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.

Assurance on XBRL for Financial Reporting

2008 ◽  
Vol 22 (3) ◽  
pp. 353-368 ◽  
Author(s):  
R. David Plumlee ◽  
Marlene A. Plumlee
Keyword(s):  
Financial Reporting ◽  
Academic Research ◽  
Financial Statements ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
The Public ◽  
Business Reporting ◽  
Paper Version ◽  
Public Company ◽  
Reporting Environment

SYNOPSIS: Since 2004, the Securities and Exchange Commission (SEC) has taken steps toward requiring eXtensible Business Reporting Language (XBRL) to be used in its filings, including a voluntary filing program. “Tagging” financial information using XBRL creates documents that are computer readable and searchable. Once XBRL is required, investors are likely to demand assurance on the tagging process. The Public Company Accounting Oversight Board (PCAOB) has issued guidance on attest engagements regarding XBRL financial information furnished under the SEC’s current voluntary filer program, which relies on the auditor “agreeing” a paper version of the XBRL-related documents to the information in the official EDGAR filing. This approach may be adequate for the current paper-oriented reporting paradigm. However, once filing in XBRL becomes required, the power of XBRL to allow individual financial datum to be extracted from the SEC’s financial database will be realized. This “data-centric” idea is a crucial extension of the traditional reporting paradigm that will alter the way financial and nonfinancial data can be used. The current audit focus on reconciling only the XBRL output with the paper submissions does not address this paradigm shift. In this commentary, we discuss the SEC’s efforts to incorporate XBRL into its filing process and provide a brief overview of the technical aspects of XBRL. The commentary’s principal focus is on several important questions that assurance guidance must address in a data-centric reporting environment, such as, what constitutes an error, or what does materiality mean when individual pieces of financial data will be used outside the context of the financial statements? It also describes some XBRL-related areas where academic research can help guide XBRL-document assurance efforts.

scholarly journals Audit Quality: Insights from the Academic Literature

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 385-421 ◽  
Author(s):  
W. Robert Knechel ◽  
Gopal V. Krishnan ◽  
Mikhail Pevzner ◽  
Lori B. Shefchik ◽  
Uma K. Velury
Keyword(s):  
Audit Quality ◽  
Academic Research ◽  
Future Research ◽  
The Public ◽  
Academic Literature ◽  
Public Company

SUMMARY This study presents a review of academic research on audit quality. We begin with a review of existing definitions of audit quality and describe general frameworks for establishing audit quality. Next, we summarize research on indicators of audit quality such as inputs, process, and outcomes. Finally, we offer some suggestions for future research. The study should be useful to academics interested in audit quality as well as to the Public Company Accounting Oversight Board (PCAOB) and other regulators.

A Summary of Research and Enforcement Release Evidence on Confirmation Use and Effectiveness

2008 ◽  
Vol 27 (2) ◽  
pp. 253-279 ◽  
Author(s):  
Paul Caster ◽  
Randal J. Elder ◽  
Diane J. Janvrin
Keyword(s):  
Specific Problem ◽  
Academic Research ◽  
Response Rates ◽  
Future Research ◽  
Directional Bias ◽  
The Public ◽  
Public Company ◽  
Audit Evidence ◽  
Research Questions

SUMMARY: Confirmations are extensively used and are often perceived by practitioners to be one of the most persuasive forms of audit evidence. Yet academic research has found limitations that restrict confirmation effectiveness for many management assertions. In addition, a number of problems with false and forged confirmations are identified in Accounting and Auditing Enforcement Releases (AAERs). The Public Company Accounting Oversight Board (PCAOB) and the International Auditing and Assurance Standards Board (IAASB) have put confirmation evidence on their respective agendas. Academic research indicates that receivable confirmations can be effective evidence for the existence assertion. Low response rates, as well as respondent errors and directional bias in detecting errors, are key barriers to confirmation effectiveness. Our review of AAERs identified failure to authenticate responses, collusion between auditee management and customers, and concealed side agreements and special terms as specific problem areas. We also identify a number of research questions for future research.

Auditors' Internal Control over Financial Reporting Decisions: Analysis, Synthesis, and Research Directions

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 131-166 ◽  
Author(s):  
Stephen K. Asare ◽  
Brian C. Fitzgerald ◽  
Lynford E. Graham ◽  
Jennifer R. Joe ◽  
Eric M. Negangard ◽  
...  
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Future Research ◽  
The Public ◽  
Road Map ◽  
Sarbanes Oxley ◽  
Environmental Attributes ◽  
Public Company ◽  
Reporting Decisions ◽  
Five Phases

