scholarly journals How Misconduct Spreads: Auditors’ Role in the Diffusion of Stock-option Backdating

2018 ◽  
Vol 64 (2) ◽  
pp. 310-336 ◽  
Author(s):  
Aharon Mohliver
Keyword(s):  
Institutional Environment ◽  
Stock Option ◽  
Legal Environment ◽  
Geographic Proximity ◽  
Local Networks ◽  
Audit Firm ◽  
External Auditors ◽  
Insight Into ◽  
The U.S

I study the role of external auditors in the diffusion of stock-option backdating in the U.S. to explore the role of professional experts in the diffusion of innovative practices that subvert stakeholders’ interests. Practices that are eventually accepted as misconduct may emerge as liminal practices—ethically and legally questionable but not clearly illegitimate or outlawed—and not be categorized as misconduct until social control agents notice, scrutinize, and react to them. I examine how the role of external auditors in the diffusion of stock-option backdating changed as the practice shifted from liminality to being illegal and illegitimate. The findings suggest that professional experts’ involvement in the diffusion of liminal practices is highly responsive to the institutional environment. Initially, professional experts diffuse these practices via local networks, but when the legal environment becomes more stringent, implying that the practice will become illegitimate, experts reverse their role and extinguish the practice. The larger network remains largely uninvolved in both diffusing and extinguishing the liminal practice until the practice is publicly exposed and labeled as illegal and illegitimate. The findings further show that the diffusion and then extinguishing of backdating before it was outlawed depended on the adopter’s geographic proximity to a local office of a complacent expert and on the absence of traceable communication about backdating between these offices. This combination set the stage for each office to develop independent views about backdating, leading some offices to view backdating favorably and diffuse it, and others to view it unfavorably and curtail it—even at the same time and within the same audit firm. This study contributes to research on the diffusion of misconduct by providing insight into the role of professional experts and the mechanisms and boundary conditions governing that role.

Political uncertainty and the choice of external audit: international evidence from private firms

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omar Farooq ◽  
Harit Satt ◽  
Basma El Fadel
Keyword(s):  
Institutional Environment ◽  
Financial Statements ◽  
Private Firms ◽  
Political Uncertainty ◽  
External Audit ◽  
High Exposure ◽  
Content Type ◽  
External Auditors ◽  
The Impact

PurposeThis paper documents the impact of political uncertainty on the decision of private firms to use external auditors to verify their financial statements.Design/methodology/approachThe authors use the data from 141 countries and the pooled logistic regression to test our arguments. The data is provided by the World Bank's Enterprise Surveys and is collected during the period between 2006 and 2019.FindingsThe results show that firms with high exposure to political uncertainty are more likely to use external auditors to verify their financial statements. The results are robust across various sub-samples and hold when we use alternate proxy for political uncertainty. The results are also robust after controlling for potential endogeneity concerns. The authors also find that the effect of political uncertainty on the choice of external audit is more pronounced for firms that are headquartered in countries with weak institutional environment. The authors document significant role of democracy, rule of law and accountability in determining the relationship between political uncertainty and the choice of external audit.Originality/valueThe authors believe that theirs is one of the initial attempts (if not the first) to investigate the effect of political uncertainty on the choice of external audit among the private firms in developing countries.

The Role of Account Subjectivity and Risk of Material Misstatement on Auditors' Internal Audit Reliance Judgments

2015 ◽  
Vol 30 (2) ◽  
pp. 225-238 ◽  
Author(s):  
Sudip Bhattacharjee ◽  
Mario J. Maletta ◽  
Kimberly K. Moreno
Keyword(s):  
Internal Audit ◽  
Costs And Benefits ◽  
Moderate Risk ◽  
Risk Levels ◽  
External Auditors ◽  
Multiple Risk Factors ◽  
Inherent Risk ◽  
And Control ◽  
Insight Into

SYNOPSIS Using a field-based questionnaire, we examine how auditors simultaneously use client-level misstatement risk (inherent risk and control risk) with account subjectivity when utilizing internal audit. We contend that auditor use of internal audit will reflect a balance of the costs and benefits of using internal audit. Prior audit research has primarily focused on lower and higher risk conditions, with relatively few studies examining the implications of moderate risk on internal audit use. Data on actual audits from an instrument administered to external auditors reveal significant differences in reliance decisions across lower, moderate, and higher misstatement risk levels. Results reveal that increases in account subjectivity have no effect on auditors' internal audit reliance when risk of material misstatement is at lower levels. However, auditors increase their internal audit reliance when account subjectivity increases across moderate misstatement risk. Finally, our results suggest that auditors decrease their internal audit reliance when account subjectivity increases across higher misstatement risk. By examining these risk variables in combination, we provide insight into the complexities associated with external auditors' internal audit usage. This research could be of interest to practitioners and academics by providing insight into how multiple risk factors may be combined when utilizing internal audit.

