Pub Date : 2022-03-30DOI: 10.2308/horizons-2020-105
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 financial reporting, fewer financial statement misstatements, shorter audit lags, and sometimes pay lower audit fees, compared to a matched sample of companies not in close proximity to these programs. These findings have implications for practitioners responsible for the staffing and quality of their internal audit functions, the Institute of Internal Auditors in its education collaboration initiatives, and higher learning institutions responsible for educating future audit practitioners. These findings also contribute to the academic debate on the value of internal audit and determinants of internal audit function quality.
{"title":"The Impact of Domain-Specific Internal Audit Education on Financial Reporting Quality and External Audit Efficiency","authors":"Christopher G. Calvin, Matthew Holt","doi":"10.2308/horizons-2020-105","DOIUrl":"https://doi.org/10.2308/horizons-2020-105","url":null,"abstract":"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 financial reporting, fewer financial statement misstatements, shorter audit lags, and sometimes pay lower audit fees, compared to a matched sample of companies not in close proximity to these programs. These findings have implications for practitioners responsible for the staffing and quality of their internal audit functions, the Institute of Internal Auditors in its education collaboration initiatives, and higher learning institutions responsible for educating future audit practitioners. These findings also contribute to the academic debate on the value of internal audit and determinants of internal audit function quality.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45228386","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-24DOI: 10.2308/horizons-2020-126
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 states where local public companies have better accounting quality are more likely to invest in stocks. Also, those households invest greater amounts of their wealth in the stock market. Furthermore, we present some evidence that accounting quality affects stock market participation through local press coverage. Additional cross-sectional tests show that the effect of accounting quality on stock market participation is more pronounced among less affluent and less educated households, consistent with prior findings that familiarity with and trust in the stock market are more important for those types of households to make stock investments.
{"title":"Accounting Quality and Household Stock Market Participation","authors":"Shawn X. Huang, Min Kim","doi":"10.2308/horizons-2020-126","DOIUrl":"https://doi.org/10.2308/horizons-2020-126","url":null,"abstract":"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 states where local public companies have better accounting quality are more likely to invest in stocks. Also, those households invest greater amounts of their wealth in the stock market. Furthermore, we present some evidence that accounting quality affects stock market participation through local press coverage. Additional cross-sectional tests show that the effect of accounting quality on stock market participation is more pronounced among less affluent and less educated households, consistent with prior findings that familiarity with and trust in the stock market are more important for those types of households to make stock investments.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43645720","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-23DOI: 10.2308/horizons-2021-074
P. Wedemeyer, S. 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 it as an independent board composed of distinguished public servants who were to review the firm’s policies and make visits to the firm’s offices around the world, and then render annual reports on their assessment of the quality of the firm’s work in carrying out its professional practice, in auditing, tax, and administrative services. The paper concludes with a discussion of some lessons learned from the PRB experience for today’s debate over the independent oversight of audit firms.
这是Arthur Andersen & Co. Public Review Board (PRB)从1974年到1983年的前9年的历史记录。这一时期与牛顿·n·米诺主席的任期相吻合。这篇论文借鉴了该公司和PRB公布的年度报告，以及对包括Minow在内的那个时期的负责人的采访。PRB是一个独特的实验，因为安达信将其建立为一个独立的董事会，由杰出的公务员组成，他们将审查公司的政策，并访问公司在世界各地的办事处，然后提交年度报告，评估公司在审计、税务和行政服务方面的专业实践的工作质量。本文最后讨论了从PRB的经验中吸取的一些教训，以供当今关于审计事务所独立监督的辩论之用。
{"title":"Organization and Development of Arthur Andersen & Co.’s Public Review Board - The Minow Years, 1974-1983","authors":"P. Wedemeyer, S. Zeff","doi":"10.2308/horizons-2021-074","DOIUrl":"https://doi.org/10.2308/horizons-2021-074","url":null,"abstract":"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 it as an independent board composed of distinguished public servants who were to review the firm’s policies and make visits to the firm’s offices around the world, and then render annual reports on their assessment of the quality of the firm’s work in carrying out its professional practice, in auditing, tax, and administrative services. The paper concludes with a discussion of some lessons learned from the PRB experience for today’s debate over the independent oversight of audit firms.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42767144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-22DOI: 10.2308/horizons-2021-042
Qiyuan Peng, Sirui Yin, Ruibin 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 their information environment is opaque, and iii) when they weigh more within the common owners’ portfolio. To address endogeneity concerns, we exploit financial institutions mergers as quasi-exogenous shocks to common ownership. Difference-in-differences tests confirm the positive association between common ownership and accounting comparability. We conclude that common owners are important capital market participants that create a demand for and have a significant impact on accounting comparability. To the extent that achieving higher comparability is an important goal in standard-setting, out study has implications for standard setters and regulators evaluating the determining factors of accounting comparability.
