Advances in Accounting最新文献

To restore investor confidence and promote the integrity of financial accounting information provided to investors, following the passage of the Sarbanes-Oxley Act (SOX), the SEC adopted two new rules for public firms in early 2003, requiring the disclosure of audit committee financial expertise (ACFE) per SOX 407 and the reconciliation of non-GAAP financial measures to those most comparable in GAAP (Regulation G) per SOX 401(b). Using quarterly filing data in the post-SOX era from March 2003 to December 2016, this study examines the impact of these requirements, with a focus on the effect of ACFE on the main earnings manipulation tactics used to just meet or beat analyst expectations (JUSTMBE). Our study investigates the effects of overall ACFE and its components on three key earnings management tactics, namely, discretionary accruals, real activities management, and non-GAAP financial disclosures. We observe that firms with a higher level of ACFE, particularly accounting and finance expertise, exhibit a lower propensity to JUSTMBE. Furthermore, we posit that two upward earnings manipulations, accrual-based and real activities management, are significantly mitigated by ACFE through a complementary effect of its accounting and supervisory expertise components. However, we identify a clear strategic shift in which non-GAAP financial disclosures with unexpected exclusions become a popular alternative tactic for managers to JUSTMBE under the increasing presence of ACFE. This study provides empirical evidence with implications for regulators to consider more rigorous intervention and regulation on non-GAAP disclosures and to refine the requirement of audit committee financial experts with an emphasis on the complement of accounting and non-accounting financial expertise to effectively curtail earnings manipulation.

We examine the influence of religiosity on professional accountants' judgments towards global convergence of financial reporting using, as an example, the Islamic religiosity context of Bangladesh. Professional accountants' judgments, in relation to the global convergence of the International Financial Reporting Standards (IFRS), is measured using Gray's (1988) accounting values (professionalism vs. statutory control, uniformity vs. flexibility, conservatism vs. optimism and secrecy vs. transparency), with Islamic religiosity measured using the Sahin–Francis Scale of Attitude towards Islam. We find that professional accountants in Bangladesh who have higher levels of Islamic religiosity values are supportive of statutory control, conservatism, uniformity, and secrecy. These findings suggest that professional accountants in Bangladesh are less likely to be supportive of principles-based financial reporting standards such as IFRS. The findings have implications for global accounting standard setters, international accounting firms, and multinational companies, particularly in Islamic countries. Our study findings may be useful to regulators in Bangladesh and other Islamic countries in improving the quality of the convergence of IFRS.

The primary objective of this research is to detect accounting fraud in Chinese family firms through the utilization of imbalanced ensemble learning algorithms. It serves as the first endeavor to predict fraud in family firms using machine learning algorithms, thus addressing the gap in machine-learning modeling for family business research. The findings of this study demonstrate that the ensemble learning models exhibit superior effectiveness in identifying accounting fraud compared to the logistic regression approach. Moreover, the imbalanced ensemble learning classifiers outperform the conventional models. Significantly, among all the studied fraud classifiers, the CUSBoost classifier consistently attains the best overall performance. This research contributes to the field of accounting fraud detection in family firms by shifting the focus from conventional causal inference methods (such as regression) to machine-learning-based predictive techniques. Additionally, it extends existing literature on accounting fraud detection by emphasizing the issue of data imbalance in fraud datasets and demonstrating the superiority of imbalanced machine learning algorithms over conventional approaches in detecting accounting fraud.

This paper investigates whether a relationship exists between the tone of narrative disclosures and engagement in earnings management activities. Using FTSE all-share nonfinancial firms, our estimates show a significant association between the tone of narrative disclosure (measured by the percentage of positive words, negative words, and net tone) and the prevalence of earnings management. The results also suggest that manipulating firms, which represent extreme cases of earnings management, are more likely to use less negative tone to conceal their fraudulent practices. In contrast, non-manipulating firms tend to use more positive tone to mask their involvement in managing earnings. Additionally, the paper examines the market reaction to both earnings management and the tone of narrative disclosure. The findings reveal that earnings management and net tone are positively associated with abnormal market returns for non-manipulating firms, but have no significant association for manipulating firms. Overall, the paper highlights the important role of the tone of narrative disclosures in providing clarity to the numbers presented in annual reports.

We investigate whether industry-level product market competition and firm-level market leadership affect firms' tax aggressiveness. Studying competition from both current market participants and potential entrants, and using a market share-based measure of market leadership, we find that firms facing higher competition from current market participants engage in more tax aggressiveness. We further find that market-following firms — rather than market‑leading firms — engage in relatively more tax aggressiveness within these higher competition settings. Our results contrast with most political and regulatory anecdotes that target market‑leading firms for aggressive tax behaviors, and add to the ongoing policy debates on tax incidence. Our main findings and additional tests are consistent with the view that market‑leading firms in imperfectively competitive product markets are able to pass on tax costs to customers, while market-following firms in crowded industries are pressured to engage in tax aggressiveness because they cannot pass on tax costs.

On April 28, 2003, ten of the largest investment banks reached an agreement with the Securities and Exchange Commission and other regulatory bodies regarding alleged misconduct of security analysts. This agreement, called the Global Research Analyst Settlement, allocated $460 million to source independent analyst research. Unlike other forms of analyst research, this research was not financed through investment banking or trading commissions and was theoretically “unbiased research”. We compare independent research funded by the Global Settlement to research provided by the same firms that was not funded by the Global Settlement. Research funded by the Global Settlement appears to be of lower quality than non-funded research produced by the same set of firms, suggesting that unbiased research does not necessarily generate higher quality research. More specifically, we find that quality declined in the later years of the Global Settlement period when there was no expectation of future funding for this research, commonly referred to as the horizon effect.

Literature has documented income classification shifting to increase core earnings. There has been little research on whether firms reduce income increasing classification shifting or classification shift to reduce core earnings - classify non-core items as core expenses. Also, research on classification shifting under non-market incentives is limited. We fill these gaps by examining the shifting behavior of oil and gas firms in response to the BP oil spill. The oil spill was an unexpected event that led to regulations and restrictions, as well as adverse publicity. This could have encouraged petroleum firms to suppress core earnings. We show that after the oil spill, (1) the likelihood of petroleum firms' classification shifting to inflate core earnings declines relative to other firms and (2) the likelihood of petroleum companies' shifting to report lower core earnings increases relative to other firms.

Understanding the behavior of chief executive officers (CEOs) enables investors, regulators, and others to better appreciate CEOs' corporate decisions. Among the many aspects that determine CEO behavior are early-life experiences, we examine whether a CEO's exposure to two important events—fatal natural disasters and violent crime—during the individual's formative years is associated with the firm's financial reporting outcomes. We argue that a CEO with early life exposure to fatal natural disasters and violent crime may be over-confident when dealing with risk and is more likely to make riskier decisions. However, this relationship becomes negative when the exposure reaches a certain level, consistent with the CEO becoming risk-averse when making business decisions (Bernile, Bhagwat, & Rau, 2017). Consistently, we report evidence of a U-shaped association between financial reporting quality and both types of early-life exposures. In addition, we find that the link between a CEO's early-life exposures and financial reporting quality is more pronounced in firms with greater incentives to manage earnings.