Auditing Section Research Summaries Space

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  • Jennifer M Mueller-Phillips
    The Impact of Authority on Reporting Behavior,...
    research summary posted July 28, 2015 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.04 Management Integrity 
    Title:
    The Impact of Authority on Reporting Behavior, Rationalization and Affect.
    Practical Implications:

    These results increase the understanding of how an authority figure’s directions to misreport impact the rationalizations and resulting reporting decisions. Situational inducement can be a powerful force on behavior and affect. The authors show that the situational inducement of being told to misreport enables individuals to mitigate the emotional cost of misreporting. The authors document the apparent ease with which misreporting individuals rationalize misreporting behavior in the presence of authority. This result can also be prevented by a good culture and leadership.

    Citation:

    Mayhew, B. W., & Murphy, P. R. 2014. The Impact of Authority on Reporting Behavior, Rationalization and Affect. Contemporary Accounting Research 31 (2): 420-443.

  • The Auditing Section
    The Impact of Management Integrity on Audit Planning and...
    research summary posted April 13, 2012 by The Auditing Section, tagged 02.02 Client Risk Assessment, 02.03 Management Integrity Assessments, 06.04 Management Integrity, 14.01 Earnings Management 
    Title:
    The Impact of Management Integrity on Audit Planning and Evidence
    Practical Implications:

    The results of this study are important because, while severe cases of low integrity may be weeded out during client acceptance, auditor firms tend to retain clients with a wide spectrum of integrity levels that must be managed throughout the audit process. Thus evidence regarding how the integrity of management influences auditors (1) assessment of risk, (2) planning of audit procedures, and (3) identification of misstatements may be useful for developing training materials or best practices for approaching audits on the lower end of the integrity spectrum.

    Citation:

    Kizirian, T.G., B.W. Mayhew, and L.D. Sneathen, Jr. 2005. The impact of management integrity on audit planning and evidence. Auditing: A Journal of Practice & Theory 24 (2): 49-67.

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  • Jennifer M Mueller-Phillips
    The Ties that Bind: The Decision to Co-Offend in Fraud.
    research summary posted July 28, 2015 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.04 Management Integrity 
    Title:
    The Ties that Bind: The Decision to Co-Offend in Fraud.
    Practical Implications:

    The phenomenon of co-offending is an important key to understanding fraudulent behavior. Understanding co-offending is best approached through a study of social ties. The reasons for co-offending vary according to the type of bond that exists between the co-offenders. Internal controls, such as job rotation policies, mandatory holidays with role replacement, forensic audits and surprise audits, that are specifically geared toward unraveling organizational cliques and subcultures help uncover fraudulent activities within a firm. This research suggests that the fraud triangle presents an overly parsimonious explanation of offending, and should incorporate materialistic, cultural, and affective considerations.

    Citation:

    Free, C., & Murphy, P. R. 2015. The Ties that Bind: The Decision to Co-Offend in Fraud. Contemporary Accounting Research 32 (1): 18-54.

  • Jennifer M Mueller-Phillips
    Tone Management.
    research summary posted July 16, 2015 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.04 Management Integrity, 06.06 Earnings Management 
    Title:
    Tone Management.
    Practical Implications:

    The evidence indicates that tone manipulation succeeds in misleading investors, and that this effect is incremental to the effect of accruals management. An abnormally positive tone incites an overly optimistic immediate stock price response to the earnings announcement and a subsequent return reversal. The evidence indicates that abnormal positive tone contains negative information about future firm fundamentals, that firms tend to engage in tone management particularly when incentives to manipulate investor perceptions are high, and that investors are misinformed by tone management.

    Citation:

    Huang, X., Teoh, S. H., & Zhang, Y. 2014. Tone Management. Accounting Review 89 (3): 1083-1113.

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