Does Client Cyber-Breach Have Reputational Consequences for the Local Audit Office?

2021 ◽  
Author(s):  
Sharad Asthana ◽  
Rachana Kalelkar ◽  
K. K. Raman
Keyword(s):  
Stock Price ◽  
Perceived Value ◽  
Audit Fees ◽  
Public Disclosure ◽  
Negative Effects ◽  
The Public ◽  
Bargaining Position ◽  
Local Engagement

We examine whether the public disclosure of a client cyber-breach hurts the reputation of the local engagement office of the incumbent auditor. Prior research suggests that alleged client misconduct (even if unrelated to accounting) can hurt the auditor’s reputation and bargaining position vis-à-vis other clients. By contrast, in a client cyber-breach the client is the victim of misconduct rather than perpetrator of the misconduct (SEC 2018). Consistent with a loss in the perceived value of the audit and a decline in the bargaining position of the incumbent auditor’s local audit office, during 2005-2018 following a client cyber-breach we find a decline in the stock price as well as audit fees for non -breach clients of the local audit office. We contribute to the literature by documenting that the negative effects of a cyber-breach are not limited to the breached client but spillover to the local audit office.

scholarly journals The Effects of Board Interlocks With an Allegedly Fraudulent Company on Audit Fees

2020 ◽  
pp. 0148558X2097194
Author(s):  
Mariya N. Ivanova ◽  
Annalisa Prencipe
Keyword(s):  
Adverse Event ◽  
Side Effect ◽  
Audit Committee ◽  
Audit Fees ◽  
Financial Fraud ◽  
Public Disclosure ◽  
The Public ◽  
Prior Literature ◽  
Client Side ◽  
Positive Effect

Drawing on prior literature on audit fees, client reputation, and corporate governance, we posit that a material adverse event at a firm, such as a financial fraud allegation, leads to an increase in the audit fees of firms connected to the former by a board interlock. We propose two possible mechanisms to explain the upward pressure on audit fees: a client-side effect, where the client demands additional audit services, and an auditor-side effect, where the auditor raises its audit fees due to a perceived increase in audit engagement risk. The results indicate an average marginal increase of 12.86% in audit fees in the year following the public revelation of financial fraud. Additional analyses suggest that an auditor-side effect is in place, while we cannot find clear evidence supporting the client-side effect. Furthermore, we document that the positive effect on audit fees persists for up to at least 2 years after public disclosure of the event when the interlocked director serves as a member of the audit committee. JEL Descriptors: G34, M40, M42

Real Earnings Management before and after Reporting SOX 404 Material Weaknesses

2015 ◽  
Vol 30 (1) ◽  
pp. 119-141 ◽  
Author(s):  
Tuukka Järvinen ◽  
Emma-Riikka Myllymäki
Keyword(s):  
Earnings Management ◽  
Internal Control ◽  
Internal Controls ◽  
Real Earnings Management ◽  
Public Disclosure ◽  
High Quality ◽  
The Public ◽  
Material Weaknesses ◽  
Internal Control System ◽  
Before And After

SYNOPSIS The purpose of this study is to investigate whether SOX Section 404 material weaknesses manifest in real earnings management behavior. The empirical findings indicate that, compared to companies with effective internal controls, companies with existing material weaknesses in their internal controls engage in more manipulation of real activities (particularly inventory overproduction). This implies that the weak commitment by management to provide effective internal control system and high-quality financial information relates to a tendency to use real earnings management methods. Moreover, we find evidence suggesting that companies employ real earnings management (overproduction and reduction of discretionary expenses) after disclosing previous year's material weaknesses. We conjecture that the public disclosure of material weaknesses induces management to strive to mitigate the expected negative reactions of stakeholders to the disclosure by engaging in real earnings management, which is not easily detected or constrained by outsiders. Overall, this study suggests that material weaknesses in internal controls signal an environment where management is more inclined to employ real earnings management.

Tax-Advantaged Trust Use Among IPO Executives: Determinants and Implications for Valuation and Future Performance

2019 ◽  
Vol 95 (3) ◽  
pp. 145-175 ◽  
Author(s):  
Michael J. Dambra ◽  
Matthew Gustafson ◽  
Phillip J. Quinn
Keyword(s):  
Stock Price ◽  
Relevant Information ◽  
Data Availability ◽  
Market Prices ◽  
The Public ◽  
Future Performance ◽  
Estate Taxes ◽  
Price Appreciation ◽  
One Year ◽  
Jel Classifications

ABSTRACT We examine the prevalence and determinants of CEOs' use of tax-advantaged trusts prior to their firm's IPO. Twenty-three percent of CEOs use tax-advantaged pre-IPO trusts, and share transfers into tax-advantaged trusts are positively associated with CEO equity wealth, estate taxes, and dynastic preferences. We project that pre-IPO trust use increases CEOs' dynastic wealth by approximately $830,000, on average. We next examine a simple model's prediction that trust use will be positively related to IPO-period stock price appreciation. We find that trust use is associated with 12 percent higher one-year post-IPO returns, but is not significantly related to the IPO's valuation, filing price revision, or underpricing. This evidence is consistent with CEOs' personal finance decisions prior to the IPO containing value-relevant information that is not immediately incorporated into market prices. JEL Classifications: D14; G12; G32; M21; M41. Data Availability: Data are available from the public sources cited in the text.