Involuntary delisting in the Japanese stock market

2018 ◽  
Vol 44 (9) ◽  
pp. 1155-1171 ◽  
Author(s):  
Jinwoo Park ◽  
Kengo Shiroshita ◽  
Naili Sun ◽  
Yun W. Park
Keyword(s):  
Stock Market ◽  
Regression Models ◽  
Institutional Environment ◽  
Wealth Effect ◽  
Share Price ◽  
Relational Contracts ◽  
Legal Environment ◽  
Content Type ◽  
Japanese Firms

Purpose The purpose of this paper is to analyze the wealth effect of involuntary delisting and investigate insider opportunism and the role of corporate governance, liquidity and legal environment in involuntary delisting in Japan’s stock market. Design/methodology/approach The authors use a sample of 136 involuntarily delisted firms in Japan’s stock markets between 2002 and 2012. The authors examine ownership changes of inside shareholders prior to delisting and estimate regression models for the wealth effect of involuntary delisting. Findings Involuntary delisting is highly disruptive in Japan, and limited liquidity of delisted stocks appears to be an important cause. However, the ownership reduction of inside shareholders before delisting is limited, totaling 2–3 percent. For delisted firms with an insider bank, the decrease in share price leading up to a delisting announcement is much less, while the decrease in share price upon a delisting announcement is far greater. Originality/value The study investigates involuntary delisting in regard to the opportunistic behavior of inside shareholders and the role of institutional environment in Japan’s stock market. Insiders, especially insider banks, maintain ownership in a distressful context leading to the forcible delisting of a distressed firm. The authors find some evidence that suggests that the market believes the insider bank will try to prevent the ailing firm’s insolvency. The findings are consistent with the implicit relational contracts that characterize Japanese firms.

The Influence of PCAOB Inspections on Audit Committee Members' Judgments

2013 ◽  
Vol 25 (2) ◽  
pp. 97-114 ◽  
Author(s):  
Julie S. Persellin
Keyword(s):  
Audit Committee ◽  
Committee Member ◽  
Stock Option ◽  
Data Availability ◽  
Short Term ◽  
External Auditors ◽  
Public Company ◽  
Governance Process ◽  
Option Compensation

ABSTRACT: This paper experimentally examines whether the likelihood of a Public Company Accounting Oversight Board (PCAOB) audit engagement inspection can moderate the negative incentives created by short-term stock option compensation on audit committee members' decisions. Prior research suggests that short-term option compensation may weaken audit committee member objectivity and oversight quality (Archambeault et al. 2008; Magilke et al. 2009; Keune and Johnstone 2010); however, holding individuals accountable for their actions has been shown to result in less self-serving decisions (Rus et al. 2012). Ninety-two Executive M.B.A.s, serving the role of audit committee members, evaluate a hypothetical audit case that involves a dispute between management and the external auditors, with likelihood of PCAOB inspection and type of compensation manipulated between participants. Results confirm prior research on option compensation, finding that participants show less support for recording a proposed income-reducing audit adjustment when compensated primarily with short-term options rather than cash. In addition, a significant interaction reveals that PCAOB inspection likelihood moderates the effect of compensation form, such that option compensation only causes audit committee members to not recommend recording the proposed adjustment when PCAOB inspection likelihood is low. These results allow stakeholders to gain valuable insights into ways in which loyalties that have been potentially misaligned may be realigned by regulatory requirements aimed at improving the corporate governance process. Data Availability: Data available upon request.

From a Distance: Geographic Proximity, Partisanship, and Public Attitudes toward the U.S.–Mexico Border Wall

2019 ◽  
Vol 73 (3) ◽  
pp. 740-754
Author(s):  
Jeronimo Cortina
Keyword(s):  
Direct Contact ◽  
Public Attitudes ◽  
Geographic Distance ◽  
Controversial Issues ◽  
Geographic Proximity ◽  
Mexico Border ◽  
Immigration Debate ◽  
Dynamic Filter ◽  
The U.S

The wall along the U.S.–Mexico border has become one of the most controversial issues in the immigration debate. Although the American public is often aligned with partisan predispositions, often ignored is the role that geographic distance to the border plays in forming attitudes. This paper explores the role of proximity, partisanship, and their interaction as determinants of public attitudes toward the border wall. This paper argues that geographic distance has two effects on public attitudes: as a catalyst for direct contact and as a dynamic filter that shapes how people process information and understand a particular place or policy. Using geocoded survey data from 2017, this paper shows that as the distance to the U.S.–Mexico border increases, Republicans are more likely to support building a wall along the entire border with Mexico due to a lack of direct contact, supplanting direct information with partisan beliefs.

