The Impact of Audit Completeness and Quality on Earnings Announcement GAAP Disclosures

2015 ◽  
Vol 91 (2) ◽  
pp. 677-705 ◽  
Author(s):  
Joseph H. Schroeder
Keyword(s):  
Detailed Balance ◽  
Balance Sheet ◽  
Data Availability ◽  
Financial Statement ◽  
Public Companies ◽  
Earnings Announcement ◽  
Recent Trends ◽  
Annual Earnings ◽  
The Impact

ABSTRACT This study examines the role of the external audit in management's decision about the amount of GAAP financial statement information to disclose in the annual earnings announcement. The earnings announcement is a key disclosure provided by public companies. Yet, there is no requirement that earnings announcements contain audited GAAP numbers; in fact, recent trends indicate that a majority of companies release earnings before the completion of year-end audit fieldwork. I predict and find that companies that wait until the audit is more complete at the earnings announcement date and receive higher quality audits provide more detailed balance sheet, cash flow statement, and overall GAAP disclosures. I also provide evidence that complete audits and higher quality audits impact the information content of the earnings announcement. The combined results indicate that audit completeness and quality help facilitate more detailed earnings announcement disclosures and have implications for the equity market. Data Availability: Data are publicly available from sources identified in the text.

Comprehensive Income: which potential effects on firms' performance evaluation and users' decision process?

2016 ◽  
pp. 55-94
Author(s):  
Pier Luigi Marchini ◽  
Carlotta D'Este
Keyword(s):  
Performance Evaluation ◽  
Decision Process ◽  
Financial Analysts ◽  
Listed Companies ◽  
Financial Statement ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Gains And Losses ◽  
The Impact

The reporting of comprehensive income is becoming increasingly important. After the introduction of Other Comprehensive Income (OCI) reporting, as required by the 2007 IAS 1-revised, the IASB is currently seeking inputs from investors on the usefulness of unrealized gains and losses and on the role of comprehensive income. This circumstance is of particular relevance in code law countries, as local pre-IFRS accounting models influence financial statement preparers and users. This study aims at investigating the role played by unrealized gains and losses reporting on users' decision process, by examining the impact of OCI on the Italian listed companies RoE ratio and by surveying a sample of financial analysts, also content analysing their formal reports. The results show that the reporting of comprehensive income does not affect the financial statement users' decision process, although it statistically affects Italian listed entities' performance.

scholarly journals The Impact of Inventory Valuation Methods on Corporate Financial Reports.

2016 ◽  
Vol 12 (3) ◽  
pp. 125-134
Author(s):  
A. Bruce Caster ◽  
Wanda K. Causseaux
Keyword(s):  
Learning Outcomes ◽  
Business Students ◽  
Balance Sheet ◽  
Financial Statement ◽  
Financial Indicators ◽  
Hypothetical Case ◽  
Financial Reports ◽  
Income Statement ◽  
The Impact

Business students are generally introduced to LIFO and FIFO in their first accounting course. However, that introduction generally focuses exclusively on computing ending inventory and cost of goods sold.  Students are rarely challenged to compute or analyze the impacts of LIFO and FIFO on the income statement, balance sheet, or cash flow statement.  This paper presents a hypothetical case designed to provide a framework within which students can compute, analyze, and discuss the financial statement impacts and economic impacts of choosing one or the other of these accounting methods.  The questions in this case also address the effects of this choice on financial indicators like liquidity ratios, the impacts of each method on quality of earnings, and the potential impacts of IFRS convergence on companies that are currently using LIFO.One important feature of this case is its adaptability to support a variety of learning outcomes in different courses.  This flexibility results from making the questions posed in the case as independent of each other as possible.  That independence allows a professor to select only the questions that support the learning outcomes for that professor’s specific course.  The teaching notes discuss in detail possible course applications and uses of this case.

