Rules-Based Accounting Standards and SEC Enforcement

2020 ◽  
Vol 27 (2) ◽  
pp. 101
Author(s):  
Devon Baranek
Keyword(s):  
Multivariate Analysis ◽  
Opposite Effect ◽  
Accounting Standards ◽  
Financial Statement ◽  
Enforcement Action ◽  
Two Samples ◽  
The Impact ◽  
Archival Study

This archival study investigates the association between rules-based violations and the likelihood of SEC enforcement. I utilize two samples of firms subject to SEC investigations: 1) firms with investigations that end in an enforcement action and 2) firms with investigations that are dropped, and examine the impact of rules-based accounting violations on enforcement. Each enforcement action in the sample specifically cites the GAAP standard violated, and the degree to which the standards contain rules-based characteristics is quantified. The violations are classified as either rules-based or principles-based and a multivariate analysis is performed. The “roadmap” theory suggests that firms who commit rules-based violations are more likely to be subject to SEC enforcement, while the “roadblock” theory predicts the opposite effect. Overall, the results suggest the SEC is less likely to litigate cases that involve rules-based accounting violations, or more likely to drop/dismiss investigations centered on rules-based violations, consistent with the “roadblock” theory. No evidence is found of a relation between rules-based accounting violations and the dollar magnitude of penalties assessed. These results are relevant for financial statement preparers, auditors, and regulators.

scholarly journals Rules-Based Accounting Standards and SEC Enforcement

2020 ◽  
Vol 27 (1) ◽  
pp. 101
Author(s):  
Devon Baranek
Keyword(s):  
Multivariate Analysis ◽  
Opposite Effect ◽  
Accounting Standards ◽  
Financial Statement ◽  
Enforcement Action ◽  
Two Samples ◽  
The Impact ◽  
Archival Study

This archival study investigates the association between rules-based violations and the likelihood of SEC enforcement.  I utilize two samples of firms subject to SEC investigations: 1) firms with investigations that end in an enforcement action and 2) firms with investigations that are dropped, and examine the impact of rules-based accounting violations on enforcement.  Each enforcement action in the sample specifically cites the GAAP standard violated, and the degree to which the standards contain rules-based characteristics is quantified.  The violations are classified as either rules-based or principles-based and a multivariate analysis is performed.  The “roadmap” theory suggests that firms who commit rules-based violations are more likely to be subject to SEC enforcement, while the “roadblock” theory predicts the opposite effect.    Overall, the results suggest the SEC is less likely to litigate cases that involve rules-based accounting violations, or more likely to drop/dismiss investigations centered on rules-based violations, consistent with the “roadblock” theory.  No evidence is found of a relation between rules-based accounting violations and the dollar magnitude of penalties assessed.  These results are relevant for financial statement preparers, auditors, and regulators. 

scholarly journals The Impact of Financial Statement Comparability on Earnings Management: Evidence from Frontier Markets

2020 ◽  
Vol 8 (4) ◽  
pp. 73
Author(s):  
Wil Martens ◽  
Prem W. S. Yapa ◽  
Maryam Safari
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Common Law ◽  
Accounting Standards ◽  
Real Earnings Management ◽  
Financial Statement ◽  
Financial Reporting Standards ◽  
Developed Markets ◽  
Accounting Comparability ◽  
The Impact

This paper examined whether financial statement comparability constrains opportunistic earnings management in frontier market countries. Using a large sample of 19 frontier market countries, and an accounting comparability method that maps comparability across several accounting standards, the results show that enhanced financial comparability constrains accruals earnings management (AEM). Contrary to developed markets and novel to this study, a significant relationship between financial comparability and real earnings management (REM) was not found. For greater robustness, AEM and REM were also tested on both International Financial Reporting Standards (IFRS) adopting and non-adopting countries. The results suggest IFRS adoption constrains AEM, yet exhibited no impact on constraining REM. Additionally, the use of BigN auditors failed to conclusively show an ability to moderate EM. When combined, the results suggest that frontier markets engage in less REM than expected. It is also noted that the legal roots (civil vs. common law) play a significant role in constraining earnings management. Common law countries exhibited lower AEM when comparability increased; this significance was not found in countries that were rooted in civil law. Contributions from this study show that findings from developed markets cannot be generalised to frontier markets.

