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Jeffrey R Cohen - One of the best experts on this subject based on the ideXlab platform.
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enterprise risk management and the Financial Reporting Process the experiences of audit committee members cfos and external auditors
Contemporary Accounting Research, 2017Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Arnold WrightAbstract:The recent Financial crisis has brought to the forefront the need for companies to effectively manage their risks. In this regard, one approach that has gained prominence is enterprise risk management (ERM). Importantly, little is known about the link between ERM and the Financial Reporting Process. This link is critical, because it is imperative that Financial Reporting adequately depicts the Financial status (e.g., valuations, estimates) and associated risks of a company as revealed by ERM. Additionally, from an auditing perspective, ERM affects the risks of misstatement, which should impact audit planning. Accordingly, the objective of this study is to examine the experiences of audit partners, CFOs, and audit committee (AC) members (“the governance triad”) on the link between ERM and the Financial Reporting Process. To determine whether members of the governance triad focus on monitoring, strategy, or both, we also examine their definition of and experiences with ERM with respect to agency and/or resource dependence theory. To address these issues, we conduct semistructured interviews of experienced individuals that form the governance triads from 11 public companies. There are three major findings from our study. First, importantly, all three types of participants see a strong link between ERM and the Financial Reporting Process. Second, despite recognition of the broad nature of ERM, the predominant experiences of the actual roles played by triad members center on agency theory, while resource dependence may be relatively underemphasized by all triad members. Finally, CFOs and AC members indicate that auditors may be especially underutilizing ERM in the audit Process, suggesting an “expectations gap.” This article is protected by copyright. All rights reserved.
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enterprise risk management and the Financial Reporting Process the experiences of audit committee members cfos and external auditors
Contemporary Accounting Research, 2017Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Arnold M WrightAbstract:The Financial crisis has brought to the forefront the need for companies to effectively manage their risks. One approach that has gained prominence is enterprise risk management (ERM), but little is known about the link between ERM and the Financial Reporting Process. This link is important, because it is imperative that the Financial Reporting Process adequately depict the performance and associated risks of a company. Additionally, ERM affects the risks of misstatement and potential lack of adequate risk disclosures, which impact audit planning. Accordingly, the objective of this study is to examine how audit partners, CFOs, and audit committee (AC) members (“the governance triad”) view ERM as it relates to the roles of governance parties, Financial Reporting quality, internal controls, and external auditing. To address these issues, we conduct semi-structured interviews of experienced individuals from 11 public companies that form 11 governance triads. Results suggest that across all three types of participants, respondents emphasize risk assessment/identification and operational efficiency/effectiveness when defining ERM. However, there is substantial variation in responses which suggests that there is still lack of consensus among key players on what constitutes ERM. Interestingly, only a minority of auditors mention strategy or strategic risks in their definition of ERM. To the extent this is reflective of auditors not fully leveraging the strategic elements of ERM, auditors may be underutilizing ERM in the audit Process. This concern is further corroborated in a number of comments made by CFOs and AC. Moreover, participants perceive that the audit committee and the CFO play a large role with ERM and auditors are perceived to play a lesser role. Additional analysis of the responses indicates that while participants view ERM and its effect upon the Financial Reporting Process from both an agency and resource dependence perspective, there is a greater focus on the agency framework. In all, resource dependence may be under-emphasized by all members, but especially by CFOs and auditors. Implications for practice and research are discussed.
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the effect of audit committee industry expertise on monitoring the Financial Reporting Process
Accounting review: A quarterly journal of the American Accounting Association, 2014Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Udi Hoitash, Arnold M WrightAbstract:ABSTRACT: Calls from practice suggest that audit committee members with industry expertise can improve audit committee effectiveness. Nevertheless, regulators and the extant literature have focused...
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the effect of audit committee industry expertise on monitoring the Financial Reporting Process
2013Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Udi Hoitash, Arnold WrightAbstract:Calls from practice suggest that audit committee members with industry expertise can improve audit committee effectiveness. Nevertheless, regulators and extant literature have focused on the Financial expertise of the audit committee. We posit that audit committee industry knowledge is valuable because accounting guidance, estimates, and oversight of the external auditor are often linked to a company’s operations within a particular industry. Taking a holistic view, we examine two measures of Financial Reporting quality (Financial restatements and discretionary accruals) and two measures of external auditor oversight (audit and non-audit fees). As predicted, we find that audit committee members who are both accounting and industry experts perform better than those with only accounting expertise. We also find that in certain instances, supervisory experts who are also industry experts perform better than supervisory experts alone. Overall, these results suggest that industry expertise, when combined with accounting expertise, can improve the effectiveness of the audit committee in monitoring the Financial Reporting Process.
