scholarly journals An Assessment Of The Impact Of The Sarbanes-Oxley Act On The Investigating Violations Of The Foreign Corrupt Practices Act

2011 ◽  
Vol 6 (10) ◽  
Author(s):  
Karen T. Cascini ◽  
Alan DelFavero
Keyword(s):  
Financial Reporting ◽  
Font Size ◽  
Foreign Corrupt Practices Act ◽  
Unethical Conduct ◽  
Corporate Scandals ◽  
Corporate Executives ◽  
Sarbanes Oxley ◽  
The Impact

<p class="MsoBodyText" style="text-align: justify; margin: 0in 0.5in 0pt; background: white;"><span style="font-style: normal; mso-bidi-font-size: 10.0pt; mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">During the late 1990s and early 2000s, a plethora of corporate scandals occurred. Due to these corporate debacles, corporate executives have been placed under fire. In response to such unethical conduct with regard to internal practices and financial reporting, legislation has been passed in order to ensure that corporations conduct their business in an ethical manner. The purpose of this paper is to assess the connection between the Foreign Corrupt Practices Act of 1977 (FCPA) and the Sarbanes-Oxley Act of 2002 (SOx), to determine whether SOx has influenced the FCPA&rsquo;s investigative violation activities by examining the number of such investigations since the passage SOx. This paper also addresses specific cases of violations of anti-corruption laws and compares SOx and the FCPA on violation penalties.</span></span></span></p>

scholarly journals An Opinion On Independent Auditors Opinions Of Substantial Doubt: A SOX-2002 Efficiency Evaluation

2011 ◽  
Vol 3 (11) ◽  
Author(s):  
Jeff Grover ◽  
Angeline M. Lavin
Keyword(s):  
Financial Reporting ◽  
Corporate Disclosure ◽  
Font Size ◽  
Corporate Scandals ◽  
Corporate Executives ◽  
Sarbanes Oxley ◽  
Ethical Misconduct ◽  
Chance Occurrence ◽  
Independent Auditors ◽  
The Government

<p class="MsoBodyText" style="text-align: justify; margin: 0in 0.6in 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Given the recent events involving allegations of ethical misconduct by corporate executives and oversight neglect from the auditing community, the government was motivated to implement national reform to minimize the continued threat of corporate malfeasance. Due to the severity of these corporate scandals, Congress mandated and the President signed into law the Sarbanes-Oxley Act of 2002 (SOX-2002) to affect sweeping corporate disclosure and financial reporting reform to thwart continued scrupulous activities. In light of these events, the motivation of this study is to examine the effects of SOX-2002 in empowering independent auditors to provide unbiased opinions of an entity&rsquo;s ability to remain as a going concern. The uniqueness of this study is that it attempts to determine if substantial doubt opinions signal bankruptcy greater than the chance occurrence of these events. If true, then these early warnings could be used to minimize the costs of bankruptcy. This study suggests that these opinions do signal bankruptcy filings greater than chance, which supports the position of auditor empowerment in a post-SOX-2002 period.</span></span></p>

The Impact of Client and Misstatement Characteristics on the Disposition of Proposed Audit Adjustments

2011 ◽  
Vol 30 (2) ◽  
pp. 103-124 ◽  
Author(s):  
Jennifer Joe ◽  
Arnold Wright, and ◽  
Sally Wright
Keyword(s):  
Financial Reporting ◽  
Internal Controls ◽  
Data Availability ◽  
Audit Firm ◽  
Sarbanes Oxley ◽  
Big 4 ◽  
Time Period ◽  
Confidentiality Agreement ◽  
Financial Scandals ◽  
The Impact

SUMMARY We present evidence on the resolution of proposed audit adjustments during a unique time period, immediately following several U.S. financial scandals and surrounding calls for reforms in auditing and financial reporting, which culminated in the passage of the Sarbanes-Oxley Act (SOX). During this period, auditors and their clients faced increased scrutiny from investors and regulators. In addition, auditors had to contend with changed incentives, a new external regulator (i.e., the PCAOB), and upcoming annual PCAOB inspections. We extend prior studies by considering a broader range of factors potentially impacting the resolution of proposed adjustments, including the effect of client tenure, strength of internal controls, and repeat adjustments. Data on 458 proposed adjustments are obtained from the working papers of a sample of 163 audit engagements conducted during 2002 by a Big 4 firm. We find that 24.2 percent of proposed adjustments were subsequently waived. The results indicate audit adjustments are more likely to be waived for clients with whom the audit firm has had a longer relationship, although the pattern does not reflect favoring such clients. We also find that adjustments are more likely to be waived for repeat adjustments. Data Availability: Due to a confidentiality agreement with the participating audit firm the data are proprietary.

