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Do Firms Modify Investments in Tax Planning to Manage Earnings? Accounting Horizons (IF 2.157) Pub Date : 2022-04-27 Yangmei Wang,Kirsten A. Cook
We examine whether suspect firms (that precisely meet or narrowly beat earnings benchmarks) decrease investments in tax planning to manage earnings; we refer to this strategy as the direct method of modifying discretionary tax fees to increase net income. We analyze investments in tax planning by suspect firms and find that most suspect firms increase earnings by curtailing these investments. Thus
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The Impact of Benefit Plan Audits on the Financial Statement Audit Accounting Horizons (IF 2.157) Pub Date : 2022-04-18 Jaclyn D. Prentice,Kenneth L. Bills,Gary F. Peters
Benefit plan audits, a material but less understood public accounting service, represent a non-audit service that is “audit-related.” We explore the implications of benefit plan audits for the financial statement audit. We find that performing a benefit plan audit for a company significantly increases the likelihood that the firm will be selected as a company’s financial statement auditor in the future
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Client Acquisition Following an Auditor’s Unethical Behavior: An Examination of Reputational Consequences Following KPMG’s “Steal the Exam” Scandal Accounting Horizons (IF 2.157) Pub Date : 2022-04-13 Kevin Hale,J. Mike Truelson
We investigate reputational effects of KPMG’s scandal involving the improper receipt of confidential regulator data by analyzing KPMG’s acquisition of new audit clients in the post-scandal period. While we find no evidence that KPMG had difficulty gaining clients relative to a broad class of other large auditors, we do find that KPMG’s acquisition rate decreased in the post-scandal period in comparison
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The Effect of Analyst Conservatism on Meeting the Consensus via Earnings Management Accounting Horizons (IF 2.157) Pub Date : 2022-04-04 Matt Bjornsen,Bryan G. Brockbank,Jaclyn Prentice
Conservative analysts react more to negative news than positive news, and the market response is greater for forecast revisions from conservative analysts (Hugon and Muslu, 2010; Keskek and Tse, 2018). Little is known about how firms and managers respond to a lower benchmark resulting from having a more conservative analyst following. We examine the effect of analyst conservatism on firms just meeting
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The Impact of Domain-Specific Internal Audit Education on Financial Reporting Quality and External Audit Efficiency Accounting Horizons (IF 2.157) Pub Date : 2022-03-30 Christopher G. Calvin,Matthew Holt
We investigate how the geographic distribution of domain-specific internal audit education impacts financial reporting quality and audit efficiency in the U.S. Using universities with Centers for Internal Auditing Excellence as proxies for robust internal audit education, we find that companies headquartered in close proximity to these programs have fewer material weaknesses in internal controls over
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Accounting Quality and Household Stock Market Participation Accounting Horizons (IF 2.157) Pub Date : 2022-03-24 Shawn X. Huang,Min Kim
Recent research documents that there is significant variation in stock market participation by state and suggests that there may be state-specific factors that determine stock market participation of U.S. households. Using household survey data, we examine how state-level, public-company accounting quality affects households’ stock market participation decisions. We find that households residing in
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Organization and Development of Arthur Andersen & Co.’s Public Review Board - The Minow Years, 1974-1983 Accounting Horizons (IF 2.157) Pub Date : 2022-03-23 Phil Wedemeyer,Stephen A. Zeff
This is a historical account of first nine years of Arthur Andersen & Co.’s Public Review Board (PRB), from 1974 to 1983. This period coincides with the term of Chair Newton N. Minow. The paper draws on the published annual reports of both the firm and the PRB, as well as on interviews with principals from that period, including Minow. The PRB was a unique experiment, as the Andersen firm established
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Common Institutional Blockholders and Reporting Practices: Evidence from Accounting Comparability Accounting Horizons (IF 2.157) Pub Date : 2022-03-22 Qiyuan Peng,Sirui Yin,Rui-Zhong Zhang