Plasminogen Activation In Vivo upon Intravenous Infusion of DDAVP

1992 ◽  
Vol 67 (01) ◽  
pp. 111-116 ◽  
Author(s):  
Marcel Levi ◽  
Jan Paul de Boer ◽  
Dorina Roem ◽  
Jan Wouter ten Cate ◽  
C Erik Hack
Keyword(s):  
Monoclonal Antibodies ◽  
Plasminogen Activator ◽  
Plasma Levels ◽  
Fold Increase ◽  
Fibrinolytic System ◽  
Plasminogen Activation ◽  
Plasminogen Activator Activity ◽  
Insight Into

SummaryInfusion of desamino-d-arginine vasopressin (DDAVP) results in an increase in plasma plasminogen activator activity. Whether this increase results in the generation of plasmin in vivo has never been established.A novel sensitive radioimmunoassay (RIA) for the measurement of the complex between plasmin and its main inhibitor α2 antiplasmin (PAP complex) was developed using monoclonal antibodies preferentially reacting with complexed and inactivated α2-antiplasmin and monoclonal antibodies against plasmin. The assay was validated in healthy volunteers and in patients with an activated fibrinolytic system.Infusion of DDAVP in a randomized placebo controlled crossover study resulted in all volunteers in a 6.6-fold increase in PAP complex, which was maximal between 15 and 30 min after the start of the infusion. Hereafter, plasma levels of PAP complex decreased with an apparent half-life of disappearance of about 120 min. Infusion of DDAVP did not induce generation of thrombin, as measured by plasma levels of prothrombin fragment F1+2 and thrombin-antithrombin III (TAT) complex.We conclude that the increase in plasminogen activator activity upon the infusion of DDAVP results in the in vivo generation of plasmin, in the absence of coagulation activation. Studying the DDAVP induced increase in PAP complex of patients with thromboembolic disease and a defective plasminogen activator response upon DDAVP may provide more insight into the role of the fibrinolytic system in the pathogenesis of thrombosis.

Convergence of Corporate Governance Models

2004 ◽  
pp. 129-140 ◽  
Author(s):  
M. Tretyakov
Keyword(s):  
Corporate Governance ◽  
Institutional Environment ◽  
Driving Forces ◽  
Commodity Markets ◽  
Legal Systems ◽  
National Institutions ◽  
Governance Models ◽  
Changing Role

The article focuses on the analysis of the process of convergence of outsider and insider models of corporate governance. Chief characteristics of basic and intermediate systems of corporate governance as well as the changing role of its main agents are under examination. Globalization of financial and commodity markets, convergence of legal systems, an open exchange of ideas and information are the driving forces of the convergence of basic systems of corporate governance. However the convergence does not imply the unification of institutional environment and national institutions of corporate governance.

Can trust become a factor of economic growth? Dynamic changes in the level of trust of Russian youth

2020 ◽  
pp. 92-107 ◽  
Author(s):  
A. I. Bakhtigaraeva ◽  
A. A. Stavinskaya
Keyword(s):  
Institutional Environment ◽  
Negative Effects ◽  
Dynamic Changes ◽  
Generalized Trust ◽  
Level Of Education ◽  
Advantages And Disadvantages ◽  
The Future ◽  
Analysis Of Dynamics

The article considers the role of trust in the economy, the mechanisms of its accumulation and the possibility of using it as one of the growth factors in the future. The advantages and disadvantages of measuring the level of generalized trust using two alternative questions — about trusting people in general and trusting strangers — are analyzed. The results of the analysis of dynamics of the level of generalized trust among Russian youth, obtained within the study of the Institute for National Projects in 10 regions of Russia, are presented. It is shown that there are no significant changes in trust in people in general during the study at university. At the same time, the level of trust in strangers falls, which can negatively affect the level of trust in the country as a whole, and as a result have negative effects on the development of the economy in the future. Possible causes of the observed trends and the role of universities are discussed. Also the question about the connection between the level of education and generalized trust in countries with different quality of the institutional environment is raised.

On Metaphysics and the Political: A Polemics of Reading Baudelaire in the 1930s

2019 ◽  
Vol 58 (2) ◽  
pp. 249-259
Author(s):  
Joseph Acquisto
Keyword(s):  
Twentieth Century ◽  
Political Crisis ◽  
The Political ◽  
Modern Poetry ◽  
Progressive Politics ◽  
The World ◽  
Relationship Of ◽  
The Relationship ◽  
Insight Into

This essay examines a polemic between two Baudelaire critics of the 1930s, Jean Cassou and Benjamin Fondane, which centered on the relationship of poetry to progressive politics and metaphysics. I argue that a return to Baudelaire's poetry can yield insight into what seems like an impasse in Cassou and Fondane. Baudelaire provides the possibility of realigning metaphysics and politics so that poetry has the potential to become the space in which we can begin to think the two of them together, as opposed to seeing them in unresolvable tension. Or rather, the tension that Baudelaire animates between the two allows us a new way of thinking about the role of esthetics in moments of political crisis. We can in some ways see Baudelaire as responding, avant la lettre, to two of his early twentieth-century readers who correctly perceived his work as the space that breathes a new urgency into the questions of how modern poetry relates to the world from which it springs and in which it intervenes.

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