Evolution of U.S. Regulation and the Standard-Setting Process for Financial Reporting: 1930s to the Present
美国监管的演变和财务报告的标准制定过程:20世纪30年代至今
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Thomas Bourveau, Matthias Breuer, Robert C. Stoumbos
We study the descriptiveness of the “unravelling” prediction in the 1890s streetcar industry. In this historical setting, capital-intensive streetcar companies gain the opportunity to disclose their earnings to dispersed investors via a new, quarterly newspaper supplement. We document that a quarter of the companies withhold their earnings from the first supplement, inconsistent with the “unravelling” prediction. However, almost all these companies start disclosing within the next couple of supplements, with the relatively-better companies among the remaining non-disclosers initiating disclosure and leaving the pool of non-disclosers each quarter. We interpret these stylized facts through the lens of a disclosure model featuring level-k thinking. Our model estimates that a substantial share of the companies employs a lower level of strategic thinking in the first supplement. This deviation from rational expectations appears to explain the initial failure of the “unravelling” prediction. Over time, companies appear to adopt higher levels of thinking, contributing to the rapid convergence to an (almost) full disclosure equilibrium. Collectively, our evidence is consistent with market forces yielding an (almost) full disclosure equilibrium in the medium to long run through repetition and learning.
{"title":"Learning to Disclose: Disclosure Dynamics in the 1890s Streetcar Industry","authors":"Thomas Bourveau, Matthias Breuer, Robert C. Stoumbos","doi":"10.2139/ssrn.3757679","DOIUrl":"https://doi.org/10.2139/ssrn.3757679","url":null,"abstract":"We study the descriptiveness of the “unravelling” prediction in the 1890s streetcar industry. In this historical setting, capital-intensive streetcar companies gain the opportunity to disclose their earnings to dispersed investors via a new, quarterly newspaper supplement. We document that a quarter of the companies withhold their earnings from the first supplement, inconsistent with the “unravelling” prediction. However, almost all these companies start disclosing within the next couple of supplements, with the relatively-better companies among the remaining non-disclosers initiating disclosure and leaving the pool of non-disclosers each quarter. We interpret these stylized facts through the lens of a disclosure model featuring level-k thinking. Our model estimates that a substantial share of the companies employs a lower level of strategic thinking in the first supplement. This deviation from rational expectations appears to explain the initial failure of the “unravelling” prediction. Over time, companies appear to adopt higher levels of thinking, contributing to the rapid convergence to an (almost) full disclosure equilibrium. Collectively, our evidence is consistent with market forces yielding an (almost) full disclosure equilibrium in the medium to long run through repetition and learning.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116476208","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
While voluntary disclosure theory posits that profit‐oriented companies voluntarily disclose information to increase their market value, this does not explain why a charity would report in accordance with a more comprehensive financial reporting framework than required. Using a unique financial reporting framework choice available in Australia, our study examines factors associated with large charities' choice of a General Purpose Financial Statements (GPFS) reporting framework, which encompasses expansive financial reporting requirements, versus a Special Purpose Financial Statements (SPFS) reporting framework, where management, within limits, effectively chooses that subset of accounting standards applicable to that charity. For those preparing GPFS, we then examine the factors that determine those charities that report in accordance with the complete set of Australian Accounting Standards (Tier 1) versus Reduced Disclosure Requirements (Tier 2). Using manually collected data from 11,471 large‐registered charities for 2014–2016, we find that the economic importance of the charity, its funding sources, and level of indebtedness are significant in explaining charities choosing a more comprehensive financial reporting framework. Further, we find a substantial increase in the proportion of large charities electing to disclose GPFS‐Tier 2 over this three‐year window. The choice of a large audit firm (Big 4 and mid‐tier audit firms) is significantly associated with charities both lodging more comprehensive GPFS, and also reporting GPFS in accordance with the less onerous GPFS‐Tier 2 framework. Our results provide insights into voluntary reporting choices made by charities and inform charities, accounting firms, and regulators of factors influencing charities' choice of financial reporting frameworks.