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the impact on auditor judgments of ceo influence on audit committee independence
Auditing-a Journal of Practice & Theory, 2011Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Lisa Milici Gaynor, Arnold M WrightAbstract:SUMMARY: Despite the importance of audit committee independence in ensuring the integrity of the Financial Reporting Process, recent research suggests that even when audit committees meet regulato...
Steven E Salterio - One of the best experts on this subject based on the ideXlab platform.
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Financial Reporting interview based research a field research primer with an illustrative example
Behavioral Research in Accounting, 2017Co-Authors: Staci Kenno, Susan Mccracken, Steven E SalterioAbstract:ABSTRACT: To better focus Financial Reporting research on key issues as seen by participants in the Financial Reporting Process and to give added depth to the interpretation of archival and experimental results, there have been increased calls for Financial Reporting researchers to “enter the field.” As field research methods, especially interview-based, are rarely covered in accounting doctoral programs that focus on archival or experimental research, the goal of this article is to provide a basic primer on how to conduct positivist field-based research using qualitative interview methods. We assemble a set of resources that facilitate the transfer of knowledge about the interview method, both by reviewing the explicit knowledge that needs to be acquired, as well as by illustrating how we carried out a study on the earnings press release creation Process. Such a “how to do” approach is well suited for the passing on of the tacit knowledge required by researchers beginning a qualitative research program. ...
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the chief Financial officer s perspective on auditor client negotiations
Contemporary Accounting Research, 2007Co-Authors: Michael Gibbins, Susan Mccracken, Steven E SalterioAbstract:Auditor-client negotiation about difficult client accounting issues involves both the auditor and the client. On the client side, the Chief Financial Officer (CFO) plays a central role in the Financial Reporting Process, yet is rarely the focus of academic study. This paper reports how a sample of Canadian CFOs viewed the negotiation Process and context, using an experiential questionnaire to build on the negotiation model developed and demonstrated for the auditor side of the negotiation by Gibbins, Salterio, and Webb 2001, and corroborated by a comparison of common questionnaire items across auditor and CFO samples by Gibbins, McCracken, and Salterio 2005. The CFOs saw negotiation with the auditors as a consequence of change in accounting and disclosure standards or personnel influential to their Financial Reporting, or business changes, such as, new business deals or acquisitions. Negotiation was thrust upon the CFO, and the CFO then had to manage it. The CFOs informed other management (such as the CEO) and was aware of their interests, but did not generally seek their help. Informing the Board or the audit committee of the issue was much less frequent. The issue being negotiated was seen as complex, requiring research and analysis, and dependent on knowledge and expertise, with the result more likely reflecting form over substance (a result some CFOs suggested was more agreeable to the auditor than to the CFO).
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the relationship between board characteristics and voluntary improvements in audit committee composition and experience
Contemporary Accounting Research, 2001Co-Authors: Mark S Beasley, Steven E SalterioAbstract:This study empirically examines the relation between certain board of director characteristics and the extent that audit committee composition voluntarily exceeds minimum mandated levels and includes outside directors with Financial Reporting and audit committee knowledge and experience. This study focuses on board characteristics because the board directly controls audit committee membership. Such staffing decisions can directly affect the ability of the audit committee to monitor management's Financial Reporting Process on behalf of the board. Results suggest that Canadian firms that voluntarily include more outside directors on the audit committee than the mandated minimum have larger boards with more outsiders serving on those boards and are more likely to segregate the board chairperson position from the CEO/president positions. Additionally, firms that voluntarily create audit committees composed of outsider members with a breadth of relevant Financial Reporting and audit committee knowledge and experience have boards that are larger, have more outside members, and are less likely to be chaired by the CEO/president. Implications of these findings for auditors, institutional investors, regulators, and other interested parties are discussed.
