Dynamic Data: Corporate Governance and Auditors' Evaluation of Accounting Estimates

2005 ◽  
Vol 20 (1) ◽  
pp. 119-128 ◽  
Author(s):  
Jeffrey R. Cohen ◽  
Ganesh Krishnamoorthy ◽  
Arnold M. Wright
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
House Of Representatives ◽  
Audit Committee ◽  
High Tech ◽  
Audit Process ◽  
Dynamic Data ◽  
Sarbanes Oxley ◽  
Accounting Scandals ◽  
Reporting Process

Corporate governance issues have grown more salient in light of alleged corporate accounting scandals and the subsequent enactment of the landmark Sarbanes-Oxley Act (U.S. House of Representatives 2002). However, even in cases where no fraud has occurred and management is completely aboveboard, the role of various players in the corporate governance framework in maintaining a high-quality financial reporting process cannot be overlooked. This case presents facts surrounding the valuation of inventory at Dynamic Data, a high-tech firm. You will be asked to consider, from an auditor's perspective, whether inventory should be carried at cost in light of changing market conditions. Further, you will be asked to consider the role, if any, that the Audit Committee and Board of Directors might play in the financial reporting process. Special consideration will also be given to examining the implications of the Sarbanes-Oxley Act in the audit process.

scholarly journals Corporate Governance on the Performance of Internal Auditors in Thailand Public Limited Company

2018 ◽  
Vol 6 (2) ◽  
pp. 118
Author(s):  
Sutana Narkchai ◽  
Faudziah Hanim Binti Fadzil ◽  
Sompon Thungwha
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Control ◽  
Audit Committee ◽  
Internal Auditing ◽  
Internal Auditor ◽  
Internal Auditors ◽  
Sarbanes Oxley ◽  
Accounting Scandals ◽  
The Relationship

<em>The issue of performance of internal auditors is important since Thailand was also affected by the accounting scandals. The expanded scope in the definition of internal auditing and new regulatory requirements such as the Sarbanes-Oxley Act 2002 has increased the demands on internal auditing. This study was conducted to examine the relationship between the corporate governance on the performance of internal auditors in Thailand public limited companies. In this study, corporate governance relates to the board of directors size and audit committee size to the performance of the internal auditor. To achieve this objective, two hypotheses were developed based on previous studies and the agency theory. Survey questionnaires were sent to the Chief Audit Executives (CAEs) to determine the effectiveness on their performance based on the professional standards issued by the IPPF (2017) indicators. A total of 520 questionnaires were distributed, but only 146 were usable. Multiple regressions were used to test the relationship between the variables. The result showed that there is insignificant relationship between board of director’s size and internal auditors’ performance. This study however found that audit committee size has a positive relationship on the performance of internal auditors. Therefore, audit committee need to increase higher responsibility with regard to corporate governance by overseeing financial reporting and internal control matters.</em>

Corporate Governance Factors and Auditor Going Concern Assessments

2005 ◽  
Vol 4 (3) ◽  
pp. 5-29 ◽  
Author(s):  
Susan Parker ◽  
Gary F. Peters ◽  
Howard F. Turetsky
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Financial Distress ◽  
Audit Committee ◽  
Future Research ◽  
Going Concern ◽  
Sarbanes Oxley ◽  
Auditing Standards ◽  
Distressed Firms ◽  
The Impact

When making going concern assessments, Statement on Auditing Standards No. 59 (Auditing Standards Board 1988) directs auditors to consider the nature of management's plans and ability to mitigate periods of financial distress successfully. Corporate governance factors reflect attributes of control, oversight, and/or support of management's plans and actions intended to overcome financial distress. Correspondingly, this study investigates the impact of certain corporate governance factors on the likelihood of a going concern modification. Using survival analysis techniques, we examine a sample of 161 financially distressed firms for the time period 1988–1996. We find that auditors are twice as likely to issue a going concern modification when the CEO is replaced. We also find that going concern modifications are inversely associated with blockholder ownership. We also confirm Carcello and Neal's (2000) findings with respect to the association between an independent audit committee and an increased likelihood of modification. In a repeated events setting, we find that insider ownership and board independence are inversely associated with repeated going concern modifications. Our study concludes by proposing implications for the current financial reporting environment (including the Sarbanes‐Oxley Act of 2002) and future research avenues.