This study investigates whether common institutional blockholders (common owners) affect the accounting comparability of their portfolio firms. We document that accounting comparability between a pair of industry peers increases with common ownership presence and intensity. Common owners’ demand for comparability is more pronounced i) when the firm pairs have higher operating uncertainty, ii) when
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PERSPECTIVES ON THE FINANCIAL REPORTING OF INTANGIBLES Accounting Horizons (IF 2.157) Pub Date : 2022-03-11 Anthony Appleton,Andreas Barckow,Christine Botosan,Yasunobu Kawanishi,Atsushi Kogasaka (Deceased),Andrew Lennard,Linda Mezon-Hutter,Joy Sy,Rebecca Villmann
Diversity in views about the existence, nature, and extent of the “intangibles problem” in financial reporting and various proposed solutions is well represented among national accounting standard setters. This paper summarizes the varying perspectives on these issues by a group of national accounting standard setters from Canada, Germany, Japan, the U.K., and the U.S. The paper strives to deliver
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Tax Software versus Paid Preparers: Motivations and Predictors for the Mode of Tax Preparation Assistance Accounting Horizons (IF 2.157) Pub Date : 2022-03-02 Leigh Rosenthal,Bonnie Brown,Julia Higgs,Timothy J Rupert
In recent years, the number of taxpayers using tax preparation software has increased substantially; however, little is known about how these taxpayers differ from those using a paid professional. We gather data from a sample of taxpayers who used either tax software or a paid professional to examine their motivations for choosing their mode of tax preparation assistance. We find software users rated
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Robotic Process Automation (RPA) Implementation Case Studies in Accounting: A Beginning to End Perspective Accounting Horizons (IF 2.157) Pub Date : 2022-02-25 Chanyuan (Abigail) Zhang,Hussein Issa,Andrea M. Rozario,Jonas Sveistrup Soegaard
Robotic Process Automation (RPA) possesses several features that may give rise to similar but also new adoption effects (both benefits and challenges) relative to other IT implementations. Our study adds to the accounting and emerging technologies literature by examining the beginning to end process through which RPA is implemented in the accounting function. We adopt an exploratory and case-centered
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The Nonlinear Relation between Effective Tax Rates and Tax-Related Restatements Accounting Horizons (IF 2.157) Pub Date : 2022-02-18 Christine C Cheng,Karen M Hennes,Pradeep Sapkota
We examine the association between firms' tax planning behavior, as measured by their effective tax rates (ETRs), and financial restatements. We find that both low and high ETRs are positively related to subsequent tax-related restatements, indicating a nonlinear relation between ETRs and tax-related financial reporting quality. We also find evidence that tax-related restatements for low ETR firms
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Exogenous Loss of Analyst Coverage and Choice of Audit Quality Accounting Horizons (IF 2.157) Pub Date : 2022-02-16 Simon Fung,Zheng Wang,Liandong Zhang,Xindong Zhu
We show that a firm’s likelihood of appointing auditors with industry expertise or with a larger office increases after the firm is affected by an exogenous reduction in analyst coverage, relative to its matched control firms. This effect is stronger for affected firms with greater reductions in analyst monitoring, for smaller or younger firms, for firms with lower institutional or CEO ownership, and
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Do as I Say: A Look at the Supervisor Behaviors that Encourage Upward Communication on Audit Teams Accounting Horizons (IF 2.157) Pub Date : 2022-02-16 Shana M. Clor-Proell,Kathryn Kadous,Chad A Proell
PCAOB AS1201 mandates that audit supervisors encourage auditors to raise critical issues and concerns to their attention. However, audit supervisors do not receive specific guidance on how to encourage upward communication. This may contribute to the AS1201 compliance issues suggested by research and PCAOB enforcement actions. We provide specific examples of supervisor behaviors that enhance and harm
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Audit digitalization and its consequences on the audit expectation gap: A critical perspective Accounting Horizons (IF 2.157) Pub Date : 2022-02-03 Lazarus Elad Fotoh,Johan Ingemar Lorentzon
