Opportunistic Avoidance of Litigation Loss Accruals and the Mitigating Effects of Auditors

2021 ◽  
pp. 0148558X2110685
Author(s):  
Hsin-Yi Huang ◽  
Eric Lohwasser ◽  
Zhiyuan Yu ◽  
Hsihui Chang
Keyword(s):  
Analyst Forecasts ◽  
Professional Skepticism ◽  
The Public ◽  
Subjective Estimate ◽  
Public Company ◽  
Subjective Estimates

We find that firms with preliminary earnings that are expected to just meet analyst forecasts are more likely to only disclose (i.e., not accrue) litigation loss contingencies, claiming that the litigation event falls below the qualitative thresholds necessitating accrual. We also find that this opportunistic treatment of a subjective estimate is reduced when firms’ auditors have expertise in the defendant’s industry or have experience auditing litigation contingencies. Furthermore, we find that opportunistic disclosure usage increases when firms are more economically important to auditors’ client portfolios. Our results are robust to a series of additional tests. We provide evidence to support the Public Company Accounting Oversight Board’s (PCAOB) call for increased auditor professional skepticism toward management bias and opportunism when evaluating subjective estimates.

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Rulemaking Docket Matter No. 37: PCAOB Release No. 2011-006, Concept Release on Auditor Independence and Audit Firm Rotation

2012 ◽  
Vol 6 (1) ◽  
pp. C15-C27 ◽  
Author(s):  
Keith L. Jones ◽  
Jagadison K. Aier ◽  
Duane M. Brandon ◽  
Tina D. Carpenter ◽  
Lisa M. Gaynor ◽  
...  
Keyword(s):  
Exposure Period ◽  
Auditor Independence ◽  
Data Availability ◽  
Professional Skepticism ◽  
Audit Firm ◽  
The Public ◽  
Public Comment ◽  
Public Company ◽  
Auditing Standards ◽  
Mandatory Audit Firm Rotation

SUMMARY In August 2011, the Public Company Accounting Oversight Board (PCAOB or Board) issued a concept release to solicit public comment on the potential direction of a proposed standard-setting project on means to enhance auditor independence, objectivity, and professional skepticism. The Concept Release sought comments on and explores in detail the possibility of mandatory audit firm rotation. The PCAOB provided for a 121-day exposure period (from August 16 to December 14, 2011) for interested parties to examine and provide comments on the concept release. The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below (dated December 13, 2011) to the PCAOB on PCAOB Rulemaking Docket Matter No. 37: PCAOB Release No. 2011-006, Concept Release on Auditor Independence and Audit Firm Rotation. Data Availability: Information about and access to the release are available at: http://pcaobus.org/Rules/Rulemaking/Docket037/Release_2011-006.pdf

Professional Skepticism: The Effects of a Partner's Influence and the Level of Fraud Indicators on Auditors' Fraud Judgments and Actions

2013 ◽  
Vol 25 (2) ◽  
pp. 45-69 ◽  
Author(s):  
Tina D. Carpenter ◽  
Jane L. Reimers
Keyword(s):  
Risk Factors ◽  
Risk Assessments ◽  
Costs And Benefits ◽  
Professional Skepticism ◽  
The Public ◽  
Fraud Risk ◽  
Public Company ◽  
Academic Researchers ◽  
Fraud Risk Assessments ◽  
Selection Of

ABSTRACT: The Public Company Accounting Oversight Board (PCAOB), in its recent auditor inspections, cited a lack of professional skepticism and selection of appropriate audit procedures as serious problems for auditors, and suggested that the tone set by audit partners is critical for auditors' fraud investigations. We investigate selected components of Nelson's (2009) model of professional skepticism: the effects of the partner's emphasis on professional skepticism and the effect of the level of fraud indicators on auditors' identification of fraud risk factors, auditors' fraud risk assessments, and their selection of audit procedures. Thus, we provide an initial test of predictions of the links established in his model, and our results suggest a possible extension to his model. This study provides evidence that a partner's emphasis on professional skepticism is critical for both effective and efficient identification of relevant fraud risk factors and choice of relevant audit procedures. These results should be informative to both standard setters and academic researchers because they highlight the costs and benefits of an audit partner's attitude toward professional skepticism on the evaluation of fraud.

Does Recent Academic Research Support Changes to Audit Reporting Standards?

