scholarly journals Does Media Exposure Affect Financial Reporting Quality Through Auditors?

2020 ◽  
pp. 0148558X2093608 ◽  
Author(s):  
Steven F. Cahan ◽  
Chen Chen ◽  
Rencheng Wang
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Media Coverage ◽  
Reporting Quality ◽  
Positive Association ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Risk Level ◽  
Audit Failure ◽  
The Media

We examine whether the media has an indirect corporate governance effect on financial reporting quality (FRQ) that operates through auditors. This occurs because greater media coverage can magnify an auditor’s business risk by exposing the auditor to more potential litigation and reputation damage if an audit failure occurs. We use a path analysis to examine the direct and indirect channels of media corporate governance. We find a positive association between media coverage and FRQ that is mediated by audit fees, and the results are stronger for firms with greater incentives to engage in earnings manipulation. In contrast, we find no evidence that the media has a direct corporate governance effect on FRQ. Our results show how the media’s corporate governance reach can be extended by auditors who care about how media coverage impacts their risk level.

Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk?

2014 ◽  
Vol 89 (6) ◽  
pp. 2115-2149 ◽  
Author(s):  
Keith Czerney ◽  
Jaime J. Schmidt ◽  
Anne M. Thompson
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Positive Association ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Reporting Quality ◽  
Accounting Principles ◽  
Client Relationship ◽  
Financial Misstatement ◽  
Audit Reports

ABSTRACT According to auditing standards, explanatory language added at the auditor's discretion to unqualified audit reports should not indicate increased financial misstatement risk. However, an auditor is unlikely to add language that would strain the auditor-client relationship absent concerns about the client's financial statements. Using a sample of 30,825 financial statements issued with unqualified audit opinions during 2000–2009, we find that financial statements with audit reports containing explanatory language are significantly more likely to be subsequently restated than financial statements without such language. We find that this positive association is driven by language that references the division of responsibility for performance of the audit, adoption of new accounting principles, and previous restatements. In addition, we find that (1) “emphasis of matter” language that discusses mergers, related-party transactions, and management's use of estimates predicts restatements related to these matters, and that (2) the financial statement accounts noted in the explanatory language typically correspond to the accounts subsequently restated. In sum, our results suggest that present-day audit reports communicate some information about financial reporting quality.

Related-Party Transactions and Stock Price Crash Risk: Evidence from China

2021 ◽  
pp. 2150020
Author(s):  
Ahsan Habib ◽  
Haiyan Jiang ◽  
Donghua Zhou
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Positive Association ◽  
Financial Reporting Quality ◽  
Crash Risk ◽  
Future Price ◽  
Accounting Data ◽  
Related Party Transactions ◽  
Representational Faithfulness

This paper investigates the association between related-party transactions (RPTs) and stock price crash risk in China. Our investigation is motivated by the controversy in the RPT literature over whether RPTs are value enhancing or opportunistic. Through the lens of stock price crash risk, we reveal that RPTs may violate the arm’s-length assumption of regular market-based transactions, impairing the representational faithfulness and verifiability of accounting data and, consequently, increasing the risk of future price crash. Importantly, we find that this detrimental economic consequence of RPTs is driven by abnormal RPTs that are opportunistic in nature. Our analyses also extend to operating RPTs, related-party loans, and two types of opportunistic RPTs: tunneling and propping. The positive association between RPTs and stock price crash risk is not mediated by financial reporting quality, suggesting that the risk factors associated with RPTs are operational. Our main results remain robust to a series of tests done to address the potential endogeneity between RPTs and stock price crash risk.

scholarly journals The effect of governance system and degree of convergence to IFRs on the quality of financial reporting: Evidence from Asia

2015 ◽  
Vol 12 (4) ◽  
pp. 409-423
Author(s):  
Ratna Wardhani ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Governance System ◽  
Governance Practice ◽  
Corporate Governance Practice ◽  
Degree Of Convergence

This research investigates the effect of governance system and degree of convergence to IFRS on financial reporting quality. With sample of Asian countries, this study concludes that country level and firm level governance systems, both at, and the degree of convergence have positive influence on financial reporting quality.The effect of degree of convergence of local GAAP to IFRS and corporate governance practice to financial reporting quality will be stronger for companies in countries with weak investor protection. Also, we find that in company with weak corporate governance practice, the adoption of international standards will increase the quality of financial reporting.The results indicate that the adoption of international accounting standard become more important in the countries and companies with weak governance system.

Family ownership and financial reporting quality: Iranian evidence

2018 ◽  
Vol 8 (3) ◽  
pp. 339-356 ◽  
Author(s):  
Mahmoud Mousavi Shiri ◽  
Mahdi Salehi ◽  
Fatemeh Abbasi ◽  
Shayan Farhangdoust
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Stock Exchange ◽  
Accounting Information ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Family Ownership ◽  
Content Type

PurposeIn the process of reporting accounting information, the auditor’s objective is to detect possible misstatements and errors in accounting information. Audit evidence aids auditors in providing reasonable assurance about the quality of financial reporting. Studying the quality of family firms’ financial reporting is of higher importance relative to non-family firms due to lower risk of accounting manipulation. Therefore, the purpose of this paper is to examine the relationship between family ownership structure and financial reporting quality from an auditing perspective.Design/methodology/approachTo analyze the research hypotheses, the authors use a sample data consisted of 221 companies listed on the Tehran Stock Exchange (including 52 family and 169 non-family firms) over a five-year span from 2011 to 2015.FindingsUsing multivariate regression analysis of panel data, our results indicate that audit risk in family firms is lower than their counterparts. Likewise, the findings are indicative of lower audit fees paid by family firms as compared to non-family ones. The authors also find that auditors put more effort in family firms and thus audit effort is more significant for these kinds of firms.Originality/valueThe study focuses on family ownership and financial reporting quality in a developing country like Iran and the results of the study may be beneficial to other developing nations, as Iran stock market possesses some unique features which are not normally prevailing in other equity markets, even in the Middle East.