PCAOB Inspections and Large Accounting Firms

2011 ◽  
Vol 26 (1) ◽  
pp. 43-63 ◽  
Author(s):  
Bryan K. Church ◽  
Lori B. Shefchik
Keyword(s):  
Audit Quality ◽  
Linear Trend ◽  
Dominant Role ◽  
Data Availability ◽  
Financial Statement ◽  
Public Companies ◽  
Accounting Firms ◽  
Big 4 ◽  
Second Tier ◽  
Over Time

SYNOPSIS The purpose of this paper is to analyze the PCAOB's inspection reports of large, annually inspected accounting firms. The inspection reports identify audit deficiencies that have implications for audit quality. By examining the inspection reports in detail, we can identify the nature and severity of audit deficiencies; we can track the total number of deficiencies over time; and we can pinpoint common, recurring audit deficiencies. We focus on large accounting firms because they play a dominant role in the marketplace (i.e., they audit public companies that comprise approximately 99 percent of U.S.-based issuer market capitalization). We document a significant, downward linear trend in the number of deficiencies from 2004 to 2009. We also identify common, recurring audit deficiencies, determine the financial statement accounts most often impacted by audit deficiencies, and isolate the primary emphasis of the financial statement impacted. Our findings generally are consistent comparing Big 4 and second-tier accounting firms, though a few differences emerge. In addition, we make comparisons with findings that have been documented for small, triennially inspected firms. Data Availability: The data are available from public sources.

scholarly journals Foreign Investors vs. National Tax Measures: Assessing the Role of International Investment Agreements

2021 ◽  
pp. 149-169
Author(s):  
Julien Chaisse ◽  
Jamieson Kirkwood
Keyword(s):  
International Investment ◽  
Foreign Investors ◽  
International Investment Agreements ◽  
Key Characteristics ◽  
Recent Trends ◽  
National Tax ◽  
Definition Of ◽  
The Impact ◽  
Investment Agreements

AbstractThis chapter focuses on the impact of the international law of foreign investment on tax issues with a view to assessing the interactions between the two regimes and identifying potential signs of convergence. In particular, this chapter focuses on the operation of International Investment Agreements (IIAs) and assesses the role of IIAs from the perspective of foreign investors vis-à-vis National Tax Measures (NTMs). Part I of this chapter provides an understanding of the convergence between investment law and tax issues. This aids in an understanding of the key characteristics of IIAs (such as the definition of investment and the use of specific tax exceptions) and the relationship between currently existing IIAs and tax disputes. Part II analyzes, both quantitatively and qualitatively, the recent trends of tax disputes in investment arbitration. Part III assesses how tax can be seen as the last barrier to cross border investment. Part IV concludes.

scholarly journals Демографический дайджест

2016 ◽  
Vol 3 (3) ◽  
pp. 170-188
Author(s):  
Илья Савельевич Кашницкий
Keyword(s):  
Home Ownership ◽  
Later Life ◽  
European Population ◽  
Second Home ◽  
Internal Migrants ◽  
Recent Trends ◽  
The Impact ◽  
Migration And Development

Murphy M. The Impact of Migration on Long-Term European Population Trends, 1850 to PresentKelle J.,  A.O. Haller. Who Benefits from Economic Growth? Work and Pay in BrazilVictora C.G., R. Bahl, A.J.D. Barros, G.V.A. França, S. Horton, J. Krasevec, S. Murch, M.J. Sankar, N. Walker, N.C Rollins. Breastfeeding in the 21st century: epidemiology, mechanisms, and lifelong effect Stillwell J., M. Thomas. How far do internal migrants really move? Demonstrating a new method for the estimation of intra-zonal distanceMarjavaara R., E. Lundholm. Does Second-Home Ownership Trigger Migration in Later Life?Bell M., E. Charles-Edwards, P. Ueffing, J. Stillwell, M. Kupiszewski, D. Kupiszewska. Internal Migration and Development: Comparing Migration Intensities Around the WorldGoujon A., S. KC, M. Speringer, B. Barakat, M. Potancoková, J. Eder, E. Striessnig, R. Bauer, W. Lutz. A harmonized dataset on global educational attainment between 1970 and 2060 – an analytical window into recent trends and future prospects in human capital developmentCooray A., F. Schneider. Does corruption promote emigration? An empirical examinationUeffing P., F. Rowe, C.H. Mulder. Differences in Attitudes towards Immigration between Australia and Germany: The Role of Immigration Policy

scholarly journals Goodwill’s Accounting Practices in Belgium and Compliance with IAS 36 Required Disclosures

