Auditing Section Research Summaries Space

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  • Jennifer M Mueller-Phillips
    A Post-SOX Examination of Factors Associated with the Size...
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.05 Impact of SOX, 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 13.0 Governance, 13.01 Board/Audit Committee Composition 
    Title:
    A Post-SOX Examination of Factors Associated with the Size of Internal Audit Functions
    Practical Implications:

    This study provides insights that should be useful for CAEs and boards of directors (or audit committees) in discussions related to (1) internal audit philosophy regarding its potential contributions to an organization, (2) alternative staffing models, (3) resource allocation, and (4) embracement of audit technology. The study could also help guide external auditors’ evaluation of client internal audit functions. The authors find that the mission of internal audit functions differs from organization to organization. Additionally, the results suggest that internal audit functions used for leadership development purposes (i.e., a rotational staffing strategy) are larger, presumably because the staff have less experience and staff are rotating in and out of the department more frequently. Finally, these findings help illustrate the importance of internal audit proving that it is ‘‘value added’’ to the organization. Management and audit committees are often looking for more than financial statement compliance, and those internal audit functions that have responded to these greater needs are rewarded with more resources, likely because they are perceived to deliver more value.

    For more information on this study, please contact Karla Johnstone.
     

    Citation:

    Anderson, U. L., M. H. Christ, K. M. Johnstone, and L. E. Rittenberg. 2012. A Post-SOX Examination of Factors Associated with the Size of Internal Audit Functions. Accounting Horizons 26(2): 167-191

  • Jennifer M Mueller-Phillips
    An Empirical Analysis of the Effects of Accounting Expertise...
    research summary posted December 1, 2014 by Jennifer M Mueller-Phillips, tagged 13.0 Governance, 13.01 Board/Audit Committee Composition, 13.02 Board/Financial Experts 
    Title:
    An Empirical Analysis of the Effects of Accounting Expertise in Audit Committees on Non-GAAP Earnings Exclusions
    Practical Implications:

    Given the Public Company Accounting Oversight Board’s (PCAOB) current proposal for auditors to provide assurance on non-GAAP information or earnings releases, the results of this study are important for regulators and boards of directors in their evaluation of the desirable attributes for audit committee financial experts. This study suggests that the audit committee financial expert designation is likely best held by a director who brings to the table more than just supervisory experience over the financial reporting function; lessons gained from actually performing financial accounting functions seem to enhance the audit committee’s ability to monitor management’s non-GAAP financial measures and rationale for excluding charges as infrequent, unusual or nonrecurring.

    For more information on this study, please contact Xu (Frank) Wang.

    Citation:

    Seetharaman, A., X. Wang, and S. Zhang. 2014. An Empirical Analysis of the Effects of Accounting Expertise in Audit Committees on Non-GAAP Earnings Exclusions. Accounting Horizons 28(1): 17-37.

  • Jennifer M Mueller-Phillips
    Associations between Internal and External Corporate...
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.05 Impact of SOX, 12.0 Accountants’ Reports and Reporting, 12.03 Restatements, 13.0 Governance 
    Title:
    Associations between Internal and External Corporate Governance Characteristics: Implications for Investigating Financial Accounting Restatements
    Practical Implications:

    Prior studies’ conflicting results regarding the association between corporate governance measures and restatements are explained (at least partially) by the time period in which the relationship is examined. The relationship is different before and after Sarbanes Oxley (2002). However, this paper cannot determine whether the change in relationship was caused by Sarbanes Oxley or whether it happened for another reason.

    For more information on this study, please contact William R. Baber.
     

    Citation:

    Baber, W. R., L. Liang, and Z. Zhu. 2012. Associations between Internal and External Corporate Governance Characteristics: Implications for Investigating Financial Accounting Restatements. Accounting Horizons 26 (2): 219-237.

  • Jennifer M Mueller-Phillips
    Assuring a New Market: The Interplay between Country-Level...
    research summary posted August 31, 2016 by Jennifer M Mueller-Phillips, tagged 13.0 Governance 
    Title:
    Assuring a New Market: The Interplay between Country-Level and Company-Level Factors on the Demand for Greenhouse Gas (GHG) Information Assurance and the Choice of Assurance Provider
    Practical Implications:

     The results from this study highlight the complexity of assurance-related decisions and the interplay between macro-level and micro-level institutional factors. The results also reveal the diversified nature of this particular emerging assurance market, which should prove to be a rich source of future research.

    Citation:

     Zhou, S., R. Simnett, and W. J. Green. 2016. Assuring a New Market: the Interplay between Country-Level and Company-Level Factors on the Demand for Greenhouse Gas (GHG) Information Assurance and the Choice of Assurance Provider. Auditing: A Journal of Practice and Theory. 35 (3): 141-168.

