that filed using the traditional S‐1 filing. The authors use three proxies to measure success, hypothesizing that, if the regulatory burden has indeed been reduced for small firms, all three variables should be smaller for SB‐2 IPOs. Univariate and multivariate analyses were conducted.

With regards to easing regulatory costs, it is found that the program has not been effective. On average, SB‐2 IPOs experience larger‐scaled offering expenses, and pay higher underwriter gross spreads compared to S‐1 IPOs of similar size. SB‐2 IPOs, however, take fewer days to complete the registration process, when controlling for other relevant factors. In the burden of time, the SBIA has been effective.

The paper is of value to managers of firms desiring to conduct an IPO. These managers, if they meet the size requirements dictated by the SEC, can elect to use an SB‐2 or an S‐1 document. The paper shows that if cost is the primary concern, the S‐1 program should be preferred. If time is the primary consideration, then the SB‐2 program is preferred.

To the authors' knowledge, they are the first to test the efficacy of the SBIA program.