A Classroom Experiment on the Benefit of Auditing in Financial Markets

2004 ◽  
Vol 19 (2) ◽  
pp. 189-209 ◽  
Author(s):  
Scott J. Boylan
Keyword(s):  
Financial Markets ◽  
Financial Reporting ◽  
Financial Information ◽  
Investor Behavior ◽  
Attractive Alternative ◽  
Related Data ◽  
Transaction Prices ◽  
Classroom Experiment ◽  
Typical Sequence

In this paper, I discuss a classroom experiment that can be used to illustrate how auditing can impact investor behavior and financial market performance by providing assurance on the quality of financial information. In particular, the experiment demonstrates that auditing can influence security prices and investment portfolio compositions in a way that benefits investors and lowers the cost of capital for firms. The experiment complements the material in auditing texts by creating an environment where students can directly observe how auditing influences investor behavior in a set of financial markets in which students trade securities based on the contents of a financial report. The simplicity of the experiment, its relatively short duration, and the formal inclusion of financial reporting make it a particularly attractive alternative for those who wish to utilize an auditing experiment in their classes. In the experiment, students trade securities in a sequence of markets in which financial information pertaining to security values is made public. The quality of the information depends on whether it was audited, and varies from market to market. Data on transaction prices, security holdings, and investor profits from a typical sequence of markets are presented, as are a series of discussion topics designed to illustrate how to use the experiment and related data to address a variety of auditing-related issues.

scholarly journals Relevance of financial reporting quality - Theory and practice in Vietnamese enterprises

2017 ◽  
Vol 1 (Q2) ◽  
pp. 119-128
Author(s):  
Thuan Quoc Pham
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Professional Associations ◽  
Financial Statements ◽  
Theory And Practice ◽  
Financial Information ◽  
Financial Reporting Quality

Financial reporting quality is one the most interesting topics which draw a great deal of attention to researchers and scientists in the field of accounting (Céline Michailesco, 2010). In the review of research on financial information from 1980 to 2016, Pham (2016) found that characteristics of useful financial information are relatively diverse with as many as 15 attributes being identified. In addition, he also found that all research in any period has employed the characteristics published by professional associations such as American Institute of Accountants, Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB as theoretical basis. Research on the quality of financial information is diverse yet have many things in common, above all is the Relevance characteristic which considered to be the basic qualitative component of the quality of financial information in financial statements. Conceptual Framework officially issued by FASB & IASB in 2010 (FASB & IASB 2010) has further confirmed Relevance is the basic quality component of financial information. Compared with previous announcements, there has been a considerable change in the criteria and attributes used to evaluate the appropriateness of Relevance characteristic of financial information in financial statements. This study aims at confirming the importance of the Relevance component in evaluating the quality of financial information, clarifyingg the characteristics of Relevance measurement before and after Conceptual Framework 2010 and constructing relevant scales as well as measuring the qualitative characteristic of Relevance among enterprises in Vietnam.

scholarly journals Market Responsiveness to Corporate Social Responsibility

2019 ◽  
Vol 8 (4) ◽  
pp. 114
Author(s):  
Zev Fried
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Financial Reporting ◽  
Perceived Quality ◽  
Financial Information ◽  
Factors Affecting ◽  
Earnings Response Coefficients ◽  
Corporate Social ◽  
The Impact

Market reaction to surprises in earnings announcements has long been used to measure the quality of the information content of the announcement, and studies have explored various factors affecting the response. This study adds to this body of research by factoring in the level of corporate social responsibility (CSR) exhibited by the firm and employs a relatively new measure of a company’s level of CSR, rankings published by JUST Capital. I hypothesize that financial information reported by higher ranked companies is weighed more heavily by investors than those reported by non-ranked or lower-ranked companies. Using earnings response coefficients as a measure of the perceived quality of the financial information reported by the firms, my results provide direct support of the hypothesis, indicating that the market reacts more strongly to earnings surprises for firms with high JUST rankings than for unranked firms or firms with lower rankings. This result contributes new insights into the impact of a firm’s CSR in terms of the perceived quality of a firm’s financial reporting.