Corporate Governance Factors and Auditor Going Concern Assessments

2005 ◽  
Vol 4 (3) ◽  
pp. 5-29 ◽  
Author(s):  
Susan Parker ◽  
Gary F. Peters ◽  
Howard F. Turetsky
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Financial Distress ◽  
Audit Committee ◽  
Future Research ◽  
Going Concern ◽  
Sarbanes Oxley ◽  
Auditing Standards ◽  
Distressed Firms ◽  
The Impact

When making going concern assessments, Statement on Auditing Standards No. 59 (Auditing Standards Board 1988) directs auditors to consider the nature of management's plans and ability to mitigate periods of financial distress successfully. Corporate governance factors reflect attributes of control, oversight, and/or support of management's plans and actions intended to overcome financial distress. Correspondingly, this study investigates the impact of certain corporate governance factors on the likelihood of a going concern modification. Using survival analysis techniques, we examine a sample of 161 financially distressed firms for the time period 1988–1996. We find that auditors are twice as likely to issue a going concern modification when the CEO is replaced. We also find that going concern modifications are inversely associated with blockholder ownership. We also confirm Carcello and Neal's (2000) findings with respect to the association between an independent audit committee and an increased likelihood of modification. In a repeated events setting, we find that insider ownership and board independence are inversely associated with repeated going concern modifications. Our study concludes by proposing implications for the current financial reporting environment (including the Sarbanes‐Oxley Act of 2002) and future research avenues.

Female Board Presence and the Likelihood of Financial Restatement

2012 ◽  
Vol 26 (4) ◽  
pp. 607-629 ◽  
Author(s):  
Lawrence J. Abbott ◽  
Susan Parker ◽  
Theresa J. Presley
Keyword(s):  
Financial Reporting ◽  
Matched Pair ◽  
Related Factors ◽  
Board Diversity ◽  
Financial Restatement ◽  
Sarbanes Oxley ◽  
Time Period ◽  
Lower Likelihood ◽  
Female Director ◽  
The Impact

SYNOPSIS: This paper investigates the impact of one form of board diversity on the incidence of financial restatement. More specifically, we hypothesize that there is a negative relation between female board presence (defined as whether or not a board has at least one female director) and the likelihood of a financial restatement. Our hypothesis is consistent with a female board presence contributing to the board's ability to maintain an attitude of mental independence, diminishing the extent of groupthink and enhancing the ability of the board to monitor financial reporting. Utilizing the U.S. General Accounting Office (U.S. GAO 2002) report on restatements, we construct a matched-pair sample of 278 annual (187 quarterly) restatement and 278 annual (187 quarterly) control firms. After controlling for other restatement-related factors, we find a significant association between the presence of at least one woman on the board and a lower likelihood of restatement. Our results continue to hold in annual restatements from the post-Sarbanes-Oxley (SOX) time period.

Are earnings strings restrained after SOX?

2018 ◽  
Vol 17 (1) ◽  
pp. 18-40 ◽  
Author(s):  
Mark Kohlbeck ◽  
Jomo Sankara ◽  
Errol G. Stewart
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Firm Value ◽  
Information Environment ◽  
Content Type ◽  
External Monitoring ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Reporting Environment ◽  
The Impact