{"title":"Financial Reporting by Charities: Why Do Some Choose to Report Under a More Extensive Reporting Framework?","authors":"Yitang (Jenny) Yang, R. Simnett","doi":"10.1111/abac.12202","DOIUrl":"https://doi.org/10.1111/abac.12202","url":null,"abstract":"While voluntary disclosure theory posits that profit‐oriented companies voluntarily disclose information to increase their market value, this does not explain why a charity would report in accordance with a more comprehensive financial reporting framework than required. Using a unique financial reporting framework choice available in Australia, our study examines factors associated with large charities' choice of a General Purpose Financial Statements (GPFS) reporting framework, which encompasses expansive financial reporting requirements, versus a Special Purpose Financial Statements (SPFS) reporting framework, where management, within limits, effectively chooses that subset of accounting standards applicable to that charity. For those preparing GPFS, we then examine the factors that determine those charities that report in accordance with the complete set of Australian Accounting Standards (Tier 1) versus Reduced Disclosure Requirements (Tier 2). Using manually collected data from 11,471 large‐registered charities for 2014–2016, we find that the economic importance of the charity, its funding sources, and level of indebtedness are significant in explaining charities choosing a more comprehensive financial reporting framework. Further, we find a substantial increase in the proportion of large charities electing to disclose GPFS‐Tier 2 over this three‐year window. The choice of a large audit firm (Big 4 and mid‐tier audit firms) is significantly associated with charities both lodging more comprehensive GPFS, and also reporting GPFS in accordance with the less onerous GPFS‐Tier 2 framework. Our results provide insights into voluntary reporting choices made by charities and inform charities, accounting firms, and regulators of factors influencing charities' choice of financial reporting frameworks.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114154787","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose – The paper examines a scarcely known research initiative, the Management Studies Research Division (MSRD), established at the London School of Economics and Political Science (LSE) in 1964, but moribund by 1972.
Design/methodology/approach - The paper seeks to identify the conditions of possibility that facilitated the MSRD’s emergence and ultimately led to its failure.
Findings – In the early 1960s, a growing social and political awareness of the importance of good management, combined with the availability of both public and private funding, encouraged management research in the UK. The MSRD had some institutional support at the LSE, but it also needed a “champion” to set it up, raise money and manage the unit. This champion was Harold C. Edey, Professor of Accounting at the LSE. Difficulties in finding and retaining good management researchers, when many universities were developing business and management teaching and research, inhibited the MSRD’s survival.
Research limitations/implications – Although the paper studies a single management research unit, it identifies conditions of possibility for management research to take off and thrive, or otherwise, that are likely to be relevant for other times and places.
Originality/value – The paper describes a largely unknown episode in the development of management research in the UK, and proposes various factors as helping to explain both the success and the ultimate failure of a management research initiative.
{"title":"What Makes Research Possible? The Management Studies Research Division at the London School of Economics","authors":"C. Napier, Martin E. Persson","doi":"10.2139/ssrn.3634236","DOIUrl":"https://doi.org/10.2139/ssrn.3634236","url":null,"abstract":"Purpose – The paper examines a scarcely known research initiative, the Management Studies Research Division (MSRD), established at the London School of Economics and Political Science (LSE) in 1964, but moribund by 1972. <br><br>Design/methodology/approach - The paper seeks to identify the conditions of possibility that facilitated the MSRD’s emergence and ultimately led to its failure.<br><br>Findings – In the early 1960s, a growing social and political awareness of the importance of good management, combined with the availability of both public and private funding, encouraged management research in the UK. The MSRD had some institutional support at the LSE, but it also needed a “champion” to set it up, raise money and manage the unit. This champion was Harold C. Edey, Professor of Accounting at the LSE. Difficulties in finding and retaining good management researchers, when many universities were developing business and management teaching and research, inhibited the MSRD’s survival. <br><br>Research limitations/implications – Although the paper studies a single management research unit, it identifies conditions of possibility for management research to take off and thrive, or otherwise, that are likely to be relevant for other times and places.<br><br>Originality/value – The paper describes a largely unknown episode in the development of management research in the UK, and proposes various factors as helping to explain both the success and the ultimate failure of a management research initiative.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125379933","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this well-argued and persuasive book Professor Bogenschneider dismantles much of the dogma of US tax policy. The crux of Bogenschneider’s argument is a discussion of 11 deceptions in tax policy ranging from (#1) the idea that tax cuts for the wealthy will cause economic growth, to (#7) the idea that workers don’t pay taxes because the income tax rates are progressive, to (#11) the idea that tax cuts for large corporations will cause a decrease in the prices of consumer goods. Notably, the other 8 deceptions not listed are of such significance and worthy of discussion on their own merits and to not mention of them here feels like leaving a suitcase or child behind on the platform in the train station. This intense feeling of the significance and novelty of Bogenschneider’s argumentation, and the ease with which it is presented, is an argument to read the book. Perhaps an important further point of introduction is that in the title Bogenschneider refers to the tricking of America, yet make no mistake, this is a book of international tax law and policy.