Corporate Governance and Internal Control over Financial Reporting: A Comparison of Regulatory Regimes

2009 ◽  
Vol 84 (3) ◽  
pp. 839-867 ◽  
Author(s):  
Udi Hoitash ◽  
Rani Hoitash ◽  
Jean C. Bedard
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Control ◽  
Audit Committee ◽  
Section 404 ◽  
Sarbanes Oxley ◽  
Material Weaknesses ◽  
Financial Expertise ◽  
Financial Expert ◽  
Section 302

ABSTRACT: This study examines the association between corporate governance and disclosures of material weaknesses (MW) in internal control over financial reporting. We study this association using MW reported under Sarbanes-Oxley Sections 302 and 404, deriving data on audit committee financial expertise from automated parsing of member qualifications from their biographies. We find that a lower likelihood of disclosing Section 404 MW is associated with relatively more audit committee members having accounting and supervisory experience, as well as board strength. Further, the nature of MW varies with the type of experience. However, these associations are not detectable using Section 302 reports. We also find that MW disclosure is associated with designating a financial expert without accounting experience, or designating multiple financial experts. We conclude that board and audit committee characteristics are associated with internal control quality. However, this association is only observable under the more stringent requirements of Section 404.

scholarly journals Corporate governance, public accounting firms and multinational corporations: The US Sarbanes-Oxley Act perspective

2006 ◽  
Vol 3 (2) ◽  
pp. 159-164
Author(s):  
Marc Massoud ◽  
Eunsup Daniel Shim
Keyword(s):  
Corporate Governance ◽  
Multinational Corporations ◽  
Financial Reporting ◽  
Audit Committee ◽  
Conflicts Of Interest ◽  
Accounting Firms ◽  
Good Corporate Governance ◽  
Sarbanes Oxley ◽  
Long Run ◽  
To Come

The purpose of this paper is to review US corporate governance systems and to highlight the mandated roles of audit committee and external auditor within the SOX Act. In addition, it discusses requirements and implications of the SOX Act for the foreign accounting firms and multinational corporations. Finally this paper provides a perspective on improvement of corporate governance and financial integrity. In order to regain trust from the financial market, the SOX Act mandates (1) to improve auditor’s independence by reducing conflicts of interest; (2) to increase corporate financial reporting responsibility by requiring a CEO or a CFO certify accuracy of annual report; and (3) to enhance financial disclosures. It also significantly increase criminal penalty for non-compliance. The authors believe that the combination of strengthening auditor’s independence, increased corporate responsibility and severe penalty and restored corporate governance would create an environment that is intended by the SOX Act. Volker and Levitt (2004) put it very forceful way: “While there are direct money costs involved in good corporate governance, we believe that an investment in good corporate governance, professional integrity and transparency will pay dividends in the form of investor confidence, more efficient markets and more market participation for years to come.” We concur with them and believe that the SOX Act will help in restoring trust in corporate governance and improve financial integrity and quality of financial information. We also agree that the benefits of the SOX Act will outweigh the costs of compliance in the long-run.

Former Audit Partners on the Audit Committee and Internal Control Deficiencies

2009 ◽  
Vol 84 (2) ◽  
pp. 559-587 ◽  
Author(s):  
Vic Naiker ◽  
Divesh S. Sharma
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
House Of Representatives ◽  
Audit Committee ◽  
Discretionary Accruals ◽  
Negative Association ◽  
Internal Controls ◽  
Sarbanes Oxley ◽  
External Auditor ◽  
Internal Control Deficiencies

ABSTRACT: This study examines the association between internal control deficiencies (ICDs) reported under Section 404 of the Sarbanes-Oxley Act (SOX, U.S. House of Representatives 2002) and the presence of former audit partners on the audit committee who are affiliated (AFAPs) and unaffiliated (UFAPs) with the firm's external auditor. We find a negative association between AFAPs and UFAPs on the audit committee and ICDs. We also find results that suggest the NYSE and NASDAQ three-year “cooling-off” rule applying to AFAPs may be unwarranted and deserves further empirical and regulatory attention. Further tests suggest AFAPs do not allow management to circumvent the disclosure of ICDs when conditions appear to suggest this may be so, and that AFAPs are negatively related to performance-adjusted discretionary accruals. Collectively, we interpret these findings to suggest that AFAPs and UFAPs on the audit committee are associated with more effective monitoring of internal controls and financial reporting.

