Using Communication Theory to Teach SOX Reporting Requirements

2011 ◽  
Vol 26 (1) ◽  
pp. 241-256 ◽  
Author(s):  
Marsha Weber ◽  
Sheri Erickson ◽  
Mary Stone
Keyword(s):  
Image Restoration ◽  
Internal Control ◽  
Communication Theory ◽  
Corporate Image ◽  
Annual Reports ◽  
Instructional Resource ◽  
Analytical Skills ◽  
Sarbanes Oxley ◽  
Material Weaknesses ◽  
Restoration Strategies

ABSTRACT: This paper presents an instructional resource and provides suggestions for its implementation. The resource demonstrates a method for teaching students how communication in required SOX Section 404 reports can impact stakeholders’ perceptions of that organization. Students read portions of selected 10-K, 10-Q, and corporate annual reports in which management responds to disclosed internal control material weaknesses. Students then analyze these excerpts according to a well-known image restoration strategy. This assignment enhances written communication skills, analytical skills, research skills, and deepens students’ understanding of Sarbanes-Oxley 404 requirements and of corporate image restoration strategies. The instructional resource would be beneficial in auditing, intermediate, or advanced accounting, as well as a graduate-level accounting course.

scholarly journals Samsung’s crisis communication response: Ineffective response strategies across traditional and social media platforms

2021 ◽  
Author(s):  
Bethlehem Dejene
Keyword(s):  
Social Media ◽  
Image Restoration ◽  
Crisis Communication ◽  
Communication Theory ◽  
Crisis Response ◽  
Corporate Image ◽  
Depth Analysis ◽  
Restoration Strategies ◽  
High Level

When reports surfaced in 2016 of complications with Samsung’s latest product release, the Galaxy Note 7, Samsung faced a significant threat to its corporate image. This MRP explores Samsung’s traditional and social media crisis responses to the explosions of consumers’ Note 7 devices. Through an in-depth analysis of Samsung’s traditional media newspaper apology ads and press statements, coupled with audience comments about the brand on YouTube, this case study analyzes how the brand incorporated two prominent theories of crisis communication, Situational Crisis Communication Theory (SCCT) and Image Restoration Theory (IRT). Through a study of Samsung’s traditional crisis response, a newspaper apology advertisement and three website press statements, this case study uncovers which strategies of SCCT and IRT were practiced. Specifically, this research study highlights image restoration strategies such as corrective action, mortification, and minimization. Similarly, the corporation wrongfully employed diminish strategies, opposed to rebuild strategies which coupled with the vague language and inconsistency of the information shared in its communications response to emerge public reactions, with consumers refusing to purchase their products in the future. However, due to its high level of reputational capital as a world class smartphone distributor, in just nine months’consumers recommitted their loyalty to organisation had recuperated its once tarnished image.

scholarly journals Samsung’s crisis communication response: Ineffective response strategies across traditional and social media platforms

2021 ◽  
Author(s):  
Bethlehem Dejene
Keyword(s):  
Social Media ◽  
Image Restoration ◽  
Crisis Communication ◽  
Communication Theory ◽  
Crisis Response ◽  
Corporate Image ◽  
Depth Analysis ◽  
Restoration Strategies ◽  
High Level

When reports surfaced in 2016 of complications with Samsung’s latest product release, the Galaxy Note 7, Samsung faced a significant threat to its corporate image. This MRP explores Samsung’s traditional and social media crisis responses to the explosions of consumers’ Note 7 devices. Through an in-depth analysis of Samsung’s traditional media newspaper apology ads and press statements, coupled with audience comments about the brand on YouTube, this case study analyzes how the brand incorporated two prominent theories of crisis communication, Situational Crisis Communication Theory (SCCT) and Image Restoration Theory (IRT). Through a study of Samsung’s traditional crisis response, a newspaper apology advertisement and three website press statements, this case study uncovers which strategies of SCCT and IRT were practiced. Specifically, this research study highlights image restoration strategies such as corrective action, mortification, and minimization. Similarly, the corporation wrongfully employed diminish strategies, opposed to rebuild strategies which coupled with the vague language and inconsistency of the information shared in its communications response to emerge public reactions, with consumers refusing to purchase their products in the future. However, due to its high level of reputational capital as a world class smartphone distributor, in just nine months’consumers recommitted their loyalty to organisation had recuperated its once tarnished image.