SUMMARY We synthesize the literature on auditors' evaluation of, and reporting on, internal control over financial reporting (ICOFR), as required by the Sarbanes-Oxley Act. The purpose of the synthesis is (1) to provide information on how and how well auditors perform the task, which serves as feedback to the Public Company Accounting Oversight Board on implementation issues and problems related to auditors' application of the professional standards on ICOFR; and (2) to identify gaps in the current literature and fruitful areas of future research. Consistent with Auditing Standard No. 5, we delineate five phases of the ICOFR audit: (1) planning; (2) scoping; (3) testing; (4) evaluation; and (5) reporting. We structure our synthesis using a framework that classifies the determinants of performance in each phase into five broad areas: (a) the auditor's attributes, (b) the client's attributes, (c) the interaction between the auditor and the client, (d) task attributes, and (e) environmental attributes. Key contributions include providing an ICOFR tasks taxonomy, proposing a model of the determinants of performance for each task, evaluating auditors' performance of the tasks in our taxonomy, highlighting findings and gaps of importance to regulators, and providing a road map for future research.

PCAOB Inspections of Smaller CPA Firms: The Perspective of Inspected Firms

2010 ◽  
Vol 24 (2) ◽  
pp. 189-219 ◽  
Author(s):  
Brian Daugherty ◽  
Wayne Tervo
Keyword(s):  
Negative Impact ◽  
Academic Research ◽  
Unintended Consequences ◽  
Publicly Traded ◽  
Investor Confidence ◽  
The Public ◽  
Market Participants ◽  
Sarbanes Oxley ◽  
Public Company ◽  
Inspection Process

SYNOPSIS: We solicit perceptions of the Public Company Accounting Oversight Board’s (PCAOB) inspection process from the leadership of triennial firms (100 or fewer publicly traded audit clients, inspected triennially) receiving their initial inspection. Our research is motivated by a growing stream of academic research related to triennial firms. Practitioners have called for research to determine whether the performance of audits in the Sarbanes-Oxley era may fail to attain the stated objective of enhancing investor confidence in the capital markets. Academics note further PCAOB inspection research can provide important insights into the consequences of PCAOB inspection for auditors and other market participants. In general, smaller respondents reported initial PCAOB inspections resulted in a negative impact on many aspects of their audit practices, while medium and larger firms reported more favorable consequences. Collectively, responding firms evaluated their initial inspection team’s performance favorably, but were more critical of other aspects of the inspection process. Levels of satisfaction with nearly all aspects of PCAOB inspections appear to increase with firm size and the passage of time. We interpret our findings as suggesting the efficacy of PCAOB inspections may be enhanced by focusing on potential unintended consequences and inspection process modifications rather than on inspectors’ qualifications and actions.

Conclusion: What academia can contribute to refugee policy

2018 ◽  
Vol 56 (1) ◽  
pp. 146-151 ◽  
Author(s):  
Idean Salehyan
Keyword(s):  
Academic Research ◽  
Forced Migration ◽  
Humanitarian Assistance ◽  
Future Research ◽  
Security Risks ◽  
Individual Level ◽  
The Public ◽  
Level Data ◽  
Potential Risks

This conclusion to the special issue highlights the role of scholars in advancing the public discussion about forced migration. As countries around the world are adopting increasing restrictions on the entry of refugees, academic research can help to dispel some of the myths and apprehensions regarding the risks that forced migration entails. While refugees may be linked to conflict and violence in limited circumstances, the research generally demonstrates that robust international cooperation to manage refugee settlements, provide adequate humanitarian assistance, and integrate refugees into host communities, among other policies, can help to mitigate potential risks. Directions for future research and analysis are also discussed. Forced migration scholars should endeavor to collect more individual-level data; seek to understand factors that exacerbate or reduce security risks associated with cross-border militancy; conduct research on the long-term integration of refugees; and seek to understand the causes and consequences of resettlement and repatriation policies.

scholarly journals The Determinants of Audit Expectation Gap: An Empirical Study from Kingdom of Bahrain

2018 ◽  
Vol 7 (3) ◽  
pp. 54 ◽  
Author(s):  
Sayed Ali Ahmed Alawi ◽  
Rami Mohammad Abu Wadi ◽  
Gagan Kukreja
Keyword(s):  
Financial Reporting ◽  
Quantitative Research ◽  
Financial Statements ◽  
International Standards ◽  
Kingdom Of Saudi Arabia ◽  
The Public ◽  
Financial Reporting Standards ◽  
Expectation Gap ◽  
Audit Firms ◽  
National Bank