Pricing Initial Audit Engagements: A Test of Competing Theories

1999 ◽  
Vol 74 (2) ◽  
pp. 201-216 ◽  
Author(s):  
Allen T. Craswell ◽  
Jere R. Francis
Keyword(s):  
United States ◽  
Product Quality ◽  
Audit Fees ◽  
The United States ◽  
Public Disclosure ◽  
Audit Pricing ◽  
Experience Goods ◽  
Economic Theories ◽  
Time Period

Two competing theories of initial engagement audit pricing are examined empirically. DeAngelo's (1981a) model predicts initial engagement discounts in all settings, while Dye's (1991) model specifically predicts discounting will not occur in settings where audit fees are publicly disclosed. Unlike the United States and most countries, audit fees are publicly disclosed in Australia. Our study examines initial engagement pricing in Australia during a time period when comparable U.S. studies report discounts of 25 percent (Ettredge and Greenberg 1990; Simon and Francis 1988). The Australian evidence finds initial engagement discounting only for upgrades from non-Big 8 to Big 8 auditors. Discounting for upgrades to Big 8 auditors is consistent with economic theories of discount pricing by sellers of higher-priced, higher-quality experience goods as an inducement to purchase when uncertainty about product quality is resolved through buying (experiencing) the goods. The evidence in our study is generally consistent with Dye's (1991) conclusion that public disclosure of audit fees precludes initial engagement discounting and the potential independence problems arising from such discounting.

Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

2020 ◽  
Vol 39 (4) ◽  
pp. 31-55
Author(s):  
Chiraz Ben Ali ◽  
Sabri Boubaker ◽  
Michel Magnan
Keyword(s):  
Risk Assessment ◽  
Negative Relationship ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Risk ◽  
Controlling Shareholder ◽  
Voting Power ◽  
The Public ◽  
Agency Conflict ◽  
Jel Classifications

SUMMARY This paper examines whether multiple large shareholders (MLS) affect audit fees in firms where the largest controlling shareholder (LCS) is a family. Results show that there is a negative relationship between audit fees and the presence, number, and voting power of MLS. This is consistent with the view that auditors consider MLS as playing a monitoring role over the LCS, mitigating the potential for expropriation by the LCS. Therefore, our evidence suggests that auditors reduce their audit risk assessment and audit effort and ultimately audit fees in family controlled firms with MLS. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; G34; M42; D86.

scholarly journals Public Transit Loyalty Modeling Considering the Effect of Passengers’ Emotional Value: A Case Study in Xiamen, China

2018 ◽  
Vol 2018 ◽  
pp. 1-12 ◽  
Author(s):  
Shi-chao Sun
Keyword(s):  
Structural Equation ◽  
Goodness Of Fit ◽  
Public Transit ◽  
Perceived Value ◽  
Index Score ◽  
The Public ◽  
Bus Service ◽  
Bus Services ◽  
Emotional Value

To better sustain passengers’ loyalty towards bus service, this paper addressed the modeling of the public transit loyalty by the use of structural equation model. As a novel hypothesis, the emotional value was considered to have effects on the perceived value of bus services in this study, which reflected the degree of passengers’ emotional dependence on the public transit. Specifically, in order to better assess the loyalty, seven unobserved variables were measured to construct the structural model, namely, “service guarantee,” “operational services and efficiency,” “emotional value,” “perceived value,” “expectation,” “satisfaction,” and “loyalty.” The goodness-of-fit of the model was estimated and evaluated by using the survey data harvested from Xiamen, China. Besides, the index score of variables was also computed to help determine targeted approaches to better improve the level of bus service. The results indicated that the time cost and the monetary cost actually had no effects on the perceived value of users in the case study. At the same time, however, it also proved that passengers’ emotional value towards the public transit indeed affected passengers’ perception of the service value. In addition, whether users’ perceived value was as expected determined how much passengers satisfied with the service. Regarding the index score of variables, it indicated a great dissatisfaction of passengers towards the current bus service. Unexpectedly, the score of loyalty even still retained a relatively high level, which reflected continue-to-use willingness of passengers. It implied that being subject to economic conditions and other factors, passengers were captive and had to continue relying on the public transit, in spite of their dissatisfaction. As for the improvement direction of bus services, targeted approaches should be determined to improve the quality of bus service, regarding the aspects of “condition of facilities in the bus,” “driving stability and comfort,” “vehicle speed,” and “safety.”

