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Ryan Lafond - One of the best experts on this subject based on the ideXlab platform.
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the effect of sox Internal Control deficiencies and their remediation on accrual quality
The Accounting Review, 2008Co-Authors: Hollis Ashbaughskaife, Daniel W Collins, William R Kinney, Ryan LafondAbstract:This paper investigates the effect of Internal Control deficiencies and their remediation on accrual quality. We first document that firms reporting Internal Control deficiencies have lower quality accruals as measured by accrual noise and absolute abnormal accruals relative to firms not reporting Internal Control problems. Second, we find that firms that report Internal Control deficiencies have significantly larger positive and larger negative abnormal accruals relative to Control firms. This finding suggests Internal Control weaknesses are more likely to lead to unintentional errors that add noise to accruals than intentional misstatements that bias earnings upward. Third, we doc- ument that firms whose Auditors confirm remediation of previously reported Internal Control deficiencies exhibit an increase in accrual quality relative to firms that do not remediate their Control problems. Finally, we find firms that receive different Internal Control Audit opinions in successive years exhibit changes in accrual quality consistent with changes in Internal Control quality. Collectively, our cross-sectional and intertem- poral change tests provide strong evidence that the quality of Internal Control affects the quality of accruals.
Debabrata Chatterjee - One of the best experts on this subject based on the ideXlab platform.
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Audit committee observation recommendations versus practices as a compliance of corporate governance in india
Dlsu Business & Economics Review, 2011Co-Authors: Debabrata ChatterjeeAbstract:The series of accounting scandals have intensified pressure from stakeholders and regulators on the Audit committees to do the jobs for which they are hired. Though most companies have Audit committees, their role has been limited due to the lack of expertise and time. An active Audit committee is important because it indicate the commitment to the issues of interest because of the reports it release about the activities undertaken during the financial year and the efforts made to ensure adequate Internal Control. Audit committees must be given the role to approve and review Audit fees, thus neutralizing the bias of management influence on the negotiations with the Auditors. Of equal importance, Auditor independence can be safeguarded if Audit committees were composed of a majority of independent and non-executive directors and this might indicate that their independent status would contribute to Auditor independence through bridging communication networks and neutralizing any conflict between the management and the Auditor. Audit committee can go a long way in enhancing the credibility of the financial disclosures of a company and promoting transparency. Thus, it is essential for the Indian companies to accept and continue with the reforms that are demarcated by the challenges of the new millennium. Keywords: Audit committee; corporate governance; Internal Auditors; statutory Auditors DOI: 10.3860/ber.v20i2.1914 DLSU Business & Economics Review 20.2 (2011), pp. 67-78
Hollis Ashbaughskaife - One of the best experts on this subject based on the ideXlab platform.
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the effect of sox Internal Control deficiencies and their remediation on accrual quality
The Accounting Review, 2008Co-Authors: Hollis Ashbaughskaife, Daniel W Collins, William R Kinney, Ryan LafondAbstract:This paper investigates the effect of Internal Control deficiencies and their remediation on accrual quality. We first document that firms reporting Internal Control deficiencies have lower quality accruals as measured by accrual noise and absolute abnormal accruals relative to firms not reporting Internal Control problems. Second, we find that firms that report Internal Control deficiencies have significantly larger positive and larger negative abnormal accruals relative to Control firms. This finding suggests Internal Control weaknesses are more likely to lead to unintentional errors that add noise to accruals than intentional misstatements that bias earnings upward. Third, we doc- ument that firms whose Auditors confirm remediation of previously reported Internal Control deficiencies exhibit an increase in accrual quality relative to firms that do not remediate their Control problems. Finally, we find firms that receive different Internal Control Audit opinions in successive years exhibit changes in accrual quality consistent with changes in Internal Control quality. Collectively, our cross-sectional and intertem- poral change tests provide strong evidence that the quality of Internal Control affects the quality of accruals.
Sheneeta White - One of the best experts on this subject based on the ideXlab platform.