Abstract This study examines how a paradigm shift from traditional to digital audits could affect the audit expectation gap. It uncovers possible new areas of the expectation gap and threats and challenges resulting from this paradigm shift. The findings suggest that audit digitalization will result in the audit profession transitioning from the defensive approach of educating users on auditors’ duties
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Investor Response to Bad News Versus Good News Management Earnings Guidance Accounting Horizons (IF 2.157) Pub Date : 2022-01-21 A. Bree Josefy,Lynn Rees,Senyo Tse
Prior research consistently reports stronger stock price responses to bad news management guidance than to good news guidance. Based on this result, several studies use the direction of guidance as a proxy for its credibility. We propose that managers opportunistically issue some small bad news guidance for the purpose of reducing earnings expectations to beatable levels. We expect investors to view
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Is it all in the Mind(fulness)? An Exploratory Study Assessing the Impact of Mindfulness on Professional Skepticism Accounting Horizons (IF 2.157) Pub Date : 2022-01-13 Jessica Cross,Robyn Moroney,Soon-Yeow Phang
Motivated by regulator concerns that auditors do not always demonstrate sufficient professional skepticism (hereafter skepticism); we consider whether a brief mindfulness intervention can assist. Research has demonstrated that mindfulness interventions help people focus on tasks in a range of settings. We draw on this research to predict, and find, that when novice auditors undertake a mindfulness
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Initial Evidence on the Market Impact of the iXBRL Adoption Accounting Horizons (IF 2.157) Pub Date : 2021-12-09 Xin Luo,Tawei (David) Wang,Liu Yang,Xinlei Zhao,Yiyang Zhang
In June 2018, the SEC adopted Inline eXtensible Business Reporting Language (iXBRL), which embeds XBRL data into HTML-formatted annual reports to improve the accessibility and usefulness of the information disclosures to investors. This study assesses the effectiveness of iXBRL by examining its impact on informational efficiency and information asymmetry. Using a sample that includes iXBRL voluntary
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Policy Uncertainty and Textual Disclosure Accounting Horizons (IF 2.157) Pub Date : 2021-11-22 Liangliang Jiang,Jeffrey A. Pittman,Walid Saffar
We study how policy uncertainty influences textual disclosure in the U.S. from 1996 to 2015. Consistent with incentives for voluntary disclosure, we find that policy uncertainty increases textual disclosure quantity, as evident in disclosure length, but lowers textual readability and increases the tone of uncertainty and negativity. We also document that the negative impact on readability subsides
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Social Capital and Internal Control Material Weaknesses Accounting Horizons (IF 2.157) Pub Date : 2021-11-19 Jayanthi Krishnan,Sang Mook Lee,Myungsoo Son,Hakjoon Song
Using a measure of social capital provided by the Northeast Regional Center for Rural Development, we document that, after controlling for auditor effort, firms headquartered in US counties with higher social capital are less likely to have ineffective internal control over financial reporting than those located in regions with lower social capital. This negative association between local social capital
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Will Someone Be Checking My Work? The Effect of Psychological Entitlement and the Expectation of Being Monitored on Task Performance and Misreporting Accounting Horizons (IF 2.157) Pub Date : 2021-11-19 D. Kip Holderness,Kari Joseph Olsen,Todd A. Thornock,Edward C. Tomlinson
Psychological entitlement is a sense that one deserves more than others, and is correlated with a host of negative workplace behaviors. Because entitled individuals have a strong desire for the approval of others, we examine whether increasing the expectation of being monitored can limit some of these negative behaviors. We find that when the expectation of being monitored is low, psychological entitlement
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The Pricing of IPO Audit Specialization and Subsequent Issuer Underpricing Accounting Horizons (IF 2.157) Pub Date : 2021-11-19 Jung Eun Park,Norman Massel
We study the costs and benefits to the issuer of engaging an initial public offering (IPO) auditor specialist. We measure IPO auditor specialization and then find that IPO specialist auditors earn significant fee premiums relative to IPO auditors without specialization and that clients with an IPO specialist auditor exhibit lower levels of underpricing relative to clients without an IPO specialist