Enhancing Financial Reporting Quality through Corporate Ethics Commitment

2021 ◽  
Vol 6 (2) ◽  
pp. 84-94
Author(s):  
Noorul Azwin Md Nasir ◽  
Hafiza Aishah Hashim ◽  
Noorshella Che Nawi ◽  
Mohd Nor Hakimin Yusoff ◽  
Nur Athirah Mohd Aluwi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Code Of Ethics ◽  
Reporting Quality ◽  
Jel Classification ◽  
Financial Reporting Quality ◽  
Corporate Ethics ◽  
Financial Statement Fraud ◽  
Code Of Corporate Governance

Objective - A rising number of cases involving ethical misconduct within firms have of late received considerable attention in Malaysia. Despite the country's declaring having a strong corporate governance policy, strengthened through the Code of Ethics for Company Directors and Malaysia Code of Corporate Governance, unethical practices, and lack of integrity within firms remain an issue. This paper aims to review the current implementation of corporate ethical conducts among corporate governance practitioners as well as factors that influence corporate ethics commitment in a firm. Methodology/Technique - This paper is developed from extensive readings of previous literature on corporate governance practices and their effect on the quality of financial reports. Findings - This paper discloses collective approaches of corporate ethics practiced in Malaysian firms and how the implementation has enhanced the firms' overall financial reporting quality. It demonstrates current issues and the importance of corporate ethics commitment to enhance financial reporting quality. Firms that emphasize ethical commitments, reduce the risk of financial statement fraud and firms will naturally gain trust from their stakeholders. Novelty - This paper stresses the importance of sound ethical conduct above other factors that influence the financial reporting quality of firms in Malaysia. This paper is the result of extensive research on corporate ethics commitment and financial reporting quality. Type of Paper - Review. Keywords: Corporate Ethics; Corporate Governance; Financial Reporting Quality JEL Classification: G34, M41.

Enhancing Financial Reporting Quality through Corporate Ethics Commitment: A Malaysian Review

2021 ◽  
Vol 12 (1) ◽  
pp. 72-72
Author(s):  
Noorul Azwin Md Nasir ◽  
Hafiza Aishah Hashim ◽  
Noorshella Che Nawi ◽  
Mohd Nor Hakimin Yusoff ◽  
Nur Athirah Mohd Aluwi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Corporate Culture ◽  
Ethical Issues ◽  
Code Of Ethics ◽  
Reporting Quality ◽  
Warning Signs ◽  
Financial Reporting Quality ◽  
Corporate Ethics ◽  
Ethical Misconduct

A rising number of cases involving ethical misconduct within firms have of late received considerable attention in Malaysia. Despite the country's declaring having a strong corporate governance policy, strengthened through the Code of Ethics for Company Directors and Malaysia Code of Corporate Governance, the unethical practices and lack of integrity within firms remain an issue. PricewaterhouseCoopers (PwC) Malaysia conducted a survey in 2018, it was found that 41 percent of Malaysian registered companies were guilty of committing some forms of economic crimes, specifically business misconduct, asset misappropriation, bribery, and corruption. They added, the actual number may be higher due to many cases of ethical misconduct that typically go unreported. Furthermore, crimes of ethical misconduct in Malaysia have also increased by 28 percent in the last two years. It was revealed taht corporate culture was the most influential element in helping detect early warning signs of ethical misconduct within a firm. A KPMG 2019 report published in the subsequent year also suggested that an unhinged desire for a wealthy lifestyle acts as a prime motivation behind many of the unethical behaviors discovered. Thus, in the light of the increasingly worsening situation of ethical misconduct in Malaysian firms, the need to explore these corporate ethical issues has never become more crucial and appropriate. The ubiquitous nature of the issue has subsequently jeopardized the financial reporting quality of Malaysia's firms. Keywords: Corporate Ethics, Corporate Governance, Earnings Management, Financial Reporting Quality

Impact of XBRL on Voluntary Adopters' Financial Reporting Quality and Cost of Equity Capital

2018 ◽  
Vol 15 (2) ◽  
pp. 45-65
Author(s):  
Tienshih Hsieh ◽  
Jean C. Bedard
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Cost Of Capital ◽  
Interactive Effect ◽  
Reporting Quality ◽  
Equity Capital ◽  
Financial Reporting Quality ◽  
Cost Of Equity Capital ◽  
Public Companies ◽  
Expected Benefits

ABSTRACT We investigate whether corporate governance quality explains differences in financial reporting quality and cost of capital following the XBRL Voluntary Filing Program (VFP) launched by the SEC. Research on the effects of voluntary XBRL adoption remains valuable, as a bill recently introduced in Congress could revert the majority of U.S. public companies to voluntary compliance. Further, such research informs investors, researchers, and regulators in other countries that do not yet require XBRL. We hypothesize that the likelihood of achieving XBRL's expected benefits is greater in companies with stronger corporate governance. For instance, such companies might implement XBRL in ways that substantially improve information gathering and reporting; or make better use of XBRL to enhance its benefits, regardless of implementation strategy. Results confirm the expected interactive effect of voluntary XBRL adoption and corporate governance strength on both financial reporting quality and cost of capital. These findings suggest that not all voluntary adopters benefited from XBRL; rather, only those with superior corporate governance show measurable benefits during our study period.

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