Do Quarterly and Annual Financial Statements Reflect Similar Financial Statement Error in the Post-SOX Era?

2021 ◽  
Vol 6 (1) ◽  
pp. 1-31
Author(s):  
Erik S. Boyle ◽  
Melissa F. Lewis-Western ◽  
Timothy A. Seidel
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Data Availability ◽  
Financial Statement ◽  
Annual Reports ◽  
Fiscal Year ◽  
High Quality ◽  
Financial Reports ◽  
Quality Reporting ◽  
Public Company

ABSTRACT The U.S. has invested substantial resources into the regulation and oversight of public-company financial reporting. While these investments should incentivize high-quality reporting among quarterly and annual financial statements, the sharp rise in public company auditor oversight may disproportionately benefit annual reports given the fiscal year-centric nature of audits. We compare the within company-year difference in financial statement error between quarterly and annual financial reports and examine how any difference changed following SOX. We find that pre-SOX error is lower for audited financial statements than for reviewed financial statements and that this difference increases following SOX. Additional tests suggest that elevated auditor oversight, rather than managerial incentives, is the impetus for the change. Despite regulatory investment designed to incentivize the production of high-quality quarterly and annual financial statements, the post-SOX difference in error between quarterly and annual financial statements appears to have increased. Data Availability: Data are available from public sources cited in the text. JEL Classifications: M41; M42.

scholarly journals PELAPORAN INFORMASI KEUANGAN MENURUT SEGMEN

2016 ◽  
Vol 4 (2) ◽  
pp. 78
Author(s):  
Akhmad Riduwan
Keyword(s):  
Financial Reporting ◽  
Complete Information ◽  
Financial Statements ◽  
Financial Information ◽  
Financial Statement ◽  
Consolidated Financial Statements ◽  
Growth Trend ◽  
Financial Reports ◽  
Financial Report ◽  
Public Company

Consolidated financial statements does not wholly provide complete information of the company’s activities with many segments. To meet the need of the financial statement users, it is necessary to expose the segmental financial information. The main objective of the exposure of the segmental financial information is to provide information for the users about relativity scale, profit contribution and the growth trend of each company’s segments to enable the financial reports users to better evaluate the company as a whole. The preparation procedure of the segmental financial statement is provided in PSAK No.5. Segmental financial reporting is a must for the ging-public company. However, this segmental report does not preclude the whole consolidated financial statement, because a segmental repot is merely complimentary to make consolidated financial report more informative.

Financial Statement Analysis Under IFRS

2018 ◽  
pp. 696-712
Author(s):  
Yasemin Zengin Karaibrahimoglu ◽  
Gökçe Tunç
Keyword(s):  
New York ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Statement Analysis ◽  
Financial Reports ◽  
York Stock Exchange ◽  
Key Points ◽  
Recent Developments

This chapter provides a clear conceptual discussion on the recent developments in the Financial Statement Analysis (FSA). It presents how IFRSs changed the outlook of the financial reporting and the analysis and explains the key points that should be considered in FSA. Using a case study on the financial reports of Turkcell, a communication and technology company listed both on the New York Stock Exchange (NYSE) and the Borsa Istanbul (BIST), the differences between IFRSs and U.S. GAAP accounting standards in the measurement of overall financial performance and position are documented. Overall findings show that IFRSs change the appearance of financial statements significantly. While IFRS reporting extenuates “the bottom line” it accentuates total assets with higher shareholder equity compared to U.S. GAAP. This chapter might be a practical guide for users, preparers, and regulators to understand the cosmetic impact of IFRSs on financial statements.

scholarly journals Integration of Internal Control and Financial Statement Audits: Are Two Audits Better than One?