{"title":"How America was Tricked on Tax Policy: Secrets and Undisclosed Practices - Book Review.","authors":"Arkadiusz Mironko","doi":"10.2139/ssrn.3686328","DOIUrl":"https://doi.org/10.2139/ssrn.3686328","url":null,"abstract":"In this well-argued and persuasive book Professor Bogenschneider dismantles much of the dogma of US tax policy. The crux of Bogenschneider’s argument is a discussion of 11 deceptions in tax policy ranging from (#1) the idea that tax cuts for the wealthy will cause economic growth, to (#7) the idea that workers don’t pay taxes because the income tax rates are progressive, to (#11) the idea that tax cuts for large corporations will cause a decrease in the prices of consumer goods. Notably, the other 8 deceptions not listed are of such significance and worthy of discussion on their own merits and to not mention of them here feels like leaving a suitcase or child behind on the platform in the train station. This intense feeling of the significance and novelty of Bogenschneider’s argumentation, and the ease with which it is presented, is an argument to read the book. Perhaps an important further point of introduction is that in the title Bogenschneider refers to the tricking of America, yet make no mistake, this is a book of international tax law and policy.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125085958","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Juan Ignacio Ibañez, Chris N Bayer, Paolo Tasca, Jiahua Xu
During the last half century, the concept of shared ledger systems that offer a single source of truth has challenged traditional bookkeeping, leading to innovations such as the resource-event-agent (REA) accounting framework, triple-entry accounting (TEA), and blockchain. Despite these advancements, the historical development of shared ledger systems remains under-researched and unclear, with the influence of REA on TEA particularly overlooked. This study aims to fill this gap by conducting a genealogical analysis of shared ledger systems, with a focus on tracing the development of TEA and its historical byproduct of the REA framework designed by McCarthy. Through a comprehensive literature review and interviews with pioneers in REA, TEA, and blockchain, we uncover the missing link between REA and TEA. Our findings suggest that the current explosion of shared ledger systems results from the convergence of three parallel research streams, occasionally interacting with each other. We correct common misconceptions, acknowledge the influence of key individuals, and map out the overlapping paths of REA, TEA, and blockchain. By elucidating the historical evolution of shared ledger systems, this study contributes to the academic debate and fosters further discourse among researchers in REA, TEA, and blockchain, thereby enhancing the potential applications within these fields.
{"title":"REA, Triple-Entry Accounting and Blockchain: Converging Paths to Shared Ledger Systems","authors":"Juan Ignacio Ibañez, Chris N Bayer, Paolo Tasca, Jiahua Xu","doi":"10.2139/ssrn.3602207","DOIUrl":"https://doi.org/10.2139/ssrn.3602207","url":null,"abstract":"During the last half century, the concept of shared ledger systems that offer a single source of truth has challenged traditional bookkeeping, leading to innovations such as the resource-event-agent (REA) accounting framework, triple-entry accounting (TEA), and blockchain. Despite these advancements, the historical development of shared ledger systems remains under-researched and unclear, with the influence of REA on TEA particularly overlooked. This study aims to fill this gap by conducting a genealogical analysis of shared ledger systems, with a focus on tracing the development of TEA and its historical byproduct of the REA framework designed by McCarthy. Through a comprehensive literature review and interviews with pioneers in REA, TEA, and blockchain, we uncover the missing link between REA and TEA. Our findings suggest that the current explosion of shared ledger systems results from the convergence of three parallel research streams, occasionally interacting with each other. We correct common misconceptions, acknowledge the influence of key individuals, and map out the overlapping paths of REA, TEA, and blockchain. By elucidating the historical evolution of shared ledger systems, this study contributes to the academic debate and fosters further discourse among researchers in REA, TEA, and blockchain, thereby enhancing the potential applications within these fields.