The Effect of Institutional Investors on Financial Reporting Comparability in the U.S.: Evidence from Common Institutional Blockholders

2018 ◽  
Author(s):  
Yun Lou ◽  
Rencheng Wang ◽  
Kaitang Zhou
Keyword(s):  
Financial Reporting ◽  
Institutional Investors ◽  
Financial Reporting Comparability ◽  
The U.S

U.S.-Listed Foreign Companies' Choice of a U.S.-Based versus Home Country-Based Big N Principal Auditor and the Effect on Audit Fees and Earnings Quality

2015 ◽  
Vol 29 (3) ◽  
pp. 631-666 ◽  
Author(s):  
Sharad C. Asthana ◽  
K. K. Raman ◽  
Hongkang Xu
Keyword(s):  
Financial Reporting ◽  
Home Country ◽  
Earnings Quality ◽  
Audit Fees ◽  
Foreign Companies ◽  
Two Factors ◽  
Just Price ◽  
Reporting Environment ◽  
The U.S

SYNOPSIS We examine why U.S.-listed foreign companies choose to have a U.S.-based (rather than home country-based) Big N firm as their principal auditor for SEC reporting purposes and the effects of that choice for audit fees and earnings quality. We find that the likelihood of the Big N principal auditor being U.S.-based is decreasing in client size and the level of investor protection in the home country, and increasing in the proportion of income earned outside the home country. We also find compelling evidence that U.S.-based Big N auditors are associated with higher-quality earnings (albeit for a higher fee), despite two factors—the greater distance between the U.S.-based (vis-à-vis home country-based) Big N auditor and the client, and the likelihood that much of the audit work is done outside the U.S.—which potentially could lower the earnings quality of the U.S.-listed foreign client when the Big N principal auditor is U.S.-based. Overall, our study suggests that the higher fees associated with a U.S.-based Big N principal auditor is not just price protection; rather, U.S.-based Big N principal auditors are also improving the financial reporting environment by reporting higher-quality audited earnings for their U.S.-listed foreign clients. JEL Classifications: L11; L15; M42.

Auditor Appointment Strategy and Intragroup Value Transfers: Evidence From Family Business Groups

2021 ◽  
pp. 0148558X2199265
Author(s):  
Yan-Leung Cheung ◽  
In-Mu Haw ◽  
Weiqiang Tan ◽  
Wenming Wang
Keyword(s):  
Adverse Effect ◽  
Financial Reporting ◽  
Family Business ◽  
Business Groups ◽  
Divide And Conquer ◽  
Alternative Measure ◽  
Family Business Groups ◽  
Audit Effectiveness ◽  
Financial Reporting Comparability

Family business groups (FBGs) typically control several member firms and can hire a single auditor or multiple auditors to audit their member firms. This article examines what type of auditor appointment strategy constrains intragroup value transfers within FBGs. Analyzing related-party transactions (RPTs) within FBGs in Hong Kong, this study provides evidence that FBGs with multiple auditors undertake more intragroup value transfers than FBGs with a single auditor. However, the adverse effect of multiple-auditor appointments is mitigated by a stronger board and higher financial reporting comparability among member firms. Using an alternative measure of intragroup value transfers, we also find that the market perceives multiple-auditor appointments as impairing audit effectiveness. Overall, our findings offer the new insight that controlling families can exploit the appointment of multiple auditors as a “divide and conquer” strategy which undermines the monitoring role of auditors against intragroup value transfers, but stronger corporate governance of member firms can mitigate the adverse effect.

Meta‐analysis of the Impact of Adoption of IFRS on Financial Reporting Comparability, Market Liquidity, and Cost of Capital

Abacus ◽  
2021 ◽  
Vol 57 (3) ◽  
pp. 502-556
Author(s):  
Solomon Opare ◽  
Muhammad Nurul Houqe ◽  
Tony van Zijl
Keyword(s):  
Financial Reporting ◽  
Cost Of Capital ◽  
Meta Analysis ◽  
Market Liquidity ◽  
The Impact ◽  
Financial Reporting Comparability

Financial Reporting Comparability in US Firms Issuing Debt in the US Primary Market

2020 ◽  
Author(s):  
Paula Hill ◽  
Gerald J. Lobo ◽  
Shuo Wang
Keyword(s):  
Financial Reporting ◽  
The Us ◽  
Financial Reporting Comparability

XBRL Tag Extensions and Tax Accrual Quality

2020 ◽  
Author(s):  
Stephanie Walton ◽  
Liu L Yang ◽  
Yiyang Zhang
Keyword(s):  
Financial Reporting ◽  
Relative Rate ◽  
Financial Statements ◽  
Accrual Quality ◽  
Business Reporting ◽  
Prior Literature ◽  
Tax Reporting ◽  
Financial Reporting Comparability

The adoption of eXtensible Business Reporting Language (XBRL) requires management to label all information in their firm's financial statements and corresponding notes with either standardor custom extended tags. While prior literature has found that the rate of customization is associated with increased financial reporting complexity, there could be an unintended, beneficial consequence to tax reporting. We examine how the relative use of tax-related XBRL tag extensions could highlight unique tax activity characteristics, in turn increasing tax accrual quality and improving tax reporting transparency. We find that having a higher relative rate of extended tax tags is associated with higher tax accrual quality. That is, utilizing more tax tag extensions can assist in providing useful tax information, especially when a high number of total XBRL tags are used. Our results also suggest the need to reexamine the standard taxonomy to include more tax-oriented terms to improve financial reporting comparability.