{"title":"Common Institutional Blockholders and Reporting Practices: Evidence from Accounting Comparability","authors":"Qiyuan Peng, Sirui Yin, Ruibin Zhang","doi":"10.2308/horizons-2021-042","DOIUrl":"https://doi.org/10.2308/horizons-2021-042","url":null,"abstract":"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 their information environment is opaque, and iii) when they weigh more within the common owners’ portfolio. To address endogeneity concerns, we exploit financial institutions mergers as quasi-exogenous shocks to common ownership. Difference-in-differences tests confirm the positive association between common ownership and accounting comparability. We conclude that common owners are important capital market participants that create a demand for and have a significant impact on accounting comparability. To the extent that achieving higher comparability is an important goal in standard-setting, out study has implications for standard setters and regulators evaluating the determining factors of accounting comparability.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47325942","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-11DOI: 10.2308/horizons-2020-150
A. Appleton, Andreas Barckow, Christine Botosan, Yasunobu Kawanishi, Atsushi Kogasaka (Deceased), A. Lennard, Linda Mezon-Hutter, Joy Sy, R. 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 a balanced discussion of the alternative perspectives to provide fodder for further consideration by the accounting community and to stimulate additional academic research relevant to these issues.
{"title":"PERSPECTIVES ON THE FINANCIAL REPORTING OF INTANGIBLES","authors":"A. Appleton, Andreas Barckow, Christine Botosan, Yasunobu Kawanishi, Atsushi Kogasaka (Deceased), A. Lennard, Linda Mezon-Hutter, Joy Sy, R. Villmann","doi":"10.2308/horizons-2020-150","DOIUrl":"https://doi.org/10.2308/horizons-2020-150","url":null,"abstract":"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 a balanced discussion of the alternative perspectives to provide fodder for further consideration by the accounting community and to stimulate additional academic research relevant to these issues.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47270222","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-02DOI: 10.2308/horizons-2020-083
L. Rosenthal, Bonnie Brown, J. Higgs, T. 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 the importance of preparing the most accurate return significantly lower than the paid professional groups, while they rated the goal of minimizing the cost of preparation significantly higher in importance. We draw upon the Unified Theory of Acceptance and Use of Technology model to examine variables that predict the mode of tax preparation assistance. Results suggest measures representing performance expectancy, effort expectancy, and social influence are significant in distinguishing taxpayers using tax software from those using a paid preparer.