The research aims at identifying the determinants of audit expectation gap between the auditors and the users of financial statements in the Kingdom of Bahrain. This issue is noticed in many frauds or errors or illegal matters by the general public after every scam whether Enron and WorldCom from United States or Satyam and Punjab National Bank from India or Tesco and BHS from United Kingdom or Mobily from Kingdom of Saudi Arabia. As per International Standards on Auditing (ISAs), auditors are not responsible to detect each and every fraud or error or illegal act as it is the responsibility of management. However, auditors are expected to assess the possibility of an error or fraud to occur and assess risks of material misstatement due to error or fraud and they are supposed to express their independent and objective opinion on financial statements whether financial statements are prepared in accordance to suitable criteria (International Financial Reporting Standards in the case of Bahrain).This quantitative research and its descriptive design aims empirically to analyze determinants that may impact the audit expectation gap in the Kingdom of Bahrain. The study used a detailed questionnaire as a measuring instrument across the sample group to measure 4 determinants that are expected to have a significant impact on the level of the audit expectation gap. Those determinants are the efforts of auditors, the skills of auditors, the knowledge of the public about the audit profession and the users’ needs from auditors. The research inferred that identified factors found to have a significant impact on the level of audit expectation gap. It is recommended that audit firms should provide training to the audit staff that how to utilize the required efforts in conducting an audit engagement and go extra miles to fill the gap. Furthermore, the auditors should keep themselves updated about the latest frauds and the best audit practices. 

Does Investment-Related Pressure Lead to Misreporting? An Analysis of Reporting Following M&A Transactions

2012 ◽  
Vol 87 (3) ◽  
pp. 839-865 ◽  
Author(s):  
Daniel A. Bens ◽  
Theodore H. Goodman ◽  
Monica Neamtiu
Keyword(s):  
Financial Reporting ◽  
Large Body ◽  
Financial Statements ◽  
Probability Of Detection ◽  
Data Availability ◽  
The Public ◽  
Announcement Returns ◽  
Reporting Decisions ◽  
The Face ◽  
Near Term

ABSTRACT This study examines whether managers alter their financial reporting decisions in the face of investment-related pressure. We define investment-related pressure as the increased pressure managers feel to retain their job following an M&A poorly received by the market. We hypothesize that managers attempt to assuage pressure by delivering strong performance post-merger, creating incentives for misreporting. Our findings indicate that acquirers with more negative M&A announcement returns are more likely to misstate financial statements in the post-investment period and the issuance of misstated financials mitigates this pressure, at least in the near term. Our study contributes to the literature on the relation between corporate investing and financial reporting by showing how investment-related pressure leads to misreporting, even in a setting where the costs (e.g., greater probability of detection) are high. Our study also has implications for the large body of research that evaluates various consequences of M&As using post-merger performance. Specifically, researchers should be careful to distinguish real from misstated financial performance in the post-investment period. Data Availability: Data are available from the public sources indicated in the text.

scholarly journals Barriers to implementing the International Integrated Reporting Framework

2017 ◽  
Vol 25 (4) ◽  
pp. 461-480 ◽  
Author(s):  
John Dumay ◽  
Cristiana Bernardi ◽  
James Guthrie ◽  
Matteo La Torre
Keyword(s):  
Financial Reporting ◽  
Early Stage ◽  
Academic Research ◽  
General Concept ◽  
Future Research ◽  
The European Union ◽  
Integrated Reporting ◽  
Content Type ◽  
Stage Of Development ◽  
Reporting Framework

Purpose This paper is motivated by the call for feedback by the International Integrated Reporting Council (IIRC) from all stakeholders with knowledge of the International Integrated Reporting Framework (<IRF>) and specifically of the enablers, incentives and barriers to its implementation. The paper synthesises insights from contemporary accounting research into integrated reporting (IR) as a general concept and <IR> as espoused by the IIRC in the <IRF> (IIRC, 2013). The authors specifically focus on possible barriers and emphasise the specific issues the authors feel could be rectified to advance the <IRF>, along with the areas that may potentially hinder its wider adoption and implementation. Design/methodology/approach The paper draws upon and synthesises academic analysis and insights provided in the IR and <IR> academic literature as well as various directives, policy and framework pronouncements. Findings The flexibility and lack of prescription concerning actual disclosures and metrics in the <IRF> could allow it to be used for compliance, regardless of the other benefits lauded by the IIRC. Thus the authors see forces, both external and internal, driving <IR> adoption, with one prominent example being the European Union Directive on non-financial reporting. Because of the different ways in which IR is understood and enacted, there are numerous theoretical and empirical challenges for academics. The authors paper highlights potential areas for further robust academic research and the need to contribute to <IR> policy and practice. Research limitations/implications The paper provides the IIRC, academics, regulators and reporting organisations with insights into current practice and the <IRF>. The authors highlight the need for further development and evidence to help inform improvements both from a policy and a practice perspective. A key limitation of the authors’ work is that the authors draw upon a synthesis of the existing literature which is still in an early stage of development. Originality/value The paper provides the IIRC with several insights into the current <IRF> and specifically with the enablers, incentives and barriers to its implementation. Also, it provides academic researchers with a number of important observations and an agenda upon which the authors can build their future research.

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