FACTORS INFLUENCING RIDERSHIP PREFERENCE IN USING LRT SERVICE IN KLANG VALLEY, MALAYSIA

2021 ◽  
Vol 19 (16) ◽  
Author(s):  
Rohayu Ab Majid ◽  
Rosli Said ◽  
Jamalunlaili Abdullah ◽  
Rohana Ngah ◽  
Qi Jie Kwong
Keyword(s):  
Light Rail ◽  
Negative Effects ◽  
Chi Square ◽  
The Public ◽  
Factors Influencing ◽  
Transportation Service ◽  
Design Attributes ◽  
Site Design ◽  
Klang Valley ◽  
Main Components

Light Rail Transit (LRT) is one of the public transports that provides a lot of benefits to the Malaysian. Yet this consumption depends on the diverse tastes of potential ridership which are influenced by various factors. However, it is very challenging to predict significant factors influencing ridership preferences. As such, the identification of these factors is very important in ensuring this transportation service really attract ridership attention. Thus, this paper intends to identify the main factors that influence ridership preference in taking LRT transportation. 28 attributes have been identified in this research which expands from four (4) main components. Data were collected from ridership’s survey, site observations and ridership statistical data. Pearson Chi-square has been employed to justify the significant status and the influence level of each LRT attribute and component factors toward ridership preference. The results show that 23 attributes recorded a significant status (<0.00) in two (2) different directions of correlation. Overall, three (3) component factors namely i) Comfortable Service, ii) Economics and iii) Indoor Environment Conditions, have influenced and contributed to the same effect on ridership considerations, as compared to the negative effects displayed by the Site Design Attributes.

Profiling the Users of High Influence on Social Media in the Context of Public Events

2021 ◽  
Vol 32 (2) ◽  
pp. 36-49
Author(s):  
Lu An ◽  
Junyang Hu ◽  
Manting Xu ◽  
Gang Li ◽  
Chuanming Yu
Keyword(s):  
Social Media ◽  
Public Opinion ◽  
Emergency Management ◽  
Emotional Support ◽  
Opinion Leader ◽  
Negative Effects ◽  
The Public ◽  
Public Events ◽  
Social Media Platforms ◽  
Influential Users

The highly influential users on social media platforms may lead the public opinion about public events and have positive or negative effects on the later evolution of events. Identifying highly influential users on social media is of great significance for the management of public opinion in the context of public events. In this study, the highly influential users of social media are divided into three types (i.e., topic initiator, opinion leader, and opinion reverser). A method of profiling highly influential users is proposed based on topic consistency and emotional support. The event of “Jiankui He Editing the Infants' Genes” was investigated. The three types of users were identified, and their opinion differences and dynamic evolution were revealed. The comprehensive profiles of highly influential users were constructed. The findings can help emergency management departments master the focus of attention and emotional attitudes of the key users and provide the method and data support for opinion management and decision-making of public events.

scholarly journals BİST’DE İŞLEM GÖREN KÂĞIT VE KÂĞIT ÜRÜNLERİ BASIM VE YAYIN İŞLETMELERİNİN TOPSİS, PROMETHEE VE COPRAS YÖNTEMLERİYLE FİNANSAL PERFORMANSLARININ BELİRLENMESİ

2018 ◽  
Vol 6 (3) ◽  
Author(s):  
Fatma AKYÜZ ◽  
Tolga YEŞİL ◽  
İsmail KARA ◽  
Gürsel ERSOY
Keyword(s):  
Decision Making ◽  
Financial Statements ◽  
Assessment Methods ◽  
Production Costs ◽  
Financial Ratios ◽  
Preference Ranking ◽  
Multi Criteria Decision Making ◽  
Public Disclosure ◽  
The Public ◽  
Period Performance

Paper and Paper Products in the printing and publishing sector, production costs have increased due to the recent dependence on imports. At this point, Paper and Paper Products Printing and Publishing sector has been preferred and the leading companies in the sector have been tried to be determined by multi-criteria decision making methods. In this study, the financial performances of the paper and paper products printing and publishing sector traded in Borsa Istanbul between the years of 2012-2017, which is one of the multi criteria decision making methods, are the most important decision making methods, PROMETHEE (Preference Ranking Organization Method for Enrichment Evaluation and COPRAS (Complex Proportional Assessment) methods. The research sample consisted of 14 companies listed in the BIST. Firstly, the financial ratios used in multi-criteria decision making methods were explained and then the application steps of TOPSİS, PROMETHEE and COPRAS methods were included. During the calculation of financial ratios, the financial statements of the related companies between the years 2012-2017 were used in the light of the data obtained from the Public Disclosure Platform. As a result of the research, the 6-period performance of the companies have rewieved, between the years 2012-2017 was evaluated with 10 financial ratios and the results were compared.

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