{"title":"Tax Software versus Paid Preparers: Motivations and Predictors for the Mode of Tax Preparation Assistance","authors":"L. Rosenthal, Bonnie Brown, J. Higgs, T. Rupert","doi":"10.2308/horizons-2020-083","DOIUrl":"https://doi.org/10.2308/horizons-2020-083","url":null,"abstract":"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 the importance of preparing the most accurate return significantly lower than the paid professional groups, while they rated the goal of minimizing the cost of preparation significantly higher in importance. We draw upon the Unified Theory of Acceptance and Use of Technology model to examine variables that predict the mode of tax preparation assistance. Results suggest measures representing performance expectancy, effort expectancy, and social influence are significant in distinguishing taxpayers using tax software from those using a paid preparer.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41676251","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-03-01DOI: 10.2308/1558-7975-36.1.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/1558-7975-36.1.i","DOIUrl":"https://doi.org/10.2308/1558-7975-36.1.i","url":null,"abstract":"","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43784237","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-02-25DOI: 10.2308/horizons-2021-084
C. Zhang, H. 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 research methodology based on a mature RPA implementation in an accounting setting. We further corroborate it with interviews with subject matter experts and compare it with another case study of an early-stage RPA implementation. We identify five themes related to RPA adoption in accounting functions: workforce, IT governance, privacy and security, system sustainability, and the measurement of RPA success. We also present key takeaways that may support effective RPA adoption in accounting. Our study provides both academics and practitioners with insights about the effects of RPA implementation.
{"title":"Robotic Process Automation (RPA) Implementation Case Studies in Accounting: A Beginning to End Perspective","authors":"C. Zhang, H. Issa, Andrea M. Rozario, Jonas Sveistrup Soegaard","doi":"10.2308/horizons-2021-084","DOIUrl":"https://doi.org/10.2308/horizons-2021-084","url":null,"abstract":"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 research methodology based on a mature RPA implementation in an accounting setting. We further corroborate it with interviews with subject matter experts and compare it with another case study of an early-stage RPA implementation. We identify five themes related to RPA adoption in accounting functions: workforce, IT governance, privacy and security, system sustainability, and the measurement of RPA success. We also present key takeaways that may support effective RPA adoption in accounting. Our study provides both academics and practitioners with insights about the effects of RPA implementation.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48340687","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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 reflect increased operational complexity that pervades the firm and results in an increased likelihood of tax and non-tax restatements. High ETR firms, in contrast, appear to suffer from inadequate controls and expertise surrounding the reporting for income taxes. We do not find evidence that this extends outside the tax function to other types of restatements. All results hold after controlling for internal control weaknesses and other characteristics known to affect ETRs and the likelihood of restatements.
{"title":"The Nonlinear Relation between Effective Tax Rates and Tax-Related Restatements","authors":"Christine C Cheng, Karen M. Hennes, Pradeep Sapkota","doi":"10.2308/horizons-19-195","DOIUrl":"https://doi.org/10.2308/horizons-19-195","url":null,"abstract":"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 reflect increased operational complexity that pervades the firm and results in an increased likelihood of tax and non-tax restatements. High ETR firms, in contrast, appear to suffer from inadequate controls and expertise surrounding the reporting for income taxes. We do not find evidence that this extends outside the tax function to other types of restatements. All results hold after controlling for internal control weaknesses and other characteristics known to affect ETRs and the likelihood of restatements.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43067965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-02-16DOI: 10.2308/horizons-2020-070
S. Fung, Zheng Wang, Liandong Zhang, X. 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 when the lost analysts are more effective monitors. We further show that affected firms that switch to high-quality auditors receive more positive market reaction, experience smaller decrease in stock liquidity and smaller increase in cost of equity capital relative to other affected firms, suggesting that audit quality has real payoffs. These results collectively provide causal evidence supporting the agency incentive driven demand for high-quality external auditing.
{"title":"Exogenous Loss of Analyst Coverage and Choice of Audit Quality","authors":"S. Fung, Zheng Wang, Liandong Zhang, X. Zhu","doi":"10.2308/horizons-2020-070","DOIUrl":"https://doi.org/10.2308/horizons-2020-070","url":null,"abstract":"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 when the lost analysts are more effective monitors. We further show that affected firms that switch to high-quality auditors receive more positive market reaction, experience smaller decrease in stock liquidity and smaller increase in cost of equity capital relative to other affected firms, suggesting that audit quality has real payoffs. These results collectively provide causal evidence supporting the agency incentive driven demand for high-quality external auditing.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-02-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49228376","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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