2018 ◽  
Vol 94 (2) ◽  
pp. 53-81 ◽  
Author(s):  
Lori Shefchik Bhaskar ◽  
Joseph H. Schroeder ◽  
Marcy L. Shepardson
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Audit Quality ◽  
Internal Controls ◽  
Data Availability ◽  
Financial Statement ◽  
Auditor Judgment ◽  
Public Company ◽  
Better Than

ABSTRACT The quality of financial statement (FS) audits integrated with audits of internal controls over financial reporting (ICFR) depends upon the quality of ICFR information used in, and its integration into, FS audits. Recent research and PCAOB inspections find auditors underreport existing ICFR weaknesses and perform insufficient testing to address identified risks, suggesting integrated audits—in which substantial ICFR testing is required—may result in lower FS audit quality than FS-only audits. We compare a 2007–2013 sample of small U.S. public company firm-years receiving integrated audits (accelerated filers) to firm-years receiving FS-only audits (non-accelerated filers) and find integrated audits are associated with higher likelihood of material misstatements and discretionary accruals, consistent with lower FS audit quality. We also find evidence of (1) auditor judgment-based integration issues, and (2) low-quality ICFR audits harming FS audit quality. Overall, results suggest an important potential consequence of integrated audits is lower FS audit quality. Data Availability: Data are publicly available from the sources identified in the text.

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Release No. 2016-003, Proposed Auditing Standard—The Auditor's Report on an Audit of Financial Statements when the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards

2016 ◽  
Vol 11 (1) ◽  
pp. C26-C40 ◽  
Author(s):  
Marcus M. Doxey ◽  
Stephen H. Fuller ◽  
Marshall A. Geiger ◽  
Willie E. Gist ◽  
Karl E. Hackenbrack ◽  
...  
Keyword(s):  
Financial Statements ◽  
Auditor Independence ◽  
Data Availability ◽  
Financial Statement ◽  
Specific Information ◽  
Reporting Standard ◽  
The Public ◽  
Auditor Tenure ◽  
Public Company ◽  
Auditor Reporting

SUMMARY On May 11, 2016 the Public Company Accounting Oversight Board (PCAOB) issued a request for comment on Proposed Auditing Standard—The Auditor's Report on an Audit of Financial Statements when the Auditor Expresses an Unqualified Opinion and Related Amendments to PCAOB Standards, a reproposal of its August 2013 proposed auditor reporting standard. The reproposal retains the pass/fail model of the existing auditor's report while seeking to enhance the form and content of the report. The reproposal solicited public comment on the following significant changes to the existing auditor's report: (1) add a description of “critical audit matters” that provides audit-specific information about especially challenging, subjective, or complex aspects of the audit as they relate to the relevant financial statement accounts and disclosures, (2) add a statement about auditor independence and the phrase “whether due to error or fraud” when describing the auditor's responsibilities to obtain reasonable assurance about whether the financial statements are free of material misstatements, (3) add a statement related to auditor tenure, and (4) standardize the form of the auditor's report, requiring the opinion be the first section of the auditor's report and requiring section titles to guide the reader. The comment period ended on August 15, 2016. This commentary summarizes the participating committee members' views on the alternatives presented in the request for comment. Data Availability: The concept release, proposed and reproposed rules, and supplemental information are available at: http://pcaobus.org/Rules/Rulemaking/Pages/Docket034.aspx

scholarly journals Legislative Regulation Financial Statement Preparation by Micro Entities: International Experience

2021 ◽  
Vol 13 (5) ◽  
pp. 125-138
Author(s):  
Natalia S. Matveeva ◽  
Keyword(s):  
Gross Domestic Product ◽  
Financial Reporting ◽  
Financial Statements ◽  
Financial Statement ◽  
Domestic Product ◽  
Federal State ◽  
The European Union ◽  
Financial Reports ◽  
Legislative Regulation ◽  
Entrepreneurial Activities

