The initiation of audit committee interlocks and the contagion of accounting policy choices: evidence from special items

2020 ◽  
Vol 25 (1) ◽  
pp. 120-158
Author(s):  
Ravi Dharwadkar ◽  
David Harris ◽  
Linna Shi ◽  
Nan Zhou
Keyword(s):  
Audit Committee ◽  
Special Items ◽  
Policy Choices ◽  
Accounting Policy

Prestige Projects Limited: Challenges in Transitioning to New Accounting Policy

2021 ◽  
Author(s):  
Samir Kumar Barua ◽  
Mahendra R. Gujarathi
Keyword(s):  
Financial Reporting ◽  
Professional Judgment ◽  
Accounting Standard ◽  
Construction Contracts ◽  
Policy Choices ◽  
Accounting Courses ◽  
Business Functions ◽  
Accounting Policy

This case provides an experiential learning opportunity to (a) appreciate the role of professional judgment in accounting policy choices, (b) evaluate the effect of accounting decisions on other business functions, and (c) understand the challenges in transitioning to a new accounting standard. Prestige’s previous auditors were fine with its use of output-based measure (milestones completed) to compute the percentage-of-completion (POC) for its long-term construction contracts. However, the newly appointed auditors recommended Prestige to switch over to input-based measure (costs incurred) to compute POC. Students need to choose the appropriate financial reporting policy considering accounting and non-accounting issues. The case addresses an important context, long-term construction contracts. Although the case setting is in India, it can be used in any country given its GAAP-agnostic nature. The case is best suited for intermediate accounting courses in which the topic of revenue recognition is addressed.

scholarly journals The Effects of Independent Audit Committee on the Accounting Policy Decisions of Nigerian Firms

2019 ◽  
Vol 5 (2) ◽  
Author(s):  
Muhammad Aminu Isa
Keyword(s):  
Audit Committee ◽  
Audit Committees ◽  
Policy Decisions ◽  
Audit Process ◽  
Predictive Capacity ◽  
Financial Reports ◽  
Statutory Requirement ◽  
Set Up ◽  
Independent Audit ◽  
Accounting Policy

Purpose: The study examines the effects of the independent audit committee on the accounting policy decisions of firms. Managers use their discretion in accounting decisions against the interests of shareholders. Independent audit committees are relied upon by the shareholders for monitoring. Design/Methodology/Approach: Data were generated from the financial reports of the sampled firms and a model similar to Bowen DuCharme and Shores (1995) and Jackson, Xiaotao and Cecchini (2009) was used to estimate the predictive capacity of the independence audit committee in the process.  Findings: It was found that the firms predominantly decided on income increasing policies but did not find any significant evidence that independence audit committee monitoring is effective on accounting decisions.  Implications/Originality/Value: The firms set up audit committees not because they rely on them for effective monitoring but to fulfil statutory requirement of CAMA 2014, as amended. This conclusion is consistent with the view of Menon and Williams (1994).  This evidence extents the literature of accounting choice in relation to the role of audit process. 

scholarly journals Explaining Accounting Policy Choices of SME’s: An Empirical Research on the Evaluation Methods

2010 ◽  
Vol XIII (Issue 1) ◽  
pp. 33-48 ◽  
Author(s):  
Szilveszter FEKETE ◽  
Yau ◽  
Razvan MUSTATA ◽  
Dumitru MATIS ◽  
Ioan POPA
Keyword(s):  
Empirical Research ◽  
Evaluation Methods ◽  
Policy Choices ◽  
Accounting Policy

Accounting Policy Choice During the Financial Crisis: Evidence From Adoption of the Fair Value Option

2018 ◽  
Vol 36 (1) ◽  
pp. 108-141
Author(s):  
Yao-Lin Chang ◽  
Chi-Chun Liu ◽  
Stephen G. Ryan
Keyword(s):  
Financial Crisis ◽  
Fair Value ◽  
Policy Choice ◽  
Financial Instruments ◽  
Regulatory Capital ◽  
Early Adopters ◽  
Policy Choices ◽  
Accounting Numbers ◽  
Regulatory Scrutiny ◽  
Accounting Policy

We examine banks’ accounting policy choices during the financial crisis where they are strongly motivated to manage earnings or regulatory capital. We address the issue via the initial elections of the fair value option (FVO) under SFAS No. 159, which provides considerable latitude and in particular its transition guidance is amenable to exploitation. We investigate banks’ reasons to elect the FVO and provide evidence regarding whether and how these reasons differed for banks adopting the standard in the first quarter of 2007 (early adopters) versus first quarter of 2008 (regular adopters). We predict and find that early adopters with histories of managing accounting numbers were more likely to make opportunistic FVO elections, and we show that early adopters with low capital tended to exploit the FVO in the opposite direction as those with high capital. With intense regulatory scrutiny since April 2007, we predict and find that regular adopters’ FVO elections complied with SFAS No. 159’s intent. We further analyze the particular reasons why early and regular adopters most commonly elected the FVO for specific types of financial instruments. We find that early adopters’ elections for available-for-sale (AFS) securities and debt reflected opportunism, and regular adopters’ elections for loans held for sale reflected compliance with the standard’s intent to remedy accounting mismatches for economic hedges.

Determinants of accounting policy choices under international accounting standards

2017 ◽  
Vol 30 (4) ◽  
pp. 430-446 ◽  
Author(s):  
Muhammad Jahangir Ali ◽  
Kamran Ahmed
Keyword(s):  
Accounting Standards ◽  
Reporting Quality ◽  
Alternative Methods ◽  
International Accounting ◽  
International Accounting Standards ◽  
Content Type ◽  
Listed Firms ◽  
Policy Choices ◽  
Investment Opportunity Set ◽  
Accounting Policy

Purpose The purpose of this paper is to examine the determinants of accounting policy choices under International Accounting Standards (IASs) of listed firms in South Asia. Design/methodology/approach We selected three IASs-based accounting policy choices from 369 listed companies in India, Pakistan and Bangladesh for the financial year 2007-2008. Findings Our results show that firm size, investment opportunity set, leverage and ownership by the general public are significant determinants of accounting policy choice in South Asian countries. However, we do not find a significant relationship between firms’ accounting policy choices and profitability, assets-in-place and taxes. Practical implications Our results suggest that as some flexibility exists in IASB’s accounting standards, this may allow managers to use income-increasing/decreasing methods. There is scope for regulators and standards setters to reduce the alternative methods which are likely improve firms’ reporting quality. Originality/value Our study contributes to the understanding as to what determines managers’ choice of a particular accounting method allowed in IAS.

Using the FASB's Qualitative Characteristics in Accounting Policy Choices

1982 ◽  
Vol 20 (2) ◽  
pp. 654 ◽  
Author(s):  
Edward J. Joyce ◽  
Robert Libby ◽  
Shyam Sunder
Keyword(s):  
Policy Choices ◽  
Qualitative Characteristics ◽  
Accounting Policy
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