Causality and multidimensionality of internal controls: Impact on organizations

This study analyzes the managers’ (Chief Financial Officer (CFO)) perception of impact of implementation of internal controls. It investigates the causes of adoption in the multidimensionality of internal control of the Brazilian companies traded in the New York Stock market. A survey sent to the CFOs of the 70 companies listed in the NYSE collected empirical data from these companies. The final response rate was 15.16 %. The study uses partial least squares modeling for statistical analysis to test the research question. Our empirical evidence supports the hypotheses that “the greater the level of multidimensionality of controls in an organization the lower the level of causal effects and damage to the control environment. Based on work performed, one is able to infer that overall, there is a significant relationship between causal effects on operating activities, financial reporting and compliance in relation to the multidimensionality of internal controls, thus, when there are uncommon features, depending on the level of multidimensionality special attention should be paid to the causes of adoption of controls to track risks posed to business.

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Executive Accountants and the Reliability of Financial Reporting

Management Science ◽

10.1287/mnsc.2020.3697 ◽

2020 ◽

Author(s):

Adrienne Rhodes ◽

Dan Russomanno

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Research Question ◽

Positive Association ◽

Chief Executive ◽

Future Research ◽

Chief Financial Officer ◽

Accrual Quality ◽

Material Weaknesses ◽

Executive Officers

Using hand-collected data from mandatory disclosures of executive officers, we examine financial reporting outcomes associated with delegating significant accounting responsibilities to an executive accountant, not concurrently serving as the chief financial officer or chief executive officer. We find executive accountants are associated with a significant reduction in the likelihood of restatement. Moreover, we find evidence of a positive association between executive accountants and accrual quality and faster remediation of material weaknesses in internal control when an executive accountant is present. Taken together, this evidence is consistent with more reliable financial reporting at firms with an executive accountant. In contrast, accountants identified in commonly used datasets (i.e., Execucomp or BoardEx) are not consistently associated with the reliability of financial reporting. We highlight the significant differences between datasets, largely attributable to the objectives and sources of the underlying data. We conclude that Execucomp and BoardEx are not substitute datasets for the executive officers disclosed in firms’ 10-K and proxy statement filings. Furthermore, we caution future research to consider which data are most appropriate in the context of each research question. This paper was accepted by Shiva Rajgopal, accounting.

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The Severity of Internal Controls over Financial Reporting Deficiencies: Differences among Types and Industries

FINANCIAL REPORTING ◽

10.3280/fr2014-001003 ◽

2014 ◽

pp. 55-77

Author(s):

Tatiana Mazza ◽

Stefano Azzali

Keyword(s):

Information Technology ◽

Financial Reporting ◽

Internal Control ◽

Service Industry ◽

Listed Companies ◽

Internal Controls ◽

Service Companies ◽

Finance Industry ◽

Material Weaknesses ◽

Fixed Assets

This study analyzes the severity of Internal Control over Financial Reporting deficiencies (Deficiencies, Significant Deficiencies and Material Weaknesses) in a sample of Italian listed companies, in the period 2007- 2012. Using proprietary data the severity of the deficiencies is tested for account-specific, entity level and information technology controls and for industries (manufacturing and services vs finance industries). The results on ICD severity is compared with one of the most frequent ICD (Acc_Period End/Accounting Policies): for account-specific, ICD in revenues, purchase, fixed assets and intangible, loans and insurance are more severe while ICD in Inventory are less severe. Differences in ICD severity have been found in the characteristic account: ICD in loan and insurance for finance industry and ICD in revenue, purchase for manufacturing and service industry are more severe. Finally, we found that ICD in entity level and information technology controls are less severe than account specific ICD in all industries. However, the results on entity level and information technology deficiencies could also mean that the importance of these types of control are under-evaluated by the manufacturing and service companies.