Purpose This paper aims to examine whether external monitors (auditors and analysts) constrain earnings strings, an indicator of earnings management, and whether this monitoring is more effective after the implementation of the Sarbanes-Oxley Act of 2002 (SOX), given the emphasis of SOX on improving auditing, financial reporting and the information environment. Design/methodology/approach Agency theory establishes the premise between external monitoring and earnings strings. Auditor tenure and number of analysts following provide measures for external monitoring quality. Using prior research, empirical models explaining the presence of an earnings strings and earnings strings trend are developed to test the hypotheses. Findings Pre-SOX, extreme auditor tenure, indicating lower quality external monitoring, is associated with greater earnings strings trend, and analyst coverage is associated with increased likelihood of earnings strings and greater earnings strings trend consistent with analyst pressure on management. More effective auditor and analyst monitoring occurs post-SOX in terms of reduced likelihood of earnings strings and earnings strings trend. Originality/value The authors provide evidence on how elements of external monitoring are associated with increased earnings strings pre-SOX. Further, they contribute to the debate on the impact of SOX on external firm monitoring and the overall financial information environment. By focusing on earnings strings, the outcome of earnings management, the authors provide a unique understanding of external monitoring that also provides insight on the overvaluation of equity and ultimate destruction of firm value. The evidence demonstrates how regulation has contributed to an improved financial reporting environment and external monitoring.

scholarly journals ASSESSMENT OF THE POTENTIAL OF AUDITING FIRMS IN THE CONTEXT OF DEVELOPING ECONOMIC CRIMES

2020 ◽  
Author(s):  
Dimitriy Grytsyshen ◽  
◽  
Zhanna Prokopenko ◽  
Tetiana Kochyn ◽  
Volodymyr Tsependa ◽  
...  
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Legal Framework ◽  
Audit Firm ◽  
Corporate Scandals ◽  
Functional Value ◽  
Functional Features ◽  
Labor Resources ◽  
The Impact

The article proves that the number one issue in the development of the information society is not the amount of information, but its quality, and it is the audit of confirmation of this quality through the assessment of the risks of its reduction. It is specified that in this direction it is important both the innovative method of auditing the financial statements for quality, and the resources needed to perform all defined audit procedures. It is revealed that according to the model the content of audit tasks changes, and there is a need to transform its methodology. The impact of negative financial reporting and auditing results on the securities markets was assessed by studying corporate scandals in Ukraine and the world. The characteristics of corporate scandals in terms of falsification of financial statements and methodology and organization of audit are given. The directions of transformation of institutional audit support as a tool for evaluating financial statements and its results as components of the information resource for internal and external users are identified. The analysis of the legal framework in the field of quality control of services provided by audit entities allowed to form the institutional aspects of quality assurance of audit activities and to establish the functional features of the relevant institutions. The organizational-hierarchical interrelations are defined, and also the functional value in system of maintenance of quality of auditing activity of subjects of regulation of auditing activity in Ukraine is defined. The relationship between the quality of the audit and the audit of the quality of financial statements is substantiated. It is established that the key resource of economic activity of the audit firm is the labor resources that form the human resources and determine the quality of the audit service. It is characterized that the quality of the audit service depends on the effectiveness of the audit entity as a subject of external independent financial control in the context of the relevant public functions and as a business entity whose main purpose is to make a profit. It was found that the efficiency of use and formation of economic resources by the audit firm depends on all the effects associated with its operation.

scholarly journals The Impact Of Sarbanes-Oxley Act

2011 ◽  
Vol 6 (10) ◽  
Author(s):  
Yousef Jahmani ◽  
William A. Dowling
Keyword(s):  
Financial Statements ◽  
Public Confidence ◽  
Font Size ◽  
Sarbanes Oxley ◽  
The Impact

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;;"><span style="font-size: x-small;">The Sarbanes-Oxley Act (SOX) was signed into law in July 2002, with the express purpose of restoring public confidence in corporate financial statements. Prior to the enactment of Sox, investors suffered significant losses due to corporate failures brought on by financial malfeasance.<span style="mso-spacerun: yes;">&nbsp; </span></span><strong></strong></span></p>

scholarly journals Corporate Reputation And Earnings Quality

2011 ◽  
Vol 25 (4) ◽  
Author(s):  
Christopher Luchs ◽  
Marty Stuebs ◽  
Li Sun
Keyword(s):  
Financial Reporting ◽  
Corporate Reputation ◽  
Earnings Quality ◽  
Individual Investors ◽  
Font Size ◽  
Cross Sectional ◽  
Investor Confidence ◽  
Reporting Environment ◽  
The Impact