Singapore Airlines: Accounting for Income Taxes

2002 ◽  
Vol 06 (02) ◽  
pp. 241-254
Author(s):  
Winston Kwok ◽  
Yew Kee Ho
Keyword(s):  
Accounting Standards ◽  
Income Taxes ◽  
Financial Statement ◽  
Financial Analyst ◽  
Deferred Taxes ◽  
Accounting Courses ◽  
Accounting Changes ◽  
Accounting For Income Taxes ◽  
The Impact

Singapore Airlines: Accounting for Income Taxes. A proposed standard on accounting for income taxes would affect the bottomline figures of many companies in Singapore, including a major international company, Singapore Airlines Ltd (SIA). Students have to assume the role of a financial analyst who would have to assess the impact of the change. This is a case that introduces some of the more contentious issues relating to deferred taxes and can be used in intermediate or advanced accounting courses, M.B.A. or executive programs, and courses in financial statement analysis. The objectives of the case are threefold. First, it helps students understand better the conceptual issues associated with deferred taxes. Secondly, it requires students to assess the impact of the proposed accounting changes on key financial figures and ratios. Thirdly, it engages the student to discuss the strategic implications of accounting standards on taxes in relation to management's ability to manage their bottomline numbers.

The impact of acute stress on the neural processing of food cues in bulimia nervosa: Replication in two samples.

2017 ◽  
Vol 126 (5) ◽  
pp. 540-551 ◽  
Author(s):  
Brittany Collins ◽  
Lauren Breithaupt ◽  
Jennifer E. McDowell ◽  
L. Stephen Miller ◽  
James Thompson ◽  
...  
Keyword(s):  
Bulimia Nervosa ◽  
Acute Stress ◽  
Neural Processing ◽  
Food Cues ◽  
Two Samples ◽  
The Impact

Comprehensive Income: which potential effects on firms' performance evaluation and users' decision process?

2016 ◽  
pp. 55-94
Author(s):  
Pier Luigi Marchini ◽  
Carlotta D'Este
Keyword(s):  
Performance Evaluation ◽  
Decision Process ◽  
Financial Analysts ◽  
Listed Companies ◽  
Financial Statement ◽  
Comprehensive Income ◽  
Other Comprehensive Income ◽  
Gains And Losses ◽  
The Impact

The reporting of comprehensive income is becoming increasingly important. After the introduction of Other Comprehensive Income (OCI) reporting, as required by the 2007 IAS 1-revised, the IASB is currently seeking inputs from investors on the usefulness of unrealized gains and losses and on the role of comprehensive income. This circumstance is of particular relevance in code law countries, as local pre-IFRS accounting models influence financial statement preparers and users. This study aims at investigating the role played by unrealized gains and losses reporting on users' decision process, by examining the impact of OCI on the Italian listed companies RoE ratio and by surveying a sample of financial analysts, also content analysing their formal reports. The results show that the reporting of comprehensive income does not affect the financial statement users' decision process, although it statistically affects Italian listed entities' performance.

The impact of business tourism clustering on the regional economy's development: A Greater Moscow case study

2020 ◽  
Vol 18 (7) ◽  
pp. 1397-1414
Author(s):  
K.S. Golondarev
Keyword(s):  
Multivariate Analysis ◽  
The State ◽  
Investment Climate ◽  
Private Investors ◽  
The Impact

Subject. This article explores the issues of business tourism clustering in Greater Moscow. Objectives. The article intends to justify the need to create a business tourism cluster in Greater Moscow to improve the investment climate in the region. Methods. For the study, I used a multivariate analysis, forecasting, and extrapolation. Results. The article shows a certain relationship between the efficient functioning of the business tourism cluster and the economy's development. Conclusions and Relevance. Certain types of tourist clusters can serve as platforms for attracting investors and implementing marketing plans. The business tourism cluster is a link between buyers and sellers in various industries. The results of the study can be used to improve the effectiveness of the cluster initiative in business tourism, as well as find ways of cooperation between the State and private investors when creating the business tourism cluster in Greater Moscow.

How a Shared Auditor Affects Firm-Pair Comparability: Implications of Both Firm and Individual Audit Styles

2020 ◽  
Vol 39 (3) ◽  
pp. 133-160
Author(s):  
Lili Jiu ◽  
Bin Liu ◽  
Yuanyuan Liu
Keyword(s):  
Accounting Standards ◽  
Financial Statement ◽  
Professional Judgment ◽  
Audit Process ◽  
Personal Style ◽  
Audit Firm ◽  
Market Participants ◽  
Audit Firms ◽  
Audit Reports ◽  
Practical Implications

SUMMARY In this study, we examine the roles of audit firms and individual auditors in improving financial statement comparability. We conduct the study in the Chinese setting, in which the identities of signing auditors are revealed in audit reports and accounting standards are principle based. After controlling for audit firm style, we find that firm pairs with shared signing auditors have incrementally greater comparability. Our results indicate that individual auditors exhibit their own personal style in implementing accounting standards and exercising professional judgment in the audit process. Overall, our study underscores the association between individual auditors and comparability, with practical implications for market participants and policymakers.

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