  • Jennifer M Mueller-Phillips
    Attracting Applicants for In-House and Outsourced Internal...
    research summary posted April 18, 2016 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale, 08.0 Auditing Procedures – Nature, Timing and Extent, 08.11 Reliance on Internal Auditors, 13.0 Governance, 13.07 Internal auditor role and involvement in controls and reporting 
    Title:
    Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors.
    Practical Implications:

    This study offers insights into why internal auditing is experiencing a shortage of qualified job candidates and offers a potential solution to the problem. The authors find that external auditors have negative perceptions about internal auditing, and these negative perceptions are associated with a (1) decreased desire to apply for internal auditing positions, (2) lower likelihood of recommending an in-house internal auditing career to high-performing students, and (3) higher likelihood of recommending an in-house internal auditing career to mediocre students. Internal auditors can try solving this problem by improving perceptions about internal auditing via a media campaign that raises awareness about the true internal audit career path.

    Citation:

    Bartlett, G.D., J. Kremin, K.K. Saunders, and D.A. Wood. 2016. Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors. Accounting Horizons 30 (1): 143-156.

  • Jennifer M Mueller-Phillips
    Audit Committee Compensation, Fairness, and the Resolution...
    research summary posted February 16, 2015 by Jennifer M Mueller-Phillips, tagged 13.0 Governance, 13.04 Board/Audit Committee Compensation 
    Title:
    Audit Committee Compensation, Fairness, and the Resolution of Accounting Disagreements
    Practical Implications:

    When selecting members of the audit committee, our results suggest the need for the nominating committee to pursue individuals who place great emphasis on issues of fairness to shareholders. Beyond such initial screening, one way to improve the quality of the financial reporting process could be to educate audit committee members to explicitly consider outcome fairness to shareholders of the financial statement presentation, especially in matters that involve ambiguous accounting issues. This education process should help to emphasize that audit committee members need to consider stakeholders, such as current and prospective shareholders, above the potentially parochial views of management. Moreover, regulatory bodies may consider emphasizing the nature of the monitoring role of the board and how examining decisions through the lens of fairness may enhance the ability of the board to fulfill its monitoring role in a more effective manner.

    For more information on this study, please contact Dana Hermanson.

    Citation:

    Bierstaker, J., J. Cohen, D. Hermanson, and T. DeZoort. 2012. Audit Committee Compensation, Fairness, and the Resolution of Accounting Disagreements. Auditing: A Journal of Practice & Theory 31 (2): 131-150.

  • Jennifer M Mueller-Phillips
    Audit Committee Director-Auditor Interlocking and...
    research summary posted March 2, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.05 Impact of SOX, 13.0 Governance, 13.02 Board/Financial Experts, 14.0 Corporate Matters, 14.11 Audit Committee Effectiveness 
    Title:
    Audit Committee Director-Auditor Interlocking and Perceptions of Earnings Quality
    Practical Implications:

    This study is important to provide an insight into the personal relationships and familiarity between audit committee directors and external auditors in terms of auditor independence. Furthermore, our examination of AC director-auditor interlocking provides a more complete basis for understanding the effectiveness of corporate governance in guarding earnings quality. The results not only support the view that AC director-auditor interlocking positively affects investors’ perception of earnings quality, but also support the regulatory requirement that audit committees include at least one financial expert.

    For more information on this study, please contact Jeng-Fang Chen.

    Citation:

    Chen, J.-F., Y.-Y. Chou, R.-R. Duh, and Y.-C. Lin. 2014. Audit committee director-auditor interlocking and perceptions of earnings quality. Auditing: A Journal of Practice and Theory 33 (4): 41-70

  • The Auditing Section
    Audit Committee Financial Expertise, Litigation Risk, and...
    research summary posted April 23, 2012 by The Auditing Section, tagged 13.0 Governance, 13.01 Board/Audit Committee Composition, 13.02 Board/Financial Experts 
    Title:
    Audit Committee Financial Expertise, Litigation Risk, and Corporate Governance
    Practical Implications:

    Based on the positive relation between litigation risk and the likelihood of appointing an accounting financial expert, this study suggests that firms with a demand for accounting financial experts are able to obtain accounting financial experts for their audit committees.  However, this relation is only present in the presence of good governance.  The authors suggest that this follows because either (1) only firms with good corporate governance seek to appoint accounting financial experts or (2) only firms with good corporate governance can attract accounting financial experts.

    Citation:

    Krishnan, J., and J.