The article analyzes the experience of legislative regulation of financial statement preparation by micro entities in the Commonwealth of Independent States, the European Union, and the United Kingdom. The legislative acts of the countries, national accounting standards and financial reporting standards serve as the methodological basis for the analysis. For the purpose of this study the article identifies the criteria for categorizing an organization as a micro entity, analyzes the documents regulating the procedure for the preparation of financial statements, and compares the procedures for financial reports formation by micro entities in different countries. Micro entities are an important component of the country’s economy, affecting the level of employment, gross domestic product and other important indicators of the country’s development. In Russia, micro entities account for 96 percent of the small and medium-sized business sector, whose share in the gross domestic product was about 20.6 % in 2019 according to Federal State Statistics Service estimates and which created about 33 % of jobs. For comparison, in the OECD countries small and medium-sized businesses generate, on average, about 55 % of GDP and about 59.1 % of jobs, whereas in the EU countries the percentage is higher: 57.5 % of GDP, and 65 % of the employed. However, in order to support the development of micro entities, it is necessary to create favorable conditions for the implementation of entrepreneurial activities, in particular through simplifying the procedure for the formation and submission of financial statements.

scholarly journals PENGARUH KAPASITAS SUMBER DAYA MANUSIA DAN KOMITMEN ORGANISASI TERHADAP KUALITAS LAPORAN KEUANGAN PEMERINTAH DAERAH PADA BADAN PENGELOLA KEUANGAN DAN ASET DAERAH (BPKAD) KOTA MANADO

2018 ◽  
Vol 13 (02) ◽  
Author(s):  
Rivaldy Manimpurung ◽  
Lintje Kalangi ◽  
Natalia Gerungai
Keyword(s):  
Organizational Commitment ◽  
Financial Reporting ◽  
Linear Regression Analysis ◽  
Financial Statements ◽  
Multiple Linear Regression Analysis ◽  
Financial Statement ◽  
Financial Reports ◽  
Human Resource Capacity ◽  
Positive Effect

The quality of government financial reporting is a normative prerequisite for the preparation of financial statements so that the resulting accounting information can be beneficial to users of financial statements. This is the aim of recognizing the effect of human resources and organizational commitment toward the quality of regional financial reports in BPKAD in Manado. The data collected through questionnaire distributions to 64 respondents were financial managers at BPKAD in Manado City. The data were analyzed using multiple linear regression analysis method with SPSS 17 program. The results showed that SDM Capacity has no positive effect on LKPD Quality and Organization Commitment positively and significantly affect the quality of Local Government Financial Reporting at BPKAD in Manado City.Keywords: Human Resource Capacity, Organizational Commitment, Quality of Financial Statement.

scholarly journals The Quality of Financial Reporting in the Republic of Serbia

2015 ◽  
Vol 52 (1) ◽  
pp. 99-114 ◽  
Author(s):  
Tadija Đ Đukić ◽  
Miloš Pavlović
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
National Level ◽  
Reporting Quality ◽  
Financial Statements ◽  
Financial Reporting Quality ◽  
High Quality ◽  
Joint Project ◽  
Quality Reporting ◽  
The Republic

AbstractHigh quality financial statements should truly and objectively reveal the financial position, business results and changes of a business entity. Satisfied users of financial statements according to which they make decisions represent the best confirmation of high quality financial reporting. The paper deals with the conceptual framework of financial reporting and with an attempt to create unified and revised conceptual framework as a joint project by FASB and IASB. Moreover, it considers novelties that the framework brings. Also, the paper points to the current state in terms of financial reporting quality in the Republic of Serbia. Furthermore, the paper points to some shortcomings of accounting regulation at the national level as a prerequisite of high quality reporting. Finally, the authors propose certain measures and activities for enhancing financial reporting quality in the current economic and political conditions in the Republic of Serbia.

Information content of IFRS versus GAAP financial statements

2018 ◽  
Vol 16 (1) ◽  
pp. 120-137 ◽  
Author(s):  
Robert C. Ricketts ◽  
Mark E. Riley ◽  
Rebecca Toppe Shortridge
Keyword(s):  
Financial Reporting ◽  
Forecast Accuracy ◽  
Financial Statements ◽  
Significant Loss ◽  
Financial Statement ◽  
Fiscal Year ◽  
Systematic Change ◽  
Forecast Errors ◽  
Content Type ◽  
Us Gaap