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the relationship between board characteristics and voluntary improvements in audit committee composition and experience
Contemporary Accounting Research, 2001Co-Authors: Mark S Beasley, Steven E SalterioAbstract:This study empirically examines the relation between certain board of director characteristics and the extent that audit committee composition voluntarily exceeds minimum mandated levels and includes outside directors with Financial Reporting and audit committee knowledge and experience. This study focuses on board characteristics as the board directly controls audit committee membership. Such staffing decisions can directly affect the ability of the audit committee to monitor management's Financial Reporting Process on behalf of the board. Results suggests that Canadian firms which voluntarily include more outside directors on the audit committee than the mandated minimum have larger boards with more outsiders serving on those boards and are more likely to segregate the board chairperson position from the CEO/president positions. Additionally, firms who voluntarily create audit committees composed of outsider members with a breadth of relevant Financial Reporting and audit committee knowledge and experience have boards that are larger, have more outside members, and are less likely to be chaired by the CEO/president. Implications of these findings for auditors, institutional investors, regulators and other interested parties are discussed.
Oliver M Rui - One of the best experts on this subject based on the ideXlab platform.
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do social ties between external auditors and audit committee members affect audit quality
The Accounting Review, 2017Co-Authors: Jeffrey Pittman, Oliver M RuiAbstract:ABSTRACT: We examine whether social ties between engagement auditors and audit committee members shape audit outcomes. Although these social ties can facilitate information transfer and help auditors alleviate management pressure to waive correction of detected misstatements, close interpersonal relations can undermine auditors' monitoring of the Financial Reporting Process. We measure social ties by alma mater connections, professor-student bonding, and employment affiliation, and audit quality by the propensity to render modified audit opinions, Financial Reporting irregularities, and firm valuation. Our evidence implies that social ties between engagement auditors and audit committee members impair audit quality. In additional results consistent with expectations, we generally find that this relation is concentrated where social ties are more salient, or firm governance is relatively poor and agency conflicts are more severe. Implying reciprocity stemming from social networks, we also report some sugge...
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do social ties between external auditors and audit committee members affect audit quality
2016Co-Authors: Jeffrey Pittman, Oliver M RuiAbstract:We examine whether social ties between engagement auditors and audit committee members shape audit outcomes. Although these social ties can facilitate information transfer and help auditors alleviate management pressure to waive correction of detected misstatements, cozy interpersonal relations can undermine auditors’ monitoring of the Financial Reporting Process. We measure social ties by alma mater connections, professor-student bonding, and employment affiliation and audit quality by the propensity to render modified audit opinions, Financial Reporting irregularities, and firm valuation. Our evidence implies that social ties between engagement auditors and audit committee members impair audit quality. In additional results consistent with expectations, we generally find that this relation is concentrated where social ties are more salient, or firm governance is relatively poor and agency conflicts are more severe. Implying reciprocity stemming from social networks, we also report some suggestive evidence that audit fees are higher in the presence of social ties between an engagement auditor and the audit committee. Collectively, our analysis lends support to the narrative that the negative implications -- namely, worse audit quality and higher audit fees -- of these social ties may outweigh the benefits.
Jeffrey Pittman - One of the best experts on this subject based on the ideXlab platform.
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do social ties between external auditors and audit committee members affect audit quality
The Accounting Review, 2017Co-Authors: Jeffrey Pittman, Oliver M RuiAbstract:ABSTRACT: We examine whether social ties between engagement auditors and audit committee members shape audit outcomes. Although these social ties can facilitate information transfer and help auditors alleviate management pressure to waive correction of detected misstatements, close interpersonal relations can undermine auditors' monitoring of the Financial Reporting Process. We measure social ties by alma mater connections, professor-student bonding, and employment affiliation, and audit quality by the propensity to render modified audit opinions, Financial Reporting irregularities, and firm valuation. Our evidence implies that social ties between engagement auditors and audit committee members impair audit quality. In additional results consistent with expectations, we generally find that this relation is concentrated where social ties are more salient, or firm governance is relatively poor and agency conflicts are more severe. Implying reciprocity stemming from social networks, we also report some sugge...
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do social ties between external auditors and audit committee members affect audit quality
2016Co-Authors: Jeffrey Pittman, Oliver M RuiAbstract:We examine whether social ties between engagement auditors and audit committee members shape audit outcomes. Although these social ties can facilitate information transfer and help auditors alleviate management pressure to waive correction of detected misstatements, cozy interpersonal relations can undermine auditors’ monitoring of the Financial Reporting Process. We measure social ties by alma mater connections, professor-student bonding, and employment affiliation and audit quality by the propensity to render modified audit opinions, Financial Reporting irregularities, and firm valuation. Our evidence implies that social ties between engagement auditors and audit committee members impair audit quality. In additional results consistent with expectations, we generally find that this relation is concentrated where social ties are more salient, or firm governance is relatively poor and agency conflicts are more severe. Implying reciprocity stemming from social networks, we also report some suggestive evidence that audit fees are higher in the presence of social ties between an engagement auditor and the audit committee. Collectively, our analysis lends support to the narrative that the negative implications -- namely, worse audit quality and higher audit fees -- of these social ties may outweigh the benefits.