Do Global Audit Firm Networks Apply Consistent Audit Methodologies across Jurisdictions? Evidence from Financial Reporting Comparability

2019 ◽  
Vol 95 (6) ◽  
pp. 151-179 ◽  
Author(s):  
Matthew S. Ege ◽  
Young Hoon Kim ◽  
Dechun Wang
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
International Standards ◽  
Global Network ◽  
Global Networks ◽  
Audit Firm ◽  
Operating Cash Flows ◽  
Audit Firms ◽  
Financial Reporting Comparability

ABSTRACT Brand name audit firms are global networks of local audit firms. These networks claim to enforce consistent audit methodologies across their member firms, which, if true, should systematically affect client financial reporting. We find that clients from different countries have more (less) comparable accruals when they are audited by local audit firms from the same global network (different global networks). Furthermore, inferences are similar when we examine client accrual comparability around audit firm switches induced by the failure of Andersen, which serves as a shock that helps improve identification. In falsification tests, having auditors from the same global network is not associated with differences in operating cash flows. Results also suggest that the role of global network methodologies in global financial reporting comparability is more pronounced across stronger investor protection jurisdictions and across jurisdictions that have adopted International Standards on Auditing. JEL Classifications: M41; M42.

14. Meetings and investor engagement

Company Law ◽  
2019 ◽  
pp. 339-374
Author(s):  
Lee Roach
Keyword(s):  
Financial Reporting ◽  
Institutional Investors ◽  
Majority Vote ◽  
General Meeting ◽  
Annual General ◽  
Annual General Meeting ◽  
Private Companies ◽  
Class Meeting ◽  
Public Companies ◽  
The Uk

This chapter examines the role and importance of general meetings, the significant body of procedural rules by which general meetings are run, and the extent to which a company's members actually engage with general meetings. Members make decisions in one of two ways: through a resolution or by unanimous assent. A resolution is simply a vote that requires a specified majority vote in its favour in order to be passed. The resolutions of public companies must be passed at meetings, whereas resolutions of private companies can be passed at meetings or via a written resolution. Two forms of general meeting existed: the annual general meeting and extraordinary general meetings. In some cases, however, companies are required to hold a class meeting in which only one class of member is entitled to attend. To encourage institutional investors to engage more, the Financial Reporting Council (FRC) has published the UK Stewardship Code.

Application of Fuzzy Logic to Fraud Detection

2005 ◽  
pp. 135-139
Author(s):  
Mary Jane Lenard ◽  
Pervaiz Alam
Keyword(s):  
Financial Reporting ◽  
Average Cost ◽  
Medical Insurance ◽  
Financial Statements ◽  
Third Party ◽  
Insurance Fraud ◽  
Fraudulent Financial Reporting ◽  
The Cost ◽  
The U.S ◽  
Financial Reporting Fraud

In light of recent reporting of the failures of some of the major publicly-held companies in the U.S. (e.g., Enron & WorldCom), it has become increasingly important that management, auditors, analysts, and regulators be able to assess and identify fraudulent financial reporting. The Enron and WorldCom failures illustrate that financial reporting fraud could have disastrous consequences both for stockholders and employees. These recent failures have not only adversely affected the U.S. accounting profession but have also raised serious questions about the credibility of financial statements. KPMG (2003) reports seven broad categories of fraud experienced by U.S. businesses and governments: employee fraud (60%), consumer fraud (32%), third-party fraud (25%), computer crime (18%), misconduct (15%), medical/insurance fraud (12%), and financial reporting fraud (7%). Even though it occurred with least frequency, the average cost of financial reporting fraud was the highest, at $257 million, followed by the cost of medical/insurance fraud (average cost of $33.7 million).

Firm Life Cycle and Financial Reporting Comparability

2016 ◽  
Vol 45 (1) ◽  
pp. 67
Author(s):  
Haewon Moon ◽  
Eunhye Jo ◽  
Kwan Choi
Keyword(s):  
Life Cycle ◽  
Financial Reporting ◽  
Firm Life Cycle ◽  
Financial Reporting Comparability

Audit Firm Tenure and Fraudulent Financial Reporting

2004 ◽  
Vol 23 (2) ◽  
pp. 55-69 ◽  
Author(s):  
Joseph V. Carcello ◽  
Albert L. Nagy
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Auditor Independence ◽  
Fraudulent Financial Reporting ◽  
Audit Firm ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Client Relationship ◽  
Mandatory Audit Firm Rotation ◽  
The U.S

The Sarbanes-Oxley Act (2002) required the U.S. Comptroller General to study the potential effects of requiring mandatory audit firm rotation. The General Accounting Office (GAO) concludes in its recently released study of mandatory audit firm rotation that “mandatory audit firm rotation may not be the most efficient way to strengthen auditor independence” (GAO 2003, Highlights). However, the GAO also suggests that mandatory audit firm rotation could be necessary if the Sarbanes-Oxley Act's requirements do not lead to improved audit quality (GAO 2003, 5). We examine the relation between audit firm tenure and fraudulent financial reporting. Comparing firms cited for fraudulent reporting from 1990 through 2001 with both a matched set of non-fraud firms and with the available population of non-fraud firms, we find that fraudulent financial reporting is more likely to occur in the first three years of the auditor-client relationship. We fail to find any evidence that fraudulent financial reporting is more likely given long auditor tenure. Our results are consistent with the argument that mandatory audit firm rotation could have adverse effects on audit quality.

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