2019 ◽  
Vol 12 (3) ◽  
pp. 139
Author(s):  
Julius Gaël Tchatchou Tchaptchet ◽  
Olivier Colot
Keyword(s):  
Intangible Assets ◽  
Stock Exchange ◽  
Balance Sheet ◽  
Financial Statement ◽  
Accounting Standard ◽  
Current Accounting ◽  
Great Heterogeneity ◽  
Separate Line ◽  
Required Disclosures ◽  
The Impact

This paper aims at studying the impact of the accounting treatment of goodwill on the mandatory disclosure required by the International Accounting Standard (IAS) 36 on the impairment test of goodwill. We use a sample comprising 79 companies listed on Brussels stock exchange to show that there is a great heterogeneity in current accounting treatment of goodwill. We identify two groups of companies: those that display the goodwill on a separate line in their balance sheet and those that integrate it in their intangible assets. For the later, the only way to notice the presence of goodwill is by looking at the financial statement’s notes presumably because those notes are expected to receive less scrutiny. Even if the compliance is not complete, the first group complies more with the paragraph 134 of IAS 36 than the other. Moreover, companies with a significant goodwill compared to both total assets and intangible assets are more compliant with IAS 36. The findings finally reveal that the notices issued by the Financial Service and Markets Authority (FSMA) have a limited impact on the disclosure level. There are some areas of improvement but others such as goodwill allocation to cash generating unit, determination of the recoverable amount, description of key hypothesis and the sensitivity test need more effort on compliance.

The Dark Side of Low Financial Reporting Frequency: Investors' Reliance on Alternative Sources of Earnings News and Excessive Information Spillovers

2020 ◽  
Vol 95 (6) ◽  
pp. 23-49 ◽  
Author(s):  
Salman Arif ◽  
Emmanuel T. De George
Keyword(s):  
Financial Reporting ◽  
Trading Volume ◽  
Price Volatility ◽  
Data Availability ◽  
Dark Side ◽  
Earnings Announcement ◽  
Earnings Information ◽  
Alternative Sources ◽  
Annual Earnings ◽  
Reporting Frequency

ABSTRACT This paper examines how low financial reporting frequency affects investors' reliance on alternative sources of earnings information. We find that the returns of semi-annual earnings announcers (i.e., low reporting frequency stocks [LRF]) are almost twice as sensitive to the earnings announcement returns of U.S. industry bellwether peers for non-reporting periods compared to reporting periods. Strikingly, these heightened spillovers are followed by return reversals when investors finally observe own-firm earnings at the subsequent semi-annual earnings announcement. This indicates that investors periodically overreact to peer-firm earnings news in the absence of own-firm earnings disclosures in interim periods. We also find elevated price volatility and trading volume around earnings announcements for non-reporting periods, consistent with theories of investor overconfidence. Collectively, our results suggest that investors are unable to successfully offset the information loss arising from low reporting frequency, thus impairing their ability to value firms and adversely affecting the quality of financial markets. JEL Classifications: M41; M48; G14. Data Availability: Data are available from the public sources cited in the text.

The role of small-scale topographic features on inundation dynamics: potential impacts on large-scale investigations

2021 ◽  
Author(s):  
Alessio Domeneghetti ◽  
Antonio Leonardi ◽  
Oliver E. J. Wing ◽  
Francesca Carisi ◽  
Armando Brath
Keyword(s):  
High Resolution ◽  
Large Scale ◽  
Hydraulic Modeling ◽  
Data Availability ◽  
Small Scale ◽  
Topographic Features ◽  
Capacity Data ◽  
The Impact ◽  
Flood Prone Areas