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a simulation study of the influence of pcaob regulatory guidance on the Internal Control Audit process an analysis of relationships risk and information sharing
Research on Professional Responsibility and Ethics in Accounting, 2014Co-Authors: Stephanie Dehning Grimm, Sheneeta WhiteAbstract:Abstract Section 404 of the Sarbanes–Oxley Act (SOX) altered the relationship between Auditors and their clients by requiring an external Audit of companies’ Internal Controls. Regulatory guidance is interpreted and applied by external Auditors to comply with SOX. The purpose of this paper is to apply service operations management theories and techniques to the Internal Control Audit process to better understand the role regulatory guidance plays in Audit services. We discuss service operations management theories that apply to the production of Audit services and employ the operations management technique of simulation to examine the effects of a historical relationship between the client and the Auditor, information sharing between the client and the Auditor, and the Auditor’s perceived risk of the client on the Internal Control Audit process. The application of service operations management theories and the simulation results illustrate that risk and information sharing are key factors for the Audit process. The results suggest the updated Public Company Accounting Oversight Board guidance from Auditing Standard 2 to Auditing Standard 5 appropriately increased Audit effectiveness by encouraging risk-based judgments and information sharing. This paper merges accounting and service operations management research to examine the effects of regulatory guidance on the Internal Control Audit process. The paper uses simulation to illustrate the importance of interpreting regulatory guidance and the specific effects of risk and information sharing on the Internal Control Audit process.
Jian Zhou - One of the best experts on this subject based on the ideXlab platform.
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does Audit committee accounting expertise help to promote Audit quality evidence from Auditor reporting of Internal Control weaknesses
Contemporary Accounting Research, 2019Co-Authors: Ling Lei Lisic, Linda A Myers, Timothy A Seidel, Jian ZhouAbstract:In this study, we examine whether Audit committee accounting expertise helps to promote Audit quality by motivating Auditors to conduct diligent Internal Control Audits and make appropriate Internal Control assessments because Audit committee accounting expertise safeguards Auditors from dismissal following adverse Internal Control opinions. Among clients with existing and likely Internal Control material weaknesses (as proxied by future restatements of Audited financial statements), we find a greater likelihood of adverse Internal Control Audit opinions when the Audit committee has greater accounting expertise (measured by the proportion of accounting experts on the Audit committee). Among all clients, we find a lower likelihood of subsequent Auditor dismissal following an adverse Internal Control Audit opinion when the Audit committee has greater accounting expertise. In further analyses, we find that this lower likelihood of subsequent Auditor dismissal occurs when at least two Audit committee members possess accounting expertise. We also find some evidence that CFO influence (but not CEO influence) over the Audit committee negates the increased likelihood of adverse Internal Control opinions when Internal Control material weaknesses likely exist, as well as the decreased likelihood of Auditor dismissal following adverse Internal Control opinions. These findings have important implications for regulators and corporate nominating committees interested in promoting Audit committee effectiveness. Les competences en comptabilite du comite d'Audit contribuent‐elles a promouvoir la qualite de l'Audit? Donnees tirees des rapports d'Audit sur les faiblesses du Controle interne Les auteurs cherchent a determiner si les competences en comptabilite du comite d'Audit contribuent a promouvoir la qualite de l'Audit en motivant les Auditeurs a soumettre le Controle interne a un examen vigilant et a une evaluation appropriee, du fait que ces competences du comite d'Audit mettent les Auditeurs a l'abri d'une revocation de mandat a la suite de l'expression d'une opinion defavorable a l’egard du Controle interne. Parmi les clients chez qui des faiblesses importantes du Controle interne sont observables et probables (ainsi qu'en font foi les retraitements ulterieurs des etats financiers Audites), les auteurs relevent une probabilite plus elevee d'opinions defavorables des Auditeurs a l’egard du Controle interne lorsque le comite d'Audit possede davantage de competences en comptabilite (mesurees en fonction de la proportion d'experts comptables membres du comite d'Audit). Chez l'ensemble des clients, les auteurs observent une probabilite plus faible de revocation du mandat de l'Auditeur a la suite de l'expression d'une opinion defavorable a l’egard du Controle interne lorsque le comite d'Audit possede davantage de competences en comptabilite. En poussant plus loin les analyses, les auteurs constatent que cette probabilite plus faible de revocation subsequente du mandat des Auditeurs est observable lorsqu'au moins deux membres du comite d'Audit possedent des competences en comptabilite. Ils relevent egalement certaines donnees etablissant que l'influence du directeur financier (mais non celle du chef de la direction) sur le comite d'Audit inverse la probabilite plus elevee d'opinions defavorables a l’egard du Controle interne lorsque l'existence de faiblesses importantes du Controle interne est probable, et inverse la probabilite plus faible de revocation du mandat de l'Auditeur a la suite de l'expression d'une opinion defavorable a l’egard du Controle interne. Ces constats ont d'importantes retombees pour les autorites de reglementation et les comites d'entreprise responsables des nominations qui s'attachent a promouvoir l'efficacite des comites d'Audit.