Shareholder Elections of Audit Committee Members

2017 ◽  
Vol 37 (4) ◽  
pp. 143-167 ◽  
Author(s):  
Ronen Gal-Or ◽  
Rani Hoitash ◽  
Udi Hoitash
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Board Members ◽  
Past Work ◽  
Reporting Process ◽  
Nominating Committees ◽  
Accounting Expertise ◽  
Governance Choices

SUMMARY Voting in directors' elections is one of few mechanisms by which shareholders can influence corporate governance choices. We study elections of directors who serve on the audit committee (AC), a topic receiving little attention in past work. Our results show that AC members, especially those who do not serve on the compensation or nominating committees, receive greater shareholder support than other independent board members. We further find that among AC members, more qualified members, in terms of accounting expertise, receive greater support, while AC chairs without such expertise receive lower support. In addition, when the AC is less effective in monitoring the financial reporting process, its members receive lower shareholder approval, while other independent board members are less affected by these same financial reporting factors. Finally, when the AC is less effective, all of its members receive lower support, irrespective of their expertise or position within the committee.

scholarly journals The relationship between corporate governance, internal audit and audit committee: Empirical evidence from Greece

2016 ◽  
Vol 14 (1) ◽  
pp. 569-577 ◽  
Author(s):  
George Drogalas ◽  
Konstantinos Arampatzis ◽  
Evgenia Anagnostopoulou
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Internal Audit ◽  
Audit Process ◽  
Athens Stock Exchange ◽  
The Relationship

Internal audit has been acknowledged as the main driver of corporate disclosure which aims to increase the quality of financial information, to ensure the transparency in financial reporting and to increase the confidence between managers and shareholders. The need for developing strong governance structures has led many researchers to examine the new framework of corporate governance and to explore its relationship to the internal audit process. Regarding Greece, there is a lack of research evaluating the relationship between corporate governance and internal audit. This study examines the above relationship in companies listed in the Athens Stock Exchange. In the present research, internal audit is examined in terms of audit quality and the consulting role of internal audit, in order to highlight the new management-oriented and value adding scope of internal audit. Data was collected via a survey questionnaire methodology and was analyzed using regression analysis. The results show that corporate governance is positively associated to the consulting role of internal audit, to internal audit quality and to the audit committee.

Enriching AIS Courses With SOX Compliance Activities

2010 ◽  
Vol 5 (1) ◽  
pp. 1-24 ◽  
Author(s):  
Joann Segovia ◽  
Carol M. Jessup ◽  
Marsha Weber ◽  
Sheri Erickson
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Controls ◽  
Accounting Profession ◽  
Investor Confidence ◽  
Reporting Requirements ◽  
Sarbanes Oxley ◽  
Audit Firms ◽  
Significant Change

A very significant change to the accounting profession occurred in 2002 when the Sarbanes-Oxley Act of 2002 (SOX) was enacted. This legislation had a significant impact on corporations and their audit firms. The objective was to improve corporate governance and its quality of financial reporting to improve investor confidence. This paper provides instructors with a background on SOX and suggests readings and activities that reflect the requirements of SOX as it relates to the AIS environment and the analysis of internal controls. These activities can strengthen students' understandings of how corporations respond to the various reporting requirements of this Act.

Did the 1999 NYSE and NASDAQ Listing Standard Changes on Audit Committee Composition Benefit Investors?

2017 ◽  
Vol 92 (6) ◽  
pp. 187-212 ◽  
Author(s):  
Seil Kim ◽  
April Klein
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Research Question ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Difference In Differences ◽  
Listed Firms ◽  
Sarbanes Oxley ◽  
Independent Audit

ABSTRACT In December 1999, the SEC instituted a new listing standard for NYSE and NASDAQ firms. Listed firms were now required to maintain fully independent audit committees with at least three members. In July 2002, the U.S. Congress legislated these standards through the Sarbanes-Oxley Act. Our research question is whether all investors benefited from the 1999 new rule. Using both an event study and a difference-in-differences methodology, we find no evidence of higher market value or better financial reporting quality resulting from this rule.

Audit Committee Members’ Reputation Incentives and Their Effectiveness in Monitoring the Financial Reporting Process

Abacus ◽  
2020 ◽  
Vol 56 (3) ◽  
pp. 348-406
Author(s):  
Eunice S. Khoo ◽  
Youngdeok Lim ◽  
Gary S. Monroe
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Process
Sign in / Sign up

Export Citation Format

Share Document