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The Search for Order in Municipal Administration: Herman A. Metz and the New York City Experience, 1898–1909

Accounting Historians Journal ◽

10.2308/aahj-18-019 ◽

2020 ◽

Vol 47 (1) ◽

pp. 55-74

Author(s):

Ryan P. McDonough ◽

Paul J. Miranti ◽

Michael P. Schoderbek

Keyword(s):

New York ◽

New York City ◽

Internal Control ◽

York City ◽

Internal Controls ◽

Data Availability ◽

Financial Reports ◽

The Public ◽

Operational Activities ◽

The City

ABSTRACT This paper examines the administrative and accounting reforms coordinated by Herman A. Metz around the turn of the 20th century in New York City. Reform efforts were motivated by deficiencies in administering New York City's finances, including a lack of internal control over monetary resources and operational activities, and opaque financial reports. The activities of Comptroller Metz, who collaborated with institutions such as the New York Bureau of Municipal Research, were paramount in initiating and implementing the administrative and accounting reforms in the city, which contributed to reform efforts across the country. Metz promoted the adoption of functional cost classifications for city departments, developed flowcharts for improved transaction processing, strengthened internal controls, and published the 1909 Manual of Accounting and Business Procedure of the City of New York, which laid the groundwork for transparent financial reports capable of providing vital information about the city's activities and subsidiary units. JEL Classifications: H72, M41, N91. Data Availability: Data are available from the public sources cited in the text.

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Subspecialization Within Pediatric Practice: A Broader Spectrum

PEDIATRICS ◽

10.1542/peds.90.4.573 ◽

1992 ◽

Vol 90 (4) ◽

pp. 573-581 ◽

Cited By ~ 1

Author(s):

Brian W. McCrindle ◽

Barbara Starfield ◽

Catherine DeAngelis

Keyword(s):

United States ◽

Primary Care ◽

Response Rate ◽

Fellowship Program ◽

Pediatric Practice ◽

Ongoing Controversy ◽

Manpower Supply ◽

Final Response ◽

Pediatric Subspecialty ◽

Final Response Rate

This study was undertaken to describe subspecialty characteristics and practices of the population of pediatricians given the ongoing controversy regarding a projected manpower oversupply of general pediatricians. A questionnaire was mailed to a national random sample of 1620 United States physicians listed in the American Medical Association's Pysician Masterfile as being in office-based pediatric practice. The final response rate was 63%. Seventy percent of respondents designated their practices as "general pediatrics" versus 17% as "general pediatrics with a specific subspecialty interest" and 13% as "subspecialty practice." The general pediatricians with a specific subspecialty interest were intermediate in the proportion that had some training in a pediatric fellowship program (general pediatricians with a specific subspecialty interest, 63% versus general pediatricians, 14%, P < .0001, and pediatricians with a subspecialty practice, 92%, P < .0001) and that were certified in a pediatric subspecialty by the American Board of Pediatrics (general pediatricians with a specific subspecialty interest 16% versus general pediatricians, 2%, P < .0001, and pediatricians with subspecialty practice, 62%, P < .0001). They were also intermediate in the proportion involved in various academic pursuits. Their practices, however, more closely resembled general pediatricians than pediatricians with a subspeciality practice in their location, setting, associates, and commitment to primary care. They were more likely than general pediatricians to utilize or provide specialized tests or procedures. A large percentage of pediatricians incorporate subspecilaty elements into their general pediatric practices. Models of current and projected pediatric manpower supply need to be reassessed in light of this form of practice.

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Do Negative Corporate Social Responsibility Events Signal Financial Misreporting? — Empirical Finding from Taiwan

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091521500041 ◽

2021 ◽

Vol 24 (01) ◽

pp. 2150004

Author(s):