A Corpus-Based Study of Corporate Image Restoration via Public Apology

2020 ◽  
Vol 12 (4) ◽  
pp. 103
Author(s):  
Zhanghong Xu ◽  
Xiaolin Liu
Keyword(s):  
Image Restoration ◽  
Communication Theory ◽  
Corporate Image ◽  
Linguistic Features ◽  
Business World ◽  
Frequent Use ◽  
Demonstrative Pronouns ◽  
Foreign Corporations ◽  
Interdisciplinary Study ◽  
Negative Impression

As one of the most effective measures for corporations to manage crises, public apology has received extensive attention from both practitioners and researchers. This paper attempts to conduct a corpus-based and interdisciplinary study on English public apologies issued by foreign corporations, and to explore how the corporations repair their images via public apology under the tentative theoretical framework adapted from Benoit’s image restoration discourse theory (IRDT) and Coombs & Holladay’s situational crisis communication theory (SCCT). Results show that three salient linguistic features are identified in corporate apology corpus: (a) highly frequent use of modal verbs “will” and “can”; (b) highly frequent use of personal pronouns “we” and “you”; (c) highly frequent use of demonstrative pronouns “this” and “that”. It is found that five pragmatic strategies (strategy of expressing apology, strategy of intensifying affection, strategy of mitigating responsibility, bolstering strategy, and rebuilding strategy) are most frequently employed to express mortification to the victims, to reduce the offensiveness of acts and to minimize or to evade responsibility. Furthermore, it is also found that corporate image is restored by means of weakening the negative impression and re-building a responsible and benevolent image. These findings would not only shed light on the corporate image restoration studies, but also offer implications for the practitioners in the business world. 

Observed effectiveness of the COSO 2013 framework

2019 ◽  
Vol 16 (1) ◽  
pp. 31-45
Author(s):  
Ifeoma Udeh
Keyword(s):  
Control Systems ◽  
Internal Control ◽  
Design Methodology ◽  
Control Process ◽  
Regression Analyses ◽  
Section 404 ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Material Weaknesses ◽  
Practical Implications

Purpose This paper aims to examine the effectiveness of the Committee of Sponsoring Organization’s 2013 Framework, by investigating how the number of auditor-reported material weaknesses compares for Early-, Timely- and Late-adopters of the framework, and how the number of auditor-reported material weaknesses changed for Early- and Timely-adopters following their adoption of the framework. Design/methodology/approach The paper uses regression analyses based on a sample of US firms subject to Sarbanes-Oxley Act Section 404(b). Findings Timely-adopters of the 2013 Framework continued to exhibit fewer instances of auditor-reported material weaknesses than Late-adopters, even though they had a marginal increase in the number of auditor-reported material weaknesses, in the post-2013 Framework period. Practical implications The findings suggest that the effectiveness of the 2013 Framework may lie in the iterative nature of the internal control process, and as firms remedy deficiencies they or their auditors identify, they will continuously improve the effectiveness of their internal control systems. Originality/value Unlike existing literature, this paper uses data from the pre-2013 Framework, transition and post-2013 Framework periods to examine changes in the number of auditor-reported material weaknesses, thus differentiating between Early-, Timely- and Late-adopters of the 2013 Framework. It also shows the effect of adopting the 2013 Framework on the number of auditor-reported material weaknesses.

The Failure to Remediate Previously Disclosed Material Weaknesses in Internal Controls

2012 ◽  
Vol 31 (2) ◽  
pp. 73-111 ◽  
Author(s):  
Jacqueline S. Hammersley ◽  
Linda A. Myers ◽  
Jian Zhou
Keyword(s):  
Interest Rates ◽  
Control Systems ◽  
Internal Control ◽  
Credit Rating ◽  
Control Sample ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Committees ◽  
Annual Reports ◽  
Material Weaknesses