2016 ◽  
Vol 30 (2) ◽  
pp. 255-275 ◽  
Author(s):  
Jean Bédard ◽  
Paul Coram ◽  
Reza Espahbodi ◽  
Theodore J. Mock
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Future Research ◽  
Research Support ◽  
The Public ◽  
Market Participants ◽  
Information Gap ◽  
Public Company ◽  
Reporting Process

SYNOPSIS The Public Company Accounting Oversight Board (PCAOB), the International Auditing and Assurance Standards Board (IAASB), and the U.K. Financial Reporting Council (FRC) have proposed or approved standards that significantly change the independent auditor's report. These initiatives require the auditor to make additional disclosures intended to close the information gap; that is, the gap between the information users desire and the information available through the audited financial statements, other corporate disclosures, and the auditor's report. They are also intended to improve the relevancy of the auditor's report. We augment prior academic research by providing standard setters with an updated synthesis of relevant research. More importantly, we provide an assessment of whether the changes are likely to close the information gap, which is important to financial market participants and other stakeholders in the audit reporting process. Also, we identify areas where there seems to be a lack of sufficient research. These results are of interest to all stakeholders in the audit reporting process, as the changes to the auditor's report are fundamental. Additionally, our summaries of research on the auditor's report highlight where there is limited research or inconsistent results, which will help academics identify important opportunities for future research.

The Development of Auditing Standards at the PCAOB and Related Audit Practitioner Input

2020 ◽  
Author(s):  
L. Tyler Williams ◽  
W. Mark Wilder
Keyword(s):  
Standard Setting ◽  
The Public ◽  
Setting Process ◽  
Public Company ◽  
Auditing Standards ◽  
Audit Standard ◽  
Comment Letters ◽  
Feedback Responses

The Public Company Accounting Oversight Board (PCAOB; Board) maintains that constituent feedback plays an essential and dynamic role in its audit standard-setting process. We examine a major source of constituent feedback, responses to standard-setting questions, using a sample drawn from the original proposals of fourteen PCAOB auditing standards. We find that after receiving comment letter feedback to the standard-setting questions, the Board revises approximately half of its guidance tied to those questions before it finalizes auditing standards-a finding consistent with the Board's assertion that it carefully considers constituent perspectives as it develops new regulation. We also explore the related comment letters of eight professional auditing firms subject to the PCAOB's annual inspection program and discover varying levels of opposition to and support for the PCAOB's proposed authoritative guidance. We observe PCAOB revision to authoritative guidance highly contested by the firms in more than three-fourths of cases of standard-setting questions and PCAOB non-revision to guidance highly supported by the firms in more than ninety percent of cases.

scholarly journals Measuring the Range Application of Internal Marketing for HRM Philosophy in the Public Company for Electrical and Electronic Industries

2019 ◽  
Vol 25 (116) ◽  
pp. 111-126
Author(s):  
Haider Fadhel Kadhem ◽  
Alaulddin B Jawad
Keyword(s):  
Research Paper ◽  
Internal Marketing ◽  
Internal Communication ◽  
Company Performance ◽  
Check List ◽  
Main Hypothesis ◽  
The Public ◽  
Public Company ◽  
List Method ◽  
Organization Framework

The reason behind choosing this topic " internal marketing (IM) of human resource management (HRM)" is to highlight the advantages of using IM in the organization framework. The problem of the research paper lies in not paying enough attention to employees genuine needs as they interact with each other in the sake of organization prosper. This research paper can be used as indictor to expose the weaknesses that the organization encounters daily. The current research paper attempts at examining the possibility of developing philosophy of internal marketing of human resources and its most practices, empowering staff, training courses, motivations and recognitions, and within departments communication, in order to reach targeted results such as performance, knowledge, and quality. That can be done through getting rid of processes that do not create value for the final product presented in the General Company for Electrical and Electronic Industries in Iraq. The main hypothesis of the research is to investigate whether the General Company for Electrical and Electronic Industries in Iraq applies IM as one of the significant approach to boost and alter employees' performance and attitudes in order to increase organizational commitment. The research in order to reach its target relied on the “check list” method, which is one of the case study methods that rely on personal observation and interviews mainly in its preparation. The “check list” involved different levels of management, directors, executives, and employees who work at General Company for Electrical and Electronic Industries in Iraq. The study reached a number of conclusions.  The most important one is dissemination of culture and principles of IM of HRM within all units of the company. The benefits of this system lead to improve the overall company performance. Organizations should be more flexible in administrative decisions by opening diverse communication channels at all levels of management, viewing employees’ suggestions and listening to their complaints, and involving them in the decision-making process as a part of principles of internal communication.

scholarly journals Is The Pcaob a “Heavily Controlled Component” Of The Sec?: An Essential Question In The Constitutional Controversy

2009 ◽  
Vol 71 (3) ◽  
Author(s):  
Donna M. Nagy
Keyword(s):  
Supreme Court ◽  
Separation Of Powers ◽  
Free Enterprise ◽  
Public Companies ◽  
The Public ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Essential Question ◽  
The U.S