Purpose This study aims to determine whether financial statement users suffered a significant loss of information when, in November 2007, the SEC dropped the requirement for foreign private issuers using International Financial Reporting Standards (“IFRS firms”) to reconcile their financial statements to US generally accepted accounting principles (GAAP). Design/methodology/approach The study investigates whether analyst forecast errors and forecast dispersion increased for IFRS firms to a greater extent than for US GAAP firms after the Securities and Exchange Commission (SEC) dropped the reconciliation requirement. Using a treatment group comprised of IFRS firms and a matched sample of US GAAP firms, this study uses regression analyses to compare forecast errors and dispersion for the last fiscal year the reconciliation was available and the first fiscal year during which the reconciliation was unavailable to analysts. Findings The study finds evidence that forecast errors for IFRS firms exhibited no systematic change after the reconciliation was no longer available for analysts covering those firms. Thus, it does not appear that dropping the reconciliation requirement was associated with a change in forecast accuracy. However, the study does find evidence of increased dispersion in the IFRS firms’ forecasts relative to their US GAAP counterparts after the reconciliation requirement was dropped. Practical implications These findings have implications for evaluating the Securities and Exchange Commission’s 2007 decision to eliminate the reconciliation for IFRS firms. Specifically, the Securities and Exchange Commission’s decision does not appear to have significantly altered analysts’ information environments. Originality/value This paper contributes to the understanding of how a group of sophisticated financial statement users adapt to different sets of accounting standards.

Do Type II Subsequent Events Impair Financial Reporting Quality?

2019 ◽  
Vol 95 (6) ◽  
pp. 97-123 ◽  
Author(s):  
Keith Czerney ◽  
Jaime J. Schmidt ◽  
Anne M. Thompson ◽  
Wei Zhu
Keyword(s):  
Resource Management ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Statements ◽  
Financial Reporting Quality ◽  
Type Ii ◽  
Resource Constrained ◽  
High Quality ◽  
Financial Reports ◽  
Subsequent Event

ABSTRACT This study examines whether material corporate events that occur during the year-end closing process constrain management's and the auditor's resources and inhibit them from providing high-quality financial reports. For a sample of U.S. company financial reports issued during 2000–2013, we identify material corporate events using Type II subsequent event footnote disclosures (i.e., material events that occur in year t+1, but prior to the issuance of the year t financial statements, yet do not affect amounts recognized in year t). We find that Type II subsequent events are associated with lower financial reporting quality, as measured by the need to subsequently restate the year t financial statements. The increased restatement likelihood only occurs when managers are resource-constrained. Auditors can mitigate the increased restatement risk, but only when they allocate more resources to the engagement. Our results underscore the importance of resource management in the financial reporting and audit processes.

scholarly journals Does the Mark-to-Model Fair Value Measure Make Assets Impairment Noisy?: A Literature Review

2020 ◽  
Vol 12 (4) ◽  
pp. 1504 ◽  
Author(s):  
Tadeusz Dudycz ◽  
Jadwiga Praźników
Keyword(s):  
Literature Review ◽  
Financial Reporting ◽  
Financial Statements ◽  
Fair Value ◽  
High Quality ◽  
Financial Reports ◽  
Financial Reporting Standards ◽  
Asset Impairment ◽  
Accounting Model ◽  
Anglo American

With the purpose of reporting high-quality, transparent, and comparable information in financial statements, there is a strong, visible trend towards the implementation and use of International Financial Reporting Standards (IFRS), which represent the Anglo-American accounting model. According to IFRS, the fair value has become a dominant measurement paradigm. The purpose of this paper is to examine the implications of the implementation of the mark-to-model fair value measures for asset impairment tests on the relevance and reliability of information presented in financial reports. Among the three levels of the fair value hierarchy, mark-to-model is most controversial because it is susceptible to manipulation and has poor verifiability. After a systematic literature review and a synthesis of high-quality contributions in this field, we conclude that the implementation of asset impairment tests, that use the mark-to-model fair value measures, is not promising for increasing the quality and reliability of the information presented in financial statements. Unfortunately, research has shown that companies are using that tool to manage their earnings and promote managers’ unethical behaviour. Furthermore, capital markets’ reaction to asset impairment announcements is negative. Performed analysis can provide valuable pointers for standard setters, accounting policy makers, and researchers.

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