SUMMARY In this paper, we study a sample of companies that fail to remediate previously disclosed material weaknesses (MWs) in their internal control systems and, thus, disclose the same MWs in two consecutive annual reports. Their failure to remediate is surprising given that regulators, credit rating agencies, and academics contend that the remediation of MWs is important. We form a control sample of companies that initially disclosed MWs in their internal control systems, but subsequently remediated these weaknesses, and investigate the characteristics of the remediated and unremediated MWs, the characteristics of remediating versus non-remediating companies, and the consequences to non-remediating companies. Regarding the characteristics of companies failing to remediate, we find that companies are less likely to remediate previously disclosed MWs when the weaknesses are more pervasive (i.e., when they are described as at the entity level, when there are more individual weaknesses) and when their operations are more complex (i.e., they have more segments and have foreign operations). In addition, companies with smaller audit committees are less likely to remediate. Regarding the consequences, we find that companies failing to remediate MWs experience larger increases in audit fees and a higher likelihood of auditor resignation as the number of MWs increases. We also find that non-remediating companies are more likely to receive modified audit opinions and going-concern opinions. Finally, we find that companies failing to remediate are more likely to miss filing deadlines and experience increased cost of debt capital (i.e., they receive poorer credit ratings when entity level MWs are present, and are charged higher interest rates). Data Availability: Data are publicly available from sources identified in the text.

scholarly journals Predicting Material Weaknesses In Internal Control Systems After The Sarbanes-Oxley Act Using Multiple Criteria Linear Programming And Other Data Mining Approaches

2011 ◽  
Vol 25 (6) ◽  
Author(s):  
Wikil Kwak ◽  
Susan Eldridge ◽  
Yong Shi ◽  
Gang Kou
Keyword(s):  
Data Mining ◽  
Linear Programming ◽  
Internal Control ◽  
Foreign Currency ◽  
Predictive Ability ◽  
Cash Flows ◽  
Multiple Criteria ◽  
Font Size ◽  
Sarbanes Oxley ◽  
Material Weaknesses

<h1 style="TEXT-JUSTIFY: inter-ideograph; TEXT-ALIGN: justify; MARGIN: 0in 0.5in 0pt"><span style="font-family: Times New Roman;"><span style="COLOR: black; FONT-SIZE: 10pt">Our study proposes a multiple criteria linear programming (MCLP) </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">and other data mining </span><span style="COLOR: black; FONT-SIZE: 10pt">method</span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">s</span><span style="COLOR: black; FONT-SIZE: 10pt"> to predict </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">material weaknesses in a firm&rsquo;s internal control system after the Sarbanes-Oxley Act</span><span style="COLOR: black; FONT-SIZE: 10pt"> (SOX) using </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">2003-2004</span><span style="COLOR: black; FONT-SIZE: 10pt"> </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">U.S. </span><span style="COLOR: black; FONT-SIZE: 10pt">data.<span style="mso-spacerun: yes">&nbsp; </span>The results of the MCLP </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">and other data mining </span><span style="COLOR: black; FONT-SIZE: 10pt">approaches in </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">our</span><span style="COLOR: black; FONT-SIZE: 10pt"> </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">prediction </span><span style="COLOR: black; FONT-SIZE: 10pt">study show that the </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">MCLP</span><span style="COLOR: black; FONT-SIZE: 10pt"> method performs</span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO"> </span><span style="COLOR: black; FONT-SIZE: 10pt">better overall than the </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">other data mining approaches </span><span style="COLOR: black; FONT-SIZE: 10pt">using financial </span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO">and other </span><span style="COLOR: black; FONT-SIZE: 10pt">data from the Form 10-K report.</span><span style="COLOR: black; FONT-SIZE: 10pt; mso-fareast-language: KO"><span style="mso-spacerun: yes">&nbsp; </span>Consistent with prior research, firms that disclosed material weaknesses in their SOX Section 302 disclosures were more complex (based on the existence of foreign currency translations), more often used Big 4 auditors, and had lower operating cash flows-to-total assets ratios than the non-material weakness control firms.<span style="mso-spacerun: yes">&nbsp; </span>Because of mixed results on several profitability measures and marginal predictive ability for the MCLP and other methods used, more research is needed to identify firm characteristics that help investors, auditors, and others predict material weaknesses.</span></span></h1>

scholarly journals Factors Influencing Material Weaknesses in Internal Control Over Financial Reporting in Malaysian Property Companies