The U.S. Supreme Court recently heard oral arguments in Free Enterprise Fund v. Public Company Accounting Oversight Board, described as “the most important separation-of-powers case regarding the President’s appointment and removal powers to reach the courts in the last 20 years.” Established by Congress as the cornerstone of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley” or the “Act”), the Public Company Accounting Oversight Board (the “PCAOB” or the “Board”) was structured as “a strong, independent board to oversee the conduct of the auditors of public companies.” Its principal mission was to prevent the type of auditing failures that contributed to the scandals at Enron, WorldCom, and numerous other public companies in the period leading up to the passage of the Act.

scholarly journals Confidence boosts serial dependence in orientation estimation

2018 ◽  
Author(s):  
Jason Samaha ◽  
Missy Switzky ◽  
Bradley R. Postle
Keyword(s):  
Decision Making ◽  
Task Performance ◽  
Signal Quality ◽  
Serial Dependence ◽  
Perceptual Decision Making ◽  
Subjective Estimate ◽  
Subjective Confidence ◽  
Internal Signal ◽  
Normative Models ◽  
Subjective Estimates

AbstractIn the absence of external feedback, a decision maker must rely on a subjective estimate of their decision accuracy in order to appropriately guide behavior. Normative models of perceptual decision making relate subjective estimates of internal signal quality (e.g. confidence) directly to the internal signal quality itself, thereby making it unknowable whether the subjective estimate or the underlying signal is what drives behavior. We constructed stimuli that dissociated human observer’s performance on a visual estimation task from their subjective estimates of confidence in their performance, thus violating normative principles. To understand whether confidence influences future decision making, we examined serial dependence in observer’s responses, a phenomenon whereby the estimate of a stimulus on the current trial can be biased towards the stimulus from the previous trial. We found that when decisions were made with high confidence, they conferred stronger biases upon the following trial, suggesting that confidence may enhance serial dependence. Critically, this finding was true also when confidence was experimentally dissociated from task performance, indicating that subjective confidence, independent of signal quality, can amplify serial dependence. These findings demonstrate an effect of confidence on future behavior, independent of task performance, and suggest that perceptual decisions incorporate recent history in an uncertainty-weighted manner, but where the uncertainty carried forward is a subjectively estimated and possibly suboptimal readout of objective sensory uncertainty.

SISTEM SIMULASI PERHITUNGAN KPR DI PERUM PERUMNAS REGIONAL V BERBASIS WEB

2021 ◽  
Vol 1 (2) ◽  
pp. 33-43
Author(s):  
Dendy Kurniawan ◽  
Dwi Setiawan
Keyword(s):  
Middle Class ◽  
Programming Languages ◽  
Home Ownership ◽  
Simulation System ◽  
Microsoft Excel ◽  
The Public ◽  
Payment Methods ◽  
Regional Area ◽  
Cash Payment ◽  
Public Company

Perum Perumnas is a State-Owned Enterprise (BUMN) in the form of a Public Company (Perum). Perum Perumnas has 7 regional business areas and 1 rusunawa regional area. Perum Perumnas Regional V which is located at Jl. Wilis No. 23 Semarang is engaged in providing housing and settlements for the middle class community. In its business activities, Perumnas sells houses to the public with cash payment methods or through Home Ownership Credit (KPR). The Perumnas Branch can serve every consumer who comes to Perumnas Branch to seek information about the amount of monthly installment payments if the consumer applies the mortgage system with the down payment that the consumer has and the shortfall that must be paid. In carrying out this activity, the Perumnas Branch still uses the Microsoft Excel application.The problem that often arises at this time is the calculation of KPR between Perumnas Semarang Branch I and Perumnas Semarang Branch II which is quite different, making it less effective for companies. Based on this description, the author tries to provide a solution that is able to overcome these problems by designing a website-based mortgage calculation simulation system at Perum Perumnas Regional V with the aim of making it easier for consumers and marketing or sales parties to find information about mortgage calculations.Making this simulation system, the author uses the HTML, CSS, PHP, JavaScript and MySQL programming languages ​​as the database. In its manufacture, this application is adapted to the needs of Perumnas in general.The conclusion that can be drawn is the dissimilarity or difference in filling out the mortgage calculation where the Semarang Branch I and Semarang Branch II when the marketing staff does the mortgage calculation even though they use the same bank Suggestions that can be put forward is to create a mortgage calculation simulation system that can make it easier for consumers to get information about mortgage calculations quickly, efficiently and accurately and can be accessed anywhere and anytime.

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