Ching-Lung Chen ◽

Hann-Pyng Wang ◽

Hung-Shu Fan ◽

Shiu-Chieh Chiu

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Cash Flow ◽

Financial Reporting ◽

Internal Control ◽

Empirical Finding ◽

Internal Controls ◽

Control Rights ◽

Cash Flow Rights ◽

Corporate Social

This study examines whether negative corporate social responsibility events (NCSRs) signal potential firm misreporting and pending financial reporting restatements. Without formal opinions on the effectiveness of internal controls over financial reporting in Taiwan, we hypothesize NCSRs can represent and/or signal a firm’s internal control weakness, which may in turn result in poor financial reporting. Note that the concern with controlling owners expropriating wealth through ineffective internal controls is given important weight by investors and regulators. We further examine whether the signaling function of NCSRs is more pronounced in contexts with a serious agency problem, such as is found in the high divergence of control and cash flow rights case (denoted as high excess control rights) in Taiwan. Empirical results indicate that, as conjectured, incidence of NCSRs is positively associated with the likelihood of reporting restatements. Further evidence reveals that this result is particularly pronounced in the high divergence of control and cash-flow rights subsample test. We demonstrate several diagnostic tests and show the results are robust in various specifications.

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Integration of Internal Control and Financial Statement Audits: Are Two Audits Better than One?

The Accounting Review ◽

10.2308/accr-52197 ◽

2018 ◽

Vol 94 (2) ◽

pp. 53-81 ◽

Cited By ~ 10

Author(s):

Lori Shefchik Bhaskar ◽

Joseph H. Schroeder ◽

Marcy L. Shepardson

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Audit Quality ◽

Internal Controls ◽

Data Availability ◽

Financial Statement ◽

Auditor Judgment ◽

Public Company ◽

Better Than

ABSTRACT The quality of financial statement (FS) audits integrated with audits of internal controls over financial reporting (ICFR) depends upon the quality of ICFR information used in, and its integration into, FS audits. Recent research and PCAOB inspections find auditors underreport existing ICFR weaknesses and perform insufficient testing to address identified risks, suggesting integrated audits—in which substantial ICFR testing is required—may result in lower FS audit quality than FS-only audits. We compare a 2007–2013 sample of small U.S. public company firm-years receiving integrated audits (accelerated filers) to firm-years receiving FS-only audits (non-accelerated filers) and find integrated audits are associated with higher likelihood of material misstatements and discretionary accruals, consistent with lower FS audit quality. We also find evidence of (1) auditor judgment-based integration issues, and (2) low-quality ICFR audits harming FS audit quality. Overall, results suggest an important potential consequence of integrated audits is lower FS audit quality. Data Availability: Data are publicly available from the sources identified in the text.

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How Effective are Organizations' Internal Controls? Insights into Specific Internal Control Elements

Current Issues in Auditing ◽

10.2308/ciia-50146 ◽

2012 ◽

Vol 6 (1) ◽

pp. A31-A50 ◽

Cited By ~ 22

Author(s):

Dana R. Hermanson ◽

Jason L. Smith ◽

Nathaniel M. Stephens

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Financial Services ◽

Audit Committee ◽

Internal Audit ◽

Internal Controls ◽

Component Level ◽

Public Companies ◽

Tone At The Top ◽

Survey Responses

SUMMARY Based on survey responses from approximately 500 Chief Audit Executives (CAEs) and other internal auditors, this article provides an insider's view of the perceived strength of organizations' internal controls (i.e., internal control over financial reporting) in the Control Environment, Risk Assessment, and Monitoring components of the Committee of Sponsoring Organizations' (COSO 1992a) Internal Control—Integrated Framework. Although the respondents largely rate control strength as relatively high, we identify several areas for potential improvement of internal controls, especially related to assessing the “tone at the top,” as well as following up on deviations from policy and management override of controls. In analyzing individual control elements, we find that public companies' controls are consistently rated as more effective than those of other organizations. We also find a number of interesting differences across key industries, especially in the Monitoring component, where banks and other financial services firms appear to have more robust Monitoring controls than do healthcare and other services firms. The component-level analysis reveals that internal control component strength is positively related to the CAE reporting primarily to the audit committee, public company status, and the average tenure of the internal audit function staff, among other findings. Based on the survey findings, we describe key implications relevant to internal and external auditors, accounting researchers and educators, and management.