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The Perception of Risk Disclosure Characteristics on the Credit Default Swap Market - An Automated Analysis Accounting Horizons (IF 2.157) Pub Date : 2021-11-18 Deborah Yvonne Nagel,Stephan Fuhrmann,Raphael Tietmeyer,Thomas W. Guenther
This paper evaluates the associations between credit default swap (CDS) spreads and risk disclosure characteristics, especially the expected qualitative and the expected quantitative impacts of risks on companies' future performance and information on risk management. We find that CDS investors can benefit from information on expected risk impacts and from information on risk management, which is important
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The Effects of Exposing CPAs to Rationalizations Conscious and Unconscious Outcomes Accounting Horizons (IF 2.157) Pub Date : 2021-11-08 Alan Reinstein,Philip Reckers
This article reports on an experimental examination of rationalization and socialization phenomenon among CPAs. Rationalizations represent the cognitive justifications that individuals use to morally disengage their internal norms. Neutralizations are rationalizations made before and influencing the decision. Socialization within an organization represents the tactics used by a corrupting influence
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Linking Cybersecurity and Accounting: An Event, Impact, Response Framework Accounting Horizons (IF 2.157) Pub Date : 2021-11-01 Diane J. Janvrin,Tawei (David) Wang
Due to recent high-profile cybersecurity breaches and increased practitioner and regulatory attention, organizations are under pressure to consider the accounting implications of these attacks and develop appropriate responses. Specifically, cybersecurity events may affect organizations’ operations, financial and non-financial performance, and ultimately its stakeholders. To address how cybersecurity
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The Association between Audit Office Team Diversity and Audit Quality Accounting Horizons (IF 2.157) Pub Date : 2021-10-29 Ying (Julie) Huang
Surveys and field studies find that high-performing teams are diverse teams. Diverse teams value different perspectives and encourage the participation of team members through psychological safety, leading to higher team performance. This paper argues that team diversity is an office-level characteristic that is distinguishable from other characteristics studied in the prior auditing literature and
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The Joint Effect of Presentation Format and Disclosure Balance on Investors’ Reactions to Sensitivity Disclosures of Hedging Instruments Accounting Horizons (IF 2.157) Pub Date : 2021-10-01 Wenhuan Liu,Hun-Tong Tan,Tu Xu,Jixun Zhang
Derivative-related risk disclosure has been a key issue in accounting regulation and research, and sensitivity analysis is the most popular form of quantitative derivative-related disclosure. In an experiment, we find that, relative to disclosing potential losses only, disclosing both potential gains and potential losses associated with hedged items and derivatives leads to favorable investor reactions
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Corporate Innovation and the Auditor's Assessment of Going Concern Accounting Horizons (IF 2.157) Pub Date : 2021-10-01 Feng Guo,Adi Masli,Yang Xu,Joseph H. Zhang
In this study, we examine whether external auditors assess corporate innovation activities when considering a financially distressed client's ability to continue as a going concern. Using patent count, patent market value, and patent citation to measure the firm-level innovation output, we document that higher quantity and quality of innovation activities are associated with a lower likelihood of going
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Response to the FASB Invitation to Comment Identifiable Intangible Assets and Subsequent Accounting for Goodwill Accounting Horizons (IF 2.157) Pub Date : 2021-10-01 Shana Clor-Proell,Nerissa Brown,Stephen Stubben,Brian White,Elizabeth Blankespoor,Elizabeth Gordon,Mahendra Gujarathi,Elaine Henry,Ken Merkley
In October 2019, the Financial Reporting Policy Committee of the Financial Accounting and Reporting Section of the American Accounting Association submitted a comment letter to the Financial Accounting Standards Board regarding the accounting for certain identifiable intangible assets acquired in a business combination and subsequent accounting for goodwill. This paper summarizes the content of the
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The Adoption and Consequences of COSO 2013 Accounting Horizons (IF 2.157) Pub Date : 2021-10-01 Amanuel F Tadesse,Gina Cavalier Rosa,Robert J. Parker