2019 ◽  
pp. 559-568
Author(s):  
Erlane K. Ghani ◽  
Mazni Zulkifli ◽  
Rahayu Abdul Rahman
Keyword(s):  
Financial Reporting ◽  
Firm Size ◽  
Significant Influence ◽  
Internal Control ◽  
Annual Reports ◽  
Small Companies ◽  
Internal Auditor ◽  
Factors Influencing ◽  
Material Weaknesses ◽  
Property Companies

This study examines the factors influencing material weaknesses in internal control over financial reporting among the companies in the property industry in Malaysia. Specifically, this study examines six factors namely firm age, firm size, financial health, financial reporting complexity, rapid growth and corporate governance. Using content analysis on the annual reports of 80 property companies, this study shows that only firm size has a significant influence on the material weaknesses in internal control over financial reporting. Other factors however, show no significant influence on the material weaknesses in internal control over financial reporting. The result in this study indicates that small companies tend to have material weaknesses in internal control due to them having limited resources in building effective internal control. These companies generally could not afford to spend on expertise such as internal auditor or consultant to assist in improving and strengthening internal control. The findings of this study shed some lights to the regulators and practitioners on the factors influencing material weaknesses in the internal control over financial reporting. Of consequence, this would reduce information asymmetry between the insiders and outsiders of a company and thus, increasing the quality of financial reporting.

Firm Characteristics and Voluntary Management Reports on Internal Control

2006 ◽  
Vol 25 (2) ◽  
pp. 25-39 ◽  
Author(s):  
Scott N. Bronson ◽  
Joseph V. Carcello ◽  
K. Raghunandan
Keyword(s):  
Internal Control ◽  
Audit Committee ◽  
Annual Report ◽  
Institutional Ownership ◽  
Income Growth ◽  
Sales Growth ◽  
Firm Characteristics ◽  
Control Effectiveness ◽  
Sarbanes Oxley ◽  
Material Weaknesses

This study provides evidence on the nature of voluntary management reports on internal control (MRIC), and on the characteristics of firms issuing such reports, before internal control reports were mandated under Section 404 of the Sarbanes-Oxley Act. We examine the association between firm characteristics and the voluntary inclusion of an MRIC in the firm's annual report. Our analysis of 397 midsized firms in 1998 indicates that a voluntary MRIC is more likely for firms that are larger, have an audit committee that meets more often, have a greater level of institutional ownership, and have more rapid income growth. We find that a voluntary MRIC is less likely for companies with more rapid sales growth. Slightly more than one-third of our sample issues an MRIC. None of the voluntary MRICs mention any material weaknesses; no reports include an auditor attestation; less than half (41 percent) of the reports include a statement that controls were effective; and only three of these reports include the criteria used to assess control effectiveness.

Assessing Internal Audit with Text Mining

2018 ◽  
Vol 17 (02) ◽  
pp. 1850020 ◽  
Author(s):  
Georgia Boskou ◽  
Efstathios Kirkos ◽  
Charalambos Spathis
Keyword(s):  
Text Mining ◽  
Financial Reporting ◽  
Internal Control ◽  
Audit Quality ◽  
Internal Audit ◽  
Internal Controls ◽  
Annual Reports ◽  
Previous Attempt ◽  
Sarbanes Oxley ◽  
Audit Information

Recently internal controls, corporate governance and risk management have received a great deal of attention. Regarding internal control, several research studies address the issue of internal audit quality. Noteworthy, according to Sarbanes–Oxley (SOX) the internal controls over financial reporting are assessed by the auditors and the management. In the present study, we assess internal controls over financial reporting by employing Text Mining techniques. We analyse the annual reports of 133 publicly traded Greek Companies. The textual parts of the annual reports that refer to internal audit mechanism are extracted. We adopt a Vector Space model and the term-document matrix records the occurrence frequencies of the terms. By applying feature selection, a set of significant keywords, which are used as predictors, is extracted. The Linear Regression model developed explains the variance of the data and highlights significant predictors. The model manages to successfully assess the internal audit function. By performing PCA, major underlying procedures and concepts related to internal audit quality are revealed. Inspite of the undoubted importance of the assessment of internal audit, no previous attempt has been made to assess internal audit and to extract internal audit information from corporate disclosures by using Text Mining techniques. Our results can be useful to internal and external auditors, managers, company decision-makers, regulators and researchers.

Sign in / Sign up

Export Citation Format

Share Document