<p>The execution of large-scale (i.e., continental or global) hydraulic modeling is nowadays a reality thanks to the increasing computational capacity, data availability, as well as understanding of essential physical dynamics. Such achievements are typically associated to a compromise in terms of model resolutions (the finer being of few tens of meters, with a coarsened representation of the terrain) and, thus, accuracy on representing the topographic peculiarities of the flood-prone areas. Nevertheless, the experience gained observing the dynamics of past inundations highlights the role of small-scale topographic features (e.g., minor embankments, road deck, railways, etc.) in driving the flow paths. Recent advances on automated identification of flood defense from high resolution digital elevation model paved the way to include hydraulically relevant features (e.g., main levees) while preserving the model resolution suitable for large-scale applications (Wing et al, 2020). <br>The present study extends this approach to flood-prone areas by investigating how the automatic detection of minor topographic discontinuities can enhance the estimation of flood dynamics of large-scale models. Taking advantage of high-resolution topographic data (i.e., 1-2 m) the approach automatically detects hydraulically relevant features and preserves their height while coarsening the resolution of the terrain used into the hydraulic model. The impact of such approach on the inundation dynamic is tested referring to three different case-studies that recently experienced riverine flooding: Secchia and Enza rivers (2014, 2017, respectively; Italy), Des Moines (Iowa, USA). The results confirm the relevance of small-scale topographic features, which, when considered, ensure a high correspondence to observations and local models. The element of strength of the presented approach is that such performances are ensured without requiring the adoption of high grid resolutions, and thus, not affecting the overall computational costs.</p>

The Impact of Materiality Decisions on Financial Ratios: A Computer Simulation

1997 ◽  
Vol 12 (2) ◽  
pp. 125-147 ◽  
Author(s):  
Jerry L. Turner
Keyword(s):  
Balance Sheet ◽  
Distribution Patterns ◽  
Error Distribution ◽  
Financial Statement ◽  
Financial Ratios ◽  
Standard Normal Distribution ◽  
Income Statement ◽  
Standard Normal ◽  
The Impact ◽  
Profitability Ratios

This study examines the extent to which immaterial uncorrected errors may combine to affect specific financial ratios. A simulation is performed in which three balance sheet accounts and three related income statement accounts are seeded with immaterial errors. The magnitudes of the errors are controlled so the financial statement account balances are materially correct both individually and in the aggregate. The study examines six materiality heuristics for each of three industry classifications and three different error distribution patterns. For each heuristic/industry combination and error distribution pattern, a 95 percent confidence interval is generated for nine financial ratios. Results indicate that immaterial errors may combine to create substantial variances in some ratios. Profitability ratios based on income statement accounts display wide confidence intervals, while solvency ratios based on balance sheet accounts display relatively narrow intervals. Comparison between a standard normal distribution and a nonsymmetrical error distribution indicates that ratio variances are substantial and sensitive to error patterns even when errors are immaterial. Tests for equality of variances identify significant differences between heuristic methods and between industries. When making the decision regarding requiring entry or waiving discovered errors, the auditor should consider the impact of such errors not only on financial statement balances, but on the ways users may combine those balances.

scholarly journals The impact of earnings-announcement timing on technical analysis signal: The case of Indonesia

2015 ◽  
Vol 18 (2) ◽  
pp. 179
Author(s):  
Dedhy Sulistiawan
Keyword(s):  
Stock Market ◽  
Emerging Market ◽  
Earnings Announcements ◽  
Information Leakage ◽  
Technical Analysis ◽  
Earnings Announcement ◽  
Price Reaction ◽  
Fundamental Information ◽  
Annual Earnings ◽  
The Impact

This study discusses technical analysis signal and earnings-announcements timing. Technical analysis signal is used to capture price reaction around earnings announcement dates. Technical analysis is selected because it is potential for competing information as fundamental information in emerging market, especially in Indonesian stock market. The longer reporting lag will result in a tendency of bigger information leakage which makes price reaction before announcements stronger. That reaction produces a reliable technical analysis signal. By using Indonesian stock market data, the results show that (1) technical analysis signal generates bigger (lower) return for late (earlier) reporting, and (2) reporting lag positively affects the performance of technical analysis signal that emerge before annual earnings announcements. These findings indicate a tendency of bigger information leakage for companies that delay earnings announcements. It contributes to building a bridge between technical analysis and earnings-announcement timing studies.

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