COSO has developed frameworks for firms to improve their internal controls with the objective of reducing fraud and managing enterprise risk. The frameworks are widely used by firms and their auditors to comply with the internal control requirements of the Sarbanes-Oxley Act (SOX). We investigate two issues involving the most recent COSO internal control framework (COSO 2013): the determinants of a
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Overview of U.S. State and Local Government Financial Reporting: A Reference for Academic Research Accounting Horizons (IF 2.157) Pub Date : 2021-09-27 Won Jung Kim,Marlene A. Plumlee,Stephen Stubben
The purpose of this paper is to encourage and support academic research related to U.S. state and local government financial reporting. We provide an overview of U.S. state and local governments and their financial reporting, discuss sources of government data available to researchers, review key streams of academic research on governmental financial reporting, and suggest opportunities for future
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Blockchain technology, inter-organizational relationships and management accounting: A synthesis and a research agenda Accounting Horizons (IF 2.157) Pub Date : 2021-09-20 Nikola Kostić,Tomaz Sedej
Blockchain technology is increasingly emerging as an important organizational phenomenon, especially for collaboration across firm boundaries. Over the past three decades, accounting scholars have shown significant interest in management accounting and control mechanisms that are used by actors to sustain inter-organizational relationships. We outline fundamental technical features and limitations
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The Development of Expected-Loss Methods of Accounting for Credit Losses: A Review with Analysis of Comment Letters Accounting Horizons (IF 2.157) Pub Date : 2021-09-17 Noor Hashim,Weijia Li,John O'Hanlon
After the financial crisis of the late 2000s, concern about delayed credit-loss recognition under the incurred-loss method prompted the FASB and the IASB to develop expected-loss methods. We review the development of these methods, including through comment-letter analysis. Initially, the FASB recommended immediate full recognition of expected losses, including at day one, and the IASB recommended
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STAKEHOLDER ENGAGEMENT AND EFFECTIVE STANDARD-SETTING Accounting Horizons (IF 2.157) Pub Date : 2021-09-17 Amanda Convery,Matt Kaufman,Terry D. Warfield
Successful standard-setting outcomes require some level of acceptance by diverse stakeholder groups. This study examines the evolution of FASB due process institutions since Enron, which have the potential to engender stakeholder acceptance. The prior literature on accounting standard-setting outcomes often focuses on the effects of individuals, organizations, or established due process institutions
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Voluntary Disclosure of Disaggregated Balance Sheet and Cash Flow Information Around Restatements Accounting Horizons (IF 2.157) Pub Date : 2021-08-30 Kai Chen,Darren Henderson,Christine I Wiedman
We examine changes in voluntary disclosure of balance sheet and cash flow (BS/CF) information in earnings releases after restatement announcements. We consider these disclosures to be particularly relevant in the restatement context since they help investors interpret accruals and assess reporting quality at a time when information uncertainty is high. We find that BS/CF disclosures drop significantly
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Convertible debt usage and the pricing of audit services Accounting Horizons (IF 2.157) Pub Date : 2021-08-27 Henri Akono,Heeick Choi,Khondkar Karim
This study examines the association between convertible debt usage and the pricing of audit services. We test the (nondirectional) hypothesis that convertible debt usage is associated with audit effort and therefore fees, due to its association with client business risk and its dilutive effect on earnings per share. We find a positive association between audit fees and convertible debt, suggesting
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Publication Benchmarking Data Based on Faculty Promoted at the Top 200 Worldwide Accounting Research Institutions Accounting Horizons (IF 2.157) Pub Date : 2021-08-27 Jared S. Moon,Scott L. Summers,Nathan J. Waddoups,David A. Wood
The primary purpose of this paper is to update and extend past promotion benchmarking studies. We update prior benchmarking studies by providing publication benchmarking data for faculty promoted between 2013 and 2019, inclusive. We extend prior benchmarking studies by evaluating a larger number of institutions (the top 200 worldwide accounting institutions), using a more global journal list, and providing