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115883731","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Essentially, this study asks: Does the business risk audit (BRA) approach increase audit production efficiency? To answer this question empirically, direct and indirect tests are employed using proprietary, working paper data from the larger clients of a major Australian public sector audit provider and an efficiency frontier analytic methodology, data envelopment analysis (DEA). Results based on this proprietary, audit hours data for audit engagements carried out just after BRA approach implementation show that they have high levels of production efficiency and are risk‐adjusted, with no significant difference in production efficiency between higher and lower business risk audit engagements. Results based on audit fees data for audit engagements carried out shortly before and after BRA approach implementation show that overall production efficiency significantly improves. Importantly, while this improvement is significant for lower‐risk audit engagements, there is no significant improvement for higher‐risk audit engagements. In the context of this study's research site, this is consistent with the BRA approach addressing inefficiencies created when lower‐risk audit engagements are being over‐audited. That is, the BRA approach can result in both risk‐adjusted and more efficiently produced audits. With the re‐emergence of the BRA approach in the literature and in practice, this study provides empirical evidence to support the claim that this audit approach can lead to 'creating auditing efficiencies' (Bell et al., 1997, p. 1). [ABSTRACT FROM AUTHOR]
从本质上讲，本研究的问题是:企业风险审计(BRA)方法是否提高了审计生产效率?为了从经验上回答这个问题，采用了直接和间接测试，使用了来自澳大利亚一家主要公共部门审计提供商的大客户的专有工作纸数据和效率前沿分析方法，数据包络分析(DEA)。基于这一专有的审计时间数据，在实施BRA方法后进行的审计业务的结果表明，它们具有高水平的生产效率，并经过风险调整，在高业务风险和低业务风险审计业务之间的生产效率没有显著差异。基于实施BRA方法前后审计业务的审计费用数据的结果表明，整体生产效率显著提高。重要的是，虽然这种改进对于低风险审计业务是显著的，但对于高风险审计业务没有显著的改进。在本研究的研究地点的背景下，这与BRA解决低风险审计业务被过度审计时产生的效率低下的方法是一致的。也就是说，BRA方法可以导致风险调整和更有效地产生审计。随着BRA方法在文献和实践中的重新出现，本研究提供了经验证据来支持这种审计方法可以导致“创造审计效率”的说法(Bell et al.， 1997, p. 1)。
{"title":"The Business Risk Audit Approach and Audit Production Efficiency","authors":"M. De Martinis, K. Houghton","doi":"10.1111/abac.12178","DOIUrl":"https://doi.org/10.1111/abac.12178","url":null,"abstract":"Essentially, this study asks: Does the business risk audit (BRA) approach increase audit production efficiency? To answer this question empirically, direct and indirect tests are employed using proprietary, working paper data from the larger clients of a major Australian public sector audit provider and an efficiency frontier analytic methodology, data envelopment analysis (DEA). Results based on this proprietary, audit hours data for audit engagements carried out just after BRA approach implementation show that they have high levels of production efficiency and are risk‐adjusted, with no significant difference in production efficiency between higher and lower business risk audit engagements. Results based on audit fees data for audit engagements carried out shortly before and after BRA approach implementation show that overall production efficiency significantly improves. Importantly, while this improvement is significant for lower‐risk audit engagements, there is no significant improvement for higher‐risk audit engagements. In the context of this study's research site, this is consistent with the BRA approach addressing inefficiencies created when lower‐risk audit engagements are being over‐audited. That is, the BRA approach can result in both risk‐adjusted and more efficiently produced audits. With the re‐emergence of the BRA approach in the literature and in practice, this study provides empirical evidence to support the claim that this audit approach can lead to 'creating auditing efficiencies' (Bell et al., 1997, p. 1). [ABSTRACT FROM AUTHOR]","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116136312","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the post-SOX era, research on audit committees (AC) has evolved into a distinct scientific domain devoted to the analysis of corporate oversight and its effect on financial reporting and internal control quality. Numerous studies have contributed to the identification of potential determinants of AC effectiveness and possible performance effects associated with the AC oversight process. Nevertheless, the scarcity of studies that offer a holistic view on AC research impedes a profound understanding of the antecedent elements and emerging themes in this field within recent decades. Applying a combination of citation, co-citation, and social network analysis to 92 articles published in six leading accounting journals, we comprehensively map the intellectual structure of AC research. Thus, we contribute to the literature by offering insights on major publication trends, chronological developments, and underlying relationships between different strands of the AC literature as part of the accounting discipline. Our findings reveal a high level of homogeneity in AC-related studies published in the leading accounting journals, especially when it comes to sample selection and methodological approaches.