The effect of gender composition in joint audits on earnings management

2019 ◽  
Vol 34 (5) ◽  
pp. 549-574 ◽  
Author(s):  
Fan-Hua Kung ◽  
Yu-Shan Chang ◽  
Minting Zhou
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Information ◽  
Real Earnings Management ◽  
Gender Composition ◽  
Institutional Setting ◽  
Content Type ◽  
Empirical Results ◽  
Industry Expertise

Purpose This paper aims to examine the association between gender composition of joint auditor pairs and the quality of reported financial information. More specifically, the authors attempt to assess whether and how these gender compositions affect the client firms’ earnings management behavior. Design/methodology/approach The authors utilized the unique institutional setting of Taiwan, where joint auditors are required by law. They studied the effect of gender in joint auditor pairs on accrual earnings management and real earnings management to achieve financial reporting objectives. Findings Empirical results indicate that engaging a woman as the lead auditor can constrain accrual earnings management, regardless of whether the joint auditor is male or female. The authors also found that all-male signing auditor pairs with industry expertise can significantly reduce accrual earnings management. The authors also documented that all-female signing auditor pairs and auditor industry expertise could drive clients to engage in real earnings management activities as an alternative to accrual earnings management. Originality/value The empirical results demonstrate that gender indeed plays a role in the quality of client’s reported financial information. Female auditors in a lead position and male auditors with industry expertise tend to be more successful in delivering better-quality audits.

scholarly journals Adoption of International Financial Reporting Standards (IFRS) in Ghana and the Quality of Financial Statement Disclosures

2014 ◽  
Vol 3 (2) ◽  
pp. 269 ◽  
Author(s):  
Ben Kwame Agyei-Mensah
Keyword(s):  
Regression Analysis ◽  
Financial Reporting ◽  
Firm Size ◽  
Financial Statements ◽  
Financial Information ◽  
Reporting Standards ◽  
Financial Reports ◽  
Listed Firms ◽  
Financial Reporting Standards

According to the IASB's IFRS framework, qualitative characteristics are the attributes that make the information provided in financial statements useful to others. This study was conducted to investigate the quality of financial reports before and after adopting IFRSs in Ghana, and also the influence of firm-specific characteristics which include firm size, profitability, debt equity ratio, liquidity and audit firm size on the quality of financial information disclosed by firms listed on the Ghana Stock Exchange.The research was conducted through detailed analysis of the pre-official adoption period, (2006) and post adoption period, (2008) financial statements of the listed firms.  Descriptive analysis was performed to provide the background statistics of the variables examined.  This was followed by regression analysis which forms the main data analysis.  The results of the quality of financial information disclosure mean of 76.80% (pre adoption) and 87.09% (post adoption) for the two years indicate that the quality of financial reports has improved significantly after adopting IFRSs. The study thus confirms that the implementation of IFRSs generally reinforce accounting disclosure quality.  It also indicates listed firms' overwhelming compliance with the IASB's IFRS Framework.The results of the multiple regression analysis show that company size, represented by net assets and Auditor type were found to be associated at a statistically significant level with the quality of financial information disclosed.  With the improvement in the quality of the financial reports after adopting IFRS users are assured of useful information for financial decision-making.Keywords: Quality of financial reports' disclosure, Firm-specific characteristics, International Financial Reporting Standards, Mandatory disclosure, Ghana. JEL Classifications: M40, M41, M48

scholarly journals The Company’s Internal Characteristics and Mandatory Disclosure Size of Web-Based Financial Reporting

2017 ◽  
Vol 19 (3) ◽  
Author(s):  
Weli Weli
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Capital Market ◽  
Financial Information ◽  
Web Based ◽  
Full Disclosure ◽  
Main Motivation ◽  
Good Corporate Governance ◽  
Size Type

The new regulation on the Indonesian Capital Market (XK6-Bapepam-LK No. KEP-431/BL/ 2012), related to the disclosure of financial information on the company's website is the main motivation of this study, which is to analyze the extent to which issuers responded to the new regulation. The study was conducted on 50 companies included in the list of 50 companies with the highest score of corporate governance version IICD in 2013 - 2014 and 57 companies in the same industry as a control companies, with the total number of samples is 107 companies. The study was conducted by analyzing the factors (size, listing period, industry, the quality of corporate governance) that affect the level of disclosure by the company on their website. The results showed that not all sample companies do a full disclosure and the average disclosure is only 77%. Further, the factor of disclosure size was also influenced by the company's internal characteristics such as company size, type of industry and good corporate governance.

scholarly journals PERANCANGAN APLIKASI AKUNTANSI PABRIK BERBASIS WEBSITE

2021 ◽  
Vol 1 (3) ◽  
pp. 232
Author(s):  
Fritz Gamaliel ◽  
P.Yudi Dwi Arliyant
Keyword(s):  
Programming Language ◽  
Financial Reporting ◽  
Financial Information ◽  
Financial Report ◽  
Document Format

The financial information that has been made by the accountant can now be easily accessed by the part of the leadership. However there are difficulties faced by the leaders as well as accountants, one that is non-uniformity of financial document format. This has resulted in the related division must input the financial document data which is the task of their division into the system. After that, the division sends the documents to the accountant for then the accountant enters it back into the system. This causes work to be inefficient because it has to be entered twice. In this research, the application was made with the concept of uniform financial document formats so that one entry is sufficient. Application is made using the PHP programming language and MySQL database. The existence of the study expected that Application can improve the quality of financial reporting in the process recording the financial report

scholarly journals Standard-Setters Versus Big4 Opinion, Concerning Iasb Revision Project of the Conceptual Framework for Financial Reporting. the Case of Presentation and Disclosures Chapter