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Relevance of Accounting Research (ROAR) Scores: Ratings of Titles and Abstracts by Accounting Professionals Accounting Horizons (IF 2.157) Pub Date : 2021-08-20 F. Greg Burton,Scott L Summers,T. Jeffrey Wilks,David A. Wood
The relevance of academic accounting research to practice has been frequently discussed in the accounting academy, yet very little data has been put forth in these discussions. We create Relevance of Accounting Research (ROAR) scores by asking accounting professionals to read and evaluate the titles and abstracts of every article published in 12 leading accounting journals for the years 2016 to 2018
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On the Threshold of Compliance: Public Charities and the Public Support Test Accounting Horizons (IF 2.157) Pub Date : 2021-07-09 Ashley Newton
SYNOPSIS This study investigates how public charities respond to the public support test—an IRS requirement that at least one-third of a public charity's financial support is derived from public sources. Using a large sample of 836,920 charity-year observations during 2009–2018, I find that a disproportionately large number of charities exceed the 33-1/3 percent public support threshold by a small
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Is Audit Committee Power Associated with Audit Completeness and Earnings Announcement Timing? Accounting Horizons (IF 2.157) Pub Date : 2021-07-09 Michelle A. Draeger,Jacob Haislip,Mikhail Sterin
Companies are increasingly disclosing earnings announcements prior to the completion of the year-end audit. Earnings that are released before the audit is complete are viewed negatively by investors and are positively associated with restatements and management turnover. We examine the role of the audit committee in the timing of earnings announcements. We predict and find that more powerful audit
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Does Audit Committee Disclosure of Partner-Selection Involvement Signal Greater Audit Quality? Accounting Horizons (IF 2.157) Pub Date : 2021-06-29 Jimmy F. Downes,Michelle A Draeger,Abbie E. Sadler
SYNOPSIS We investigate whether audit committees use voluntary disclosures to signal the committees' higher level of involvement in the audit partner-selection process, which contributes to higher levels of audit quality. Audit committees more involved in the partner-selection process should ensure the selection of a more rigorous partner. We test this conjecture by first identifying partners new to
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Auditor Response to Estimated Misstatement Risk: A Machine Learning Approach Accounting Horizons (IF 2.157) Pub Date : 2021-06-03 Emily Hunt,Joshua Hunt,Vernon J. Richardson,David Rosser
SYNOPSIS We investigate whether misstatement risk estimated using advanced machine learning techniques—hereafter, estimated misstatement risk (EMR)—approximates auditors' risk assessments in practice. We find that auditors price EMR and auditor turnover is more likely to occur when EMR increases, indicating that EMR is associated with auditors' risk assessment. We also find evidence that EMR is positively
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Corporate Culture and Financial Reporting Quality Accounting Horizons (IF 2.157) Pub Date : 2021-06-03 Avishek Bhandari,Babak Mammadov,Maya Thevenot,Hamid Vakilzadeh
SYNOPSIS With the increased focus on corporate culture as an important determinant of organizational behavior and outcomes, we study how corporate culture affects firm financial reporting quality. Relying on the Competing Values Framework (CVF) to define four types of corporate culture, we find that collaboration- (competition-) oriented culture firms have lower (higher) financial reporting quality
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Improving Earnings Predictions and Abnormal Returns with Machine Learning Accounting Horizons (IF 2.157) Pub Date : 2021-06-03 Joshua O. S. Hunt,James N. Myers,Linda A. Myers
SYNOPSIS Using stepwise logit regression, Ou and Penman (1989) predicts the sign of future earnings changes and uses these predictions to form a profitable hedge portfolio. Increases in computing power and advances in machine learning allow us to extend Ou and Penman (1989) using more data, computer intensive forecasting algorithms, and modern prediction models. Stepwise logit still provides good predictions
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The Spillover Effect of Audit Firm Office Acquisition on the Audit Quality of the Existing Client Base Accounting Horizons (IF 2.157) Pub Date : 2021-06-03 Aleksandra B. Zimmerman,Amirali M. Chaghervand,R. Drew Sellers,Timothy J. Fogarty
