This study provides some of the first empirical evidence of the characteristics of efficient MCS design for PHOs. This evidence has the potential to assist primary healthcare owners, managers and their advisors to better understand the relationship between ownership and MCS design and thereby improve the effectiveness and efficiency of delivery of primary care. 

King, R. and P. Clarkson. 2015. Management control system design, ownership, and performance in professional service organizations. Accounting, Organizations and Society 45: 24-39. 

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The study results are important to regulators, practitioners, and academics. The findings show that internal controls opinion shopping appears to occur among firms that have clean internal control opinions prior to a restatement. In addition, clients have the incentive to manipulate the audit process, via internal control opinion shopping, due to the increased focus and oversight on internal controls reporting. Finally, auditor dismissals that occur late in the fiscal period are more likely to be associated with internal control opinion shopping.   

Newton, N. J., J. S. Persellin, D. Wang, and M. S. Wilkins. 2016. Internal Control Opinion Shopping and Audit Market Competition. The Accounting Review 91 (2): 603–623.

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The authors use a unique data set to shed light on characteristics which lead to material weaknesses, specifically in tax-related accounts relative to other accounts. The data (obtained from several international accounting firms) allows the authors to determine which characteristics of tax-related internal control deficiencies are different from other deficiencies, prevent them from being remediated, and cause them to rise to the level of a material weakness. Results suggest that tax deficiencies, relative to other account-specific deficiencies, are less likely to be remediated, more severe, and more likely to cause a financial misstatement. Tax-related deficiencies are less likely to get remediated by year-end if discovered by the auditor, if the control was deficient in design, or if the control pertained to monitoring. This paper underscores the importance of auditor involvement in internal control reporting in taxes.

Graham, L. and J.C. Bedard. 2015. Internal Control Deficiencies in Tax Reporting: A Detailed View. Accounting Horizons 29 (4): 917-942.

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The study contributes by contending and showing that for fraudulent financial reporting, reporting intentions to different internal report recipients are influenced by a particular situational antecedent: unsuccessful social confrontation. The authors believe that the research and related findings will be useful for audit committees and other senior executives concerned with the timely reporting of fraud. Such groups not only are responsible for establishing internal reporting channels, but also are responsible for training and communicating with employees about what to do should they discover wrongdoing such as fraud. The evidence on the effects of social confrontation on reporting intentions for two different internal report recipients should be helpful in training and communicating with employees regarding what to do in response to discovering fraud.

Kaplan, S. E., K. R. Pope, and J. A. Samuels. 2010. The Effect of Social Confrontation on Individuals' Intentions to Internally Report Fraud. Behavioral Research in Accounting 22 (2): 51-67.

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The findings offer three important contributions to the existing literature. First, they indicate that MW reported in multiple consecutive years have a progressively larger and statistically significant negative impact on CE when firms that partially remediate are excluded from the sample. That is, the market notices that some firms are slow to remediate MW, whereas other firms take timely remediation steps to address MW. Second, the study shows that the number and specific types of MW are significant factors in understanding the relation between MW and CE. In fact, even if a firm does not remediate all MW in a given year, the market views favorably a reduction in the number of MW (i.e., partial remediation). Third, given the richness of the dataset, the current study helps to reconcile conflicting results in the prior literature on the effects of MW.

Gordon, L. A., and A. L. Wilford. 2012. An Analysis of Multiple Consecutive Years of Material Weaknesses in Internal Control. Accounting Review 87 (6): 2027-2060.

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