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Assistance For Dentists In Lithuania

Sveikatos mokslai ◽

10.5200/sm-hs.2016.108 ◽

2017 ◽

Vol 26 (6) ◽

pp. 155-160

Author(s):

Vilija Berlin ◽

Alina Pūrienė ◽

Greta Dulkė

Keyword(s):

Questionnaire Survey ◽

Response Rate ◽

Postal Questionnaire ◽

Dental Practitioners ◽

Dental Assistant ◽

Final Response ◽

Dental Assistants ◽

Final Response Rate

The study objectives were to investigate the preference of Lithuanian dentists to work with or without an assistant and to identify the most significant predictors for the preference. As well, we aimed to explore the education of practicing dental assistants in Lithuania. The information was collected by a postal questionnaire survey which was carried out among all practicing general dental practitioners and dental specialists in Lithuania (n=2971). The final response rate was 67.6% corresponding to 2,008 respondents. The results show that most dentists in Lithuania always or sometimes work without an assistant. Each third dentist of those who work with an assistant employ non-certified dental assistant. This may be done on purpose due to financial reasons. Dentists should be educated how efficient, ergonomic practice with a qualified dental assistant can be; inclusion of contemporary four-handed practice subject in applicants resume could improve employment of certified dental assistants in the long term.

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Does Control Self-Assessment Influence Financial Reporting Quality?

Regular issue - International Journal of Management and Humanities ◽

10.35940/ijmh.d1199.125420 ◽

2020 ◽

Vol 5 (4) ◽

pp. 70-76

Author(s):

Hiroshi Uemura

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Negative Relationship ◽

Reporting Quality ◽

Audit Fees ◽

Internal Controls ◽

Financial Reporting Quality ◽

Control Environment ◽

Self Assessment ◽

Positive Effects

The aim of this study is to examine the effect of control self-assessment (CSA) on financial reporting quality by using CSA as a proxy of monitoring quality. CSA has an important feature that allows the employees themselves to become involved in the assessment of internal controls’ effectiveness. Moreover, CSA has two important monitoring functions. First, it can add value to internal auditing. Second, because all employees of operational units participate in the assessment of internal controls in CSA, that control environment is expected to be mature. The investigation of this study used data from 3,517 Japanese firms listed on the First Section, Second Section, Mothers, and JASDAQ of the Tokyo Stock Exchange. The result of 2SLS regression shows that CSA adoption has a negative relationship with the number of financial restatements and audit fees, and therefore, I conclude that CSA has positive consequences for financial reporting quality. This result indicates that the internal monitoring mechanism that continuously monitors internal control over financial reporting (ICFR) effectiveness and in which all employees participate has some positive effects on financial reporting quality. There are two reasons for this result. First, employees have easier access to negative information concerning ICFR effectiveness than outsiders and can share that information with the internal personnel in charge of monitoring (e.g., internal auditors). Moreover, CSA is expected raise an entity’s awareness of ICFR, that is, the control environment of ICFR components is made into an environment that prevents and detects impropriety in the accounting process. Keywords: Control

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Effective Internal Controls for Not-For Profit Entities

International Journal of Business and Applied Social Science ◽

10.33642/ijbass.v6n2p4 ◽

2020 ◽

pp. 47-58

Author(s):

Achraf Seyam, CPA ◽

Barry Copper, CPA

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Continuous Monitoring ◽

Internal Controls ◽

Professional Services ◽

Non Profit ◽

The Public ◽

For Profit ◽

Not For Profit ◽

Non Profit Organizations

The importance of internal control is clear. Effective internal control makes sure non-profit organizations to carried out their mission and objectives, such as proper use of funds and provide professional services to the public without any risk of fraud and mismanagement or breach of ethics. Through continuous monitoring of non-profit’s performance and activities, internal controls dispose of the behaviors of non-profit organizations with their objectives. Internal controls also engaged in good management and make sure to provide appropriate financial reporting by providing accurate and complete reports to the management in a timely manner and make sure the sources are correctly allocated. Internal control is also the tool to safeguard assets that make sure the organizations physical and intangible assets are protected from fraud, misused, and error. Internal control is not only able to deter and detect fraud and error but also is able to reduce the chance to risks.

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