This study investigates accounting firm office acquisitions. It explores whether office acquisitions affect post-acquisition office audit quality, particularly whether there is a spillover effect on the existing client base of the acquiring office. We capitalize on a unique circumstance: the 2002 acquisition of Arthur Andersen (Andersen) offices by other audit firms. This setting involves a set of
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Accounting Horizons Revised Editorial Policy: A Renewed Focus on Practice Problems of Real Consequence Accounting Horizons (IF 2.157) Pub Date : 2021-06-01 D. Scott Showalter,T. Jeffrey Wilks
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Auditor Tenure Disclosure and Shareholder Ratification Voting Accounting Horizons (IF 2.157) Pub Date : 2021-05-07 Paul N. Tanyi,Dasaratha V. Rama,K. Raghunandan
SYNOPSIS The PCAOB mandated, over the objections of the large audit firms and others, that for fiscal years ending on or after December 15, 2017, the audit report shall include information about auditor tenure. In this paper we answer the call for academic research about “the impact and usefulness of the auditor tenure disclosure as it becomes implemented” from Franzel (2017). We use data from 2,718
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Career Paths and Compensation for Accounting Graduates Accounting Horizons (IF 2.157) Pub Date : 2021-04-23 Thomas J. Frecka,H. Fred Mittelstaedt,Jennifer Sustersic Stevens
SYNOPSIS This paper reports financial and career outcomes following a degree in accounting using a large cross-sectional and time-series survey of one university's alumni. We extend the work of prior researchers by examining outcomes throughout accounting graduates' careers, which include positions outside of public accounting. We find that starting salaries are positively associated with graduate
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Use of Corporate Disclosures to Identify the Stage of Blockchain Adoption Accounting Horizons (IF 2.157) Pub Date : 2021-04-23 Theophanis C. Stratopoulos,Victor Xiaoqi Wang,Hua (Jonathan) Ye
SYNOPSIS Several studies have pointed to the transformative effects of blockchain on a wide spectrum of firms, industries, and professions. Despite the arguable consensus within the business community that blockchain will have a real impact on the way firms do business, views diverge when it comes to the timing of diffusion (i.e., when blockchain will achieve mass adoption). We propose that information
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The Incremental Value Relevance of Media Coverage of Earnings Announcements: Evidence from the Trading of Short Sellers Accounting Horizons (IF 2.157) Pub Date : 2021-04-23 Lynn Rees,Brady J. Twedt
SYNOPSIS We investigate the relation between media coverage and the trading behavior of short sellers around earnings announcements. Prior research provides conflicting evidence on the role of the media, with some studies finding that the media can impede the price discovery process. Our evidence indicates that short sellers increase their activity in line with the tone of media coverage around earnings
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Asymmetric Monitoring of Quarterly Financial Statements by Big 4 Auditors and the SEC's Timely Review Requirement Accounting Horizons (IF 2.157) Pub Date : 2021-04-23 Carol Callaway Dee,Ayalew Lulseged,Tianming Zhang
SYNOPSIS We investigate if Big 4 firms are asymmetrically more effective than non-Big 4 firms in monitoring income-increasing versus income-decreasing quarterly earnings management. We also study the Securities and Exchange Commission's (SEC) 2000 requirement that audit firm reviews of quarterly financial statements be completed prior to their filing with the SEC (“timely reviews”). We find Big 4 firms
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Auditors' Responses to Classification Shifting: Evidence from U.S. Firms Accounting Horizons (IF 2.157) Pub Date : 2021-04-13 Mai Dao,Hongkang Xu,Trung Pham
SYNOPSIS This study examines how auditors react to clients' engagement in classification shifting which refers to the intentional misallocation of line items within the income statement. We find that classification shifting is positively associated with audit fees, audit report lags, the issuance of a modified audit opinion, and auditor resignations. Additional analyses show that auditors' responses
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Goodwill Impairment and Audit Effort Accounting Horizons (IF 2.157) Pub Date : 2021-04-05 Al (Aloke) Ghosh,Cunyu Xing
SYNOPSIS Using abnormal audit fees to capture added charges associated with incremental audit effort beyond the effort level needed under normal circumstances, we find that the incremental audit effort is positively associated with goodwill to total assets. Additionally, when goodwill is impaired, auditors exert incrementally more effort for testing the magnitude of a goodwill impairment loss than
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Does Client Cyber-Breach Have Reputational Consequences for the Local Audit Office? Accounting Horizons (IF 2.157) Pub Date : 2021-04-05 Sharad C Asthana,Rachana Kalelkar,K. K. Raman
SYNOPSIS We examine whether the public disclosure of a client cyber-breach hurts the reputation of the engagement office of the incumbent auditor. Prior research suggests that alleged client misconduct (even if unrelated to accounting) can hurt the auditor's reputation and bargaining position vis-à-vis other clients. In contrast, in a client cyber-breach, the client is the victim of misconduct rather
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The Effect of Form AP on Auditor Liability when Engagement Partner Disclosure Shows a History of Restatements Accounting Horizons (IF 2.157) Pub Date : 2021-04-05 Michael Mowchan,Philip M. J. Reckers
SYNOPSIS Engagement partner disclosures required by Form AP allow litigants to associate audit partners with both current and past restatements. We investigate how this information and audit firm interventions to restore audit quality impact audit firm liability in litigation stemming from a partner's second client restatement. Interestingly, we do not find that a partner's association with a current
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Politically Connected Boards and Audit Pricing: U.S. Evidence Accounting Horizons (IF 2.157) Pub Date : 2021-03-03 Keval Amin,Chansog (Francis) Kim,Zhifeng Yang,Feiteng Ye
SYNOPSIS This study investigates the impact of political connections, as measured by having directors that previously held political positions, on audit pricing. We document that auditors charge higher fees to politically connected firms than to similar non-connected firms. Our findings are robust to a battery of additional analyses and the inclusion of transaction-based measures of political connections
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Improving the Statistical Power and Reliability of Research Using Amazon Mechanical Turk Accounting Horizons (IF 2.157) Pub Date : 2021-03-03 Jeremiah W. Bentley
SYNOPSIS Amazon Mechanical Turk (MTurk) is an increasingly popular source of experimental participants due to its convenience and low cost (relative to traditional laboratories). However, MTurk presents challenges related to statistical power and reliability. These challenges are not unique to MTurk, but are more prevalent than in research conducted with other participant pools. In this paper I discuss
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Frank Lewis Clarke (1933–2020): An International Journey in Quest of a More Serviceable Accounting Accounting Horizons (IF 2.157) Pub Date : 2021-03-01 Graeme W. Dean,Martin E. Persson,Massimo Sargiacomo
SYNOPSIS Frank Lewis Clarke (1933–2020), a member of the Sydney School of Accounting, was a keen observer of business practices, successes, and failures, an international journeyman for better accounting standards, an influential accounting academic, and a master teacher. This memorial considers Clarke's early childhood, education, and his contribution to accounting scholarship. During a career spanning
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Releasing Earnings when the Audit is Less Complete: Implications for Audit Quality and the Auditor/Client Relationship Accounting Horizons (IF 2.157) Pub Date : 2021-03-01 Scott N. Bronson,Adi Masli,Joseph H. Schroeder
SYNOPSIS This study examines the effect of audit completeness at the annual earnings announcement date on audit quality and auditor/client retention decisions. The vast majority of companies now release earnings before the year-end audit is complete while, historically, companies would release earnings on or after the date of audit completion. Management's decision to release earnings when the audit
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The FASB's Approach Toward Reviewing, Conducting, and Sponsoring Academic Research and to Engaging Academics Accounting Horizons (IF 2.157) Pub Date : 2021-02-26 Stephen A. Zeff
SYNOPSIS This is a historical account of the various approaches which the Financial Accounting Standards Board has used since 1973 in making use of academic research and in bringing academics into the standard-setting process. JEL Classifications: M41.