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This paper examines the relationship between accounting outsourcing and audit lag. Accounting outsourcing may reduce misstatement risk, reducing the amount of audit effort necessary and thereby decrease audit lag. Alternatively, outsourcing may increase the amount of coordination necessary between the auditor, client management and the outside accounting service provider and thereby increase audit lag.

The accounting outsourcing/audit lag relationship is examined among closed-end mutual funds. These funds often outsource their accounting functions and disclose the names and services provided by any company providing services to the fund. These disclosures permit a consistent measurement of whether the fund outsources their accounting functions or performs them in-house.

This paper finds a positive relationship between accounting outsourcing and audit lag; outsourcing funds have audit lags that are two to three days longer than those not outsourcing their accounting. The results are robust to different specifications, controls for the distinctive characteristics of closed-end funds and consideration of endogeneity.

Closed-end funds could consider the increased time necessary to complete the audit when deciding whether to outsource their accounting functions.

By identifying a unique setting in which outsourcing data can be consistently obtained and analyzed (i.e. closed-end funds), this is the first study to empirically evaluate the relationship between accounting outsourcing and audit lag.

We assess whether smaller investors are more likely to hold shares of closed-end funds that invest more heavily in illiquid securities. We also examine the relationship between the liquidity of the securities held in the portfolios of closed-end mutual funds (portfolio liquidity) and the liquidity of the closed-end funds’ shares (fund-share liquidity). Using a sample of 1,619 fund-years from 2010 to 2012, we find that smaller investors are more likely than institutional investors to own closed-end funds. We also find that the liquidity of closed-end funds’ portfolios is positively associated with the liquidity of the funds’ shares. Our findings are consistent with the “liquidity benefits” notion that closed-end funds are a means for smaller investors to invest in less liquid securities. In addition, our findings are consistent with the “valuation skepticism” notion which indicates that, due to the difficulty of objectively valuing illiquid securities, different perceptions of the value of illiquid securities held in funds’ portfolios may result in greater fund-share liquidity.

This study empirically investigates whether graduate degrees (MBA, MSA and MST) earned by candidates affect their performance on the CPA exam. By examining more than half million first-time exam sittings taken during the period 2005–2013, the authors find that candidates with a graduate degree performed better on each section of the CPA exam than those who only have an undergraduate degree. In addition, the authors find that the type of graduate degree also has an effect on the CPA exam performance. While candidates with an MBA degree generally performed better on the BEC section than those with an MSA or MST degree, those with an MSA degree performed best on the AUD and FAR sections; and those with an MST degree exceled on the REG section. This study contributes to the existing literature on the determinants of CPA exam success. In addition, this investigation provides valuable insights to candidates, academics and regulators. The findings of this chapter should be useful for academic administrators as they revise their accounting curricula to prepare for the new CPA licensure model. Furthermore, the results of this study should benefit accounting regulators in determining education requirements for future CPAs.

Recent major changes in the form and content tested on the Certified Public Accountant (CPA) exam have necessitated a re-examination of the relevance of undergraduate accounting coursework to CPA exam performance. Using data on candidates who attended an AACSB-accredited business school in the United States and who took the exam during the period 2005–2013, the authors examine whether the grades that candidates earned in relevant accounting course work affected their performance on related sections of the CPA exam. The authors find that student grades in related courses were positively associated with exam scores for all sections of the exam. This indicates that, despite changes to the exam and accounting education generally, an accounting curriculum can help prepare candidates to pass this critical barrier to entry in the accounting profession. The authors believe the results of this study have important implications for practitioners, academics, and candidates seeking to better understand the determinants of performance on this important professional examination.

With recent increases in cybersecurity incidents, it is imperative to supplement current accounting curriculum, equip accounting graduates with sufficient knowledge and skills to assess cybersecurity risk, and learn about controls to mitigate such risks. In this chapter, the authors describe 10 teaching modules, supported by 10 professionally produced video series. The authors developed these videos for educating students on cybersecurity and the videos are available free to instructors from other institutions who wish to use them. The videos are filled with insights and advice from our two experts – one a former hacker and the other an experienced cybersecurity professional. This dialogue between two different sides provides a rich discussion that leads to answering many questions that people often have about cybersecurity. Further, in Exhibit 1, this chapter offers a framework for characterizing and analyzing some recent publicized data-breach cases, which can supplement discussion on cybersecurity modules. Instructors can add more cases to this source overtime. Finally, the authors share the analysis of feedback from students who went through the series. The results suggest that the students show interest in the topic, and videos helped them better understand the complexity of cybersecurity risk and controls.

CEO duality occurs when the same individual holds both the CEO and board Chair positions. In some countries (such as Britain) CEO duality is considered to impair good corporate governance. In the United States, however, CEO duality is still a common practice. The Sarbanes–Oxley Act (SOX) included many corporate governance reforms, but the Act did not address the issue of CEO duality. However, we suggest that the corporate governance environment surrounding the passage of SOX may have influenced corporate board decisions regarding CEO duality when appointing new CEOs. In this study, we seek to determine whether CEO duality changed in the post-Sox environment by investigating the likelihood of CEO duality when CEO changes took place before and after SOX. Using a sample of 182 CEO succession events before and after the passage of SOX, we find that the likelihood of combining the CEO and Chair positions for newly appointed CEOs significantly decreased in the post-SOX period relative to the pre-SOX period. Our results suggest the SOX environment fostered a greater focus on governance issues even beyond the specific provisions of SOX.

The purpose of this paper is to examine whether audit committee members of the board prove to be better monitors if they are also on the compensation committee, as they would be more attuned to compensation related earnings management incentives.

The paper uses archival data on a sample of nonfinancial S&P 500 firms representing 1,032 firm years over the period 2003‐2005, and discretionary accruals as a proxy for financial reporting quality.

Firms with overlapping audit and compensation committees have higher financial reporting quality than those without such overlap. In addition, there is an inverted U‐shaped relationship between overlapping magnitude and financial reporting quality, suggesting that there are costs as well as benefits to overlapping committees.

The findings on this paper have implications for recent policy deliberations on the composition of board committees in general and audit committees in particular, as they clarify the benefits of overlapping committee members.

Understanding the costs and benefits of the board committee structure is particularly important as boards typically operate through the use of committees. This paper contributes to this area by considering the effect of overlapping memberships on two of the most active and important board committees – the compensation and audit committees – on the monitoring effectiveness of the audit committee.