<p class="MsoNoSpacing" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; font-size: 10pt;">Investor confidence and the quality of reported information are primary issues in our current financial reporting environment as a result of recent scandals and financial crises. Assessing the quality of reported financial information is an important issue for investors. Can investors use corporate reputation to assess earnings quality? This paper examines the association between corporate reputation and earnings quality. We use a public measure &ndash; &ldquo;America&rsquo;s Most Admired Companies&rdquo; &ndash; as a proxy for corporate reputation. These firms are considered to possess superior reputation. A cross-sectional accruals-based measure proxies for earnings quality. We compare the firms listed on America&rsquo;s Most Admired Companies of 2006 to a sample of control firms and find that sample firms have higher earnings quality than control firms. Our results should be of interest to managers who engage in behavior leading to or maintaining a positive corporate reputation, and to financial analysts who conduct research on the impact of corporate reputation on earnings quality. Moreover, our study can increase individual investors&rsquo; confidence in assessing the earnings quality of companies with a superior reputation. </span></p>

The Impact of SOX Section 404 Internal Control Quality Assessment on Audit Delay in the SOX Era

2006 ◽  
Vol 25 (2) ◽  
pp. 1-23 ◽  
Author(s):  
Michael L. Ettredge ◽  
Chan Li ◽  
Lili Sun
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Small Sample ◽  
Impact Factors ◽  
Section 404 ◽  
Material Weakness ◽  
Control Quality ◽  
Sarbanes Oxley ◽  
Specific Material ◽  
The Impact

This study analyzes the impact of internal control quality on audit delay following the implementation of the Sarbanes-Oxley Act (2002) (SOX). Unlike prior studies of audit delay that obtain information about internal control strength via surveys, or use fairly crude proxies for internal control quality, our study employs external auditor assessments of internal control over financial reporting (ICOFR) that are publicly disclosed in SEC 10-K filings under SOX Section 404. Thus, the empirical evidence provided in this study is both timely and reliable (i.e., not subject to small sample bias or weak proxies). Consistent with our expectation, we find that the presence of material weakness in ICOFR is associated with longer delays. The types of material weakness also matter. Compared to specific material weakness, general material weakness is associated with longer delays. Additional analyses indicate that companies with control problems in personnel, process and procedure, segregation of duties, and closing process experience longer delays. After controlling for other impact factors, this study also documents a significant increase in audit delay associated with the fulfillment of the SOX Section 404 ICOFR assessment requirement. This suggests that Section 404 assessments have made it more difficult for firms to comply with the SEC's desire to shorten 10-K filing deadlines. Our finding thus supports and helps explain the SEC's decisions in 2004 and 2005 to defer scheduled reductions in 10-K filing deadlines (from 75 days to 60 days) for large, accelerated filers.

The Impact of Enterprise Resource Planning (ERP) Systems on the Effectiveness of Internal Controls over Financial Reporting

2011 ◽  
Vol 25 (1) ◽  
pp. 129-157 ◽  
Author(s):  
John J. Morris
Keyword(s):  
Financial Reporting ◽  
Enterprise Resource Planning ◽  
Internal Control ◽  
Control Sample ◽  
Resource Planning ◽  
Internal Controls ◽  
Erp Systems ◽  
Individual Account ◽  
Sarbanes Oxley ◽  
The Impact

ABSTRACT: Software vendors that market enterprise resource planning (ERP) systems have taken advantage of the increased focus on internal controls that grew out of the Sarbanes-Oxley (SOX) legislation by emphasizing that a key feature of ERP systems is the use of “built-in” controls that mirror a firm’s infrastructure. They argue that these built-in controls and other features will help firms improve their internal control over financial reporting as required by SOX. This study tests that assertion by examining SOX Section 404 compliance data for a sample of firms that implemented ERP systems between 1994 and 2003. The results suggest that ERP-implementing firms are less likely to report internal control weaknesses (ICW) than a matched control sample of non-ERP-implementing firms. It also finds that this difference exists for both general (entity-wide), and individual (account-level) controls.

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