2015 ◽  
Vol 25 (2) ◽  
pp. 81-107
Author(s):  
Valentin Burca ◽  
Dorel Mates ◽  
Adriana Puscas
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Financial Statements ◽  
Financial Information ◽  
Economic Systems ◽  
Accounting System ◽  
Narrow Scope ◽  
Comment Letters ◽  
Current List

Abstract On the last decades the accounting system haven‘t been able to follow the dynamics of the economic systems generated by the globalization process. In order to reduce the lag between the demand of financial information and the offer of financial information, IASB has started numerous initiatives aiming the increase on the quality of the financial information. Among the current list of current IASB major projects there is also the project of revising the actual conceptual framework for financial reporting. This study is designed to give some directions that will be considered on the exposure draft of this project, analyzing the comment letters submitted by the members of ASAF and the Big4 as well. The study reveals the increasing importance the preparers and users give to the disclosures included on the notes to the primary financial statements. Moreover, on this study we emphasize several challenges that IASB has to face on issuing the exposure draft for this important project. Some of the main challenges refer to the narrow scope of the financial statements, the criteria used on classification, aggregation and offsetting, or the use of the materiality concept

“Transparency” in Accounting and Corporate Governance: Making Sense of Multiple Meanings

2017 ◽  
Vol 17 (1) ◽  
pp. 31-59 ◽  
Author(s):  
Mitchell J. Stein ◽  
Steven E. Salterio ◽  
Teri Shearer
Keyword(s):  
Financial Markets ◽  
Financial Reporting ◽  
Financial Crises ◽  
Meaning Construction ◽  
Financial Information ◽  
Public Accountability ◽  
Senior Managers ◽  
Making Sense ◽  
Accounting Scandals ◽  
Multiple Meanings

ABSTRACT Calls for greater transparency of accounting and financial information in the aftermath of Enron and other accounting scandals appeared to offer the opportunity for greater public accountability within financial reporting. Our analysis however suggests that different emergent meanings from various groups such as senior managers, investors, regulators, and other gatekeepers were associated with these calls, indicating an underlying “taken for grantedness” concerning the need for increased transparency. We examine these emergent meanings of transparency and their effects on broader issues of accountability within financial reporting. Our analysis, employing sensemaking, shows the mobilization of “transparency” to construct meanings to make sense of and rationalize complex, ambiguous, and uncertainty events around the accounting scandals and the subsequent financial crises. This meaning construction permitted action that “restored” confidence in financial markets and in doing so served the interests of senior managers who defined their own public accountability. Our analysis also suggests that accountants and regulators need to provide higher forms of sensegiving around such crises to offer alternatives to senior managers' accounts of transparency and financial reporting.

scholarly journals Quality of financial reporting: approaches to measuring

2015 ◽  
Vol 4 (1) ◽  
pp. 1 ◽  
Author(s):  
Jurij Renkas ◽  
Olena Goncharenko ◽  
Olena Lukianets
Keyword(s):  
Soviet Union ◽  
Financial Reporting ◽  
Former Soviet Union ◽  
Information Needs ◽  
Information Quality ◽  
Reporting Quality ◽  
Financial Statements ◽  
Financial Information ◽  
Qualitative Characteristics

<p>Financial reporting must meet many criteria to be considered high quality because it is the quality of information that determines the viability of future strategic decisions. The article investigates the essence of the concept of "quality" and "quality of financial infor-mation", and defines indicators and criteria of the financial reporting quality. As for the quality of the financial reporting, it is found that the latter is a structured reflection of financial condition and financial results of the entity, therefore, can be regarded as a set of components: quality of the financial information; quality of presentation of the financial information. It was found that the quality of the reporting of financial information is evaluated using a system of indicators that are qualified by the Financial reporting framework as the qualitative characteristics of useful financial information and National Accounting Statement (standard) 1 as the qualitative characteristics of financial reporting. In terms of formalization (presentation within the legislation forms) of the financial information presentation in Ukraine, we can speak of quality only in respect of the notes to the financial statements. It has been established that quality assessment indicators of presenting the financial information in the notes may be: readability of the information, visualization of the representation. Research of the quality requirements for the financial statements (information) of the participating countries of the former Soviet Union has identified many variations, but the most commonly used features are relevance, reliability, comparability and understandability. It is indicated that most post-Soviet countries, including Ukraine, gradually bring its legislation on the regulation of financial statements in conformity with IFRS. But there are still many unresolved differences, chief among which are the qualitative characteristics of the financial statements that should provide the information needs of different user groups.</p>

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