{"title":"Four Decades of Audit Committee Research: A Bibliometric Analysis (1977–2018)","authors":"Joel Behrend, Marc Eulerich","doi":"10.2139/ssrn.3496040","DOIUrl":"https://doi.org/10.2139/ssrn.3496040","url":null,"abstract":"In the post-SOX era, research on audit committees (AC) has evolved into a distinct scientific domain devoted to the analysis of corporate oversight and its effect on financial reporting and internal control quality. Numerous studies have contributed to the identification of potential determinants of AC effectiveness and possible performance effects associated with the AC oversight process. Nevertheless, the scarcity of studies that offer a holistic view on AC research impedes a profound understanding of the antecedent elements and emerging themes in this field within recent decades. Applying a combination of citation, co-citation, and social network analysis to 92 articles published in six leading accounting journals, we comprehensively map the intellectual structure of AC research. Thus, we contribute to the literature by offering insights on major publication trends, chronological developments, and underlying relationships between different strands of the AC literature as part of the accounting discipline. Our findings reveal a high level of homogeneity in AC-related studies published in the leading accounting journals, especially when it comes to sample selection and methodological approaches.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127274917","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We propose a new set of citation metrics for evaluating the relative impact of scholarly research in accounting. Our metrics are based on current practices in bibliometrics and normalize citations by both field (accounting) and year of publication. We show that our normalized citation metrics dominate other commonly used metrics in accounting when predicting the long-term citation impact of recently published research. We conduct our analysis using citations from the Social Science Citation Index for the top six general interest accounting journals. More generally, our metrics can be readily constructed using any citation database and for any subfield of accounting. The metrics simply require the total citation counts for a benchmark set of papers published in the same calendar year. The use of these metrics should enable more informed performance evaluations of junior accounting researchers.
{"title":"Is It a Home Run? Measuring Relative Citation Rates in Accounting Research","authors":"Patricia M. Dechow, Richard G. Sloan, Jean Zeng","doi":"10.2139/ssrn.2635700","DOIUrl":"https://doi.org/10.2139/ssrn.2635700","url":null,"abstract":"\u0000 We propose a new set of citation metrics for evaluating the relative impact of scholarly research in accounting. Our metrics are based on current practices in bibliometrics and normalize citations by both field (accounting) and year of publication. We show that our normalized citation metrics dominate other commonly used metrics in accounting when predicting the long-term citation impact of recently published research. We conduct our analysis using citations from the Social Science Citation Index for the top six general interest accounting journals. More generally, our metrics can be readily constructed using any citation database and for any subfield of accounting. The metrics simply require the total citation counts for a benchmark set of papers published in the same calendar year. The use of these metrics should enable more informed performance evaluations of junior accounting researchers.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"111 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125541853","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the context of austerity-inspired reforms to public audit in England we investigate the extent to which audit firms mitigate management bias in public sector financial reports. A substantial body of literature finds that both public and not-for-profit managers manage ?earnings? to report small surpluses close to zero by managing deficits upwards and surpluses downwards. Under agency theory, auditors acting in the interests of their principal(s) would tend to reverse this bias. We exploit privileged access to pre-audit financial statements in the setting of the English National Health Service (NHS) to investigate the impact of audit adjustments on the pre-audit financial statements of English NHS Foundation Trusts over the period 2010?2011 to 2014?2015. We find evidence that auditors act to reverse management bias in the case of Trusts with a pre-audit deficit, but find no evidence that this is the case for Trusts with a pre-audit surplus. In the case of Trusts in surplus, these findings are consistent with auditors? interests being aligned with management, rather than principals.
{"title":"Audit Adjustments and Public Sector Audit Quality","authors":"M. Greenwood, Ruijia Zhan","doi":"10.1111/abac.12165","DOIUrl":"https://doi.org/10.1111/abac.12165","url":null,"abstract":"In the context of austerity-inspired reforms to public audit in England we investigate the extent to which audit firms mitigate management bias in public sector financial reports. A substantial body of literature finds that both public and not-for-profit managers manage ?earnings? to report small surpluses close to zero by managing deficits upwards and surpluses downwards. Under agency theory, auditors acting in the interests of their principal(s) would tend to reverse this bias. We exploit privileged access to pre-audit financial statements in the setting of the English National Health Service (NHS) to investigate the impact of audit adjustments on the pre-audit financial statements of English NHS Foundation Trusts over the period 2010?2011 to 2014?2015. We find evidence that auditors act to reverse management bias in the case of Trusts with a pre-audit deficit, but find no evidence that this is the case for Trusts with a pre-audit surplus. In the case of Trusts in surplus, these findings are consistent with auditors? interests being aligned with management, rather than principals.","PeriodicalId":123337,"journal":{"name":"History of Accounting eJournal","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116184447","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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