Arnold M Wright - One of the best experts on this subject based on the ideXlab platform.
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enterprise risk management and the Financial Reporting Process the experiences of audit committee members cfos and external auditors
Contemporary Accounting Research, 2017Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Arnold M WrightAbstract:The Financial crisis has brought to the forefront the need for companies to effectively manage their risks. One approach that has gained prominence is enterprise risk management (ERM), but little is known about the link between ERM and the Financial Reporting Process. This link is important, because it is imperative that the Financial Reporting Process adequately depict the performance and associated risks of a company. Additionally, ERM affects the risks of misstatement and potential lack of adequate risk disclosures, which impact audit planning. Accordingly, the objective of this study is to examine how audit partners, CFOs, and audit committee (AC) members (“the governance triad”) view ERM as it relates to the roles of governance parties, Financial Reporting quality, internal controls, and external auditing. To address these issues, we conduct semi-structured interviews of experienced individuals from 11 public companies that form 11 governance triads. Results suggest that across all three types of participants, respondents emphasize risk assessment/identification and operational efficiency/effectiveness when defining ERM. However, there is substantial variation in responses which suggests that there is still lack of consensus among key players on what constitutes ERM. Interestingly, only a minority of auditors mention strategy or strategic risks in their definition of ERM. To the extent this is reflective of auditors not fully leveraging the strategic elements of ERM, auditors may be underutilizing ERM in the audit Process. This concern is further corroborated in a number of comments made by CFOs and AC. Moreover, participants perceive that the audit committee and the CFO play a large role with ERM and auditors are perceived to play a lesser role. Additional analysis of the responses indicates that while participants view ERM and its effect upon the Financial Reporting Process from both an agency and resource dependence perspective, there is a greater focus on the agency framework. In all, resource dependence may be under-emphasized by all members, but especially by CFOs and auditors. Implications for practice and research are discussed.
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the effect of audit committee industry expertise on monitoring the Financial Reporting Process
Accounting review: A quarterly journal of the American Accounting Association, 2014Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Udi Hoitash, Arnold M WrightAbstract:ABSTRACT: Calls from practice suggest that audit committee members with industry expertise can improve audit committee effectiveness. Nevertheless, regulators and the extant literature have focused...
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managers audit negotiation judgments before an initial public offering
2013Co-Authors: Helen L Brownliburd, Arnold M Wright, Valentina L ZamoraAbstract:Auditor-client negotiations are a common and critical part of the Financial Reporting Process, yet we know little about contextual factors that influence negotiation judgments from the manager’s perspective. Managers have incentives to act aggressively since outcomes often materially impact Financial reports and managerial compensation. However, managers also have incentives to behave less aggressively since unresolved issues may result in audit delay, qualification or auditor resignation, all of which may damage firm and/or managerial reputation. These two opposing incentives are particularly prominent during the initial public offering (IPO) planning period when information asymmetry between managers and outsiders is arguably at its highest, and scrutiny from a variety of IPO monitors begins to heighten. We examine the impact of two pervasive IPO monitoring parties – auditors and audit committees – on the pre-negotiation judgments of 137 experienced CFO/controllers. Prior audit negotiations research suggests that a contentious past relationship with the auditor compels managers to be less aggressive, while a stronger audit committee curbs managerial opportunism. We thus expect that relative to other conditions, managers faced with a contentious past auditor relationship and a stronger audit committee will be least aggressive in an audit negotiation during the IPO planning period. To test our hypothesis, we use a 2 x 2 experimental factorial design with past auditor relationship (contentious or cooperative) and audit committee strength (stronger or weaker) manipulated between-subjects. The results support our expectations. Further, additional analysis indicates that these strong monitoring mechanisms have a sustained impact on managers’ judgments in the IPO offer year.
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the impact on auditor judgments of ceo influence on audit committee independence
Auditing-a Journal of Practice & Theory, 2011Co-Authors: Jeffrey R Cohen, Ganesh Krishnamoorthy, Lisa Milici Gaynor, Arnold M WrightAbstract:SUMMARY: Despite the importance of audit committee independence in ensuring the integrity of the Financial Reporting Process, recent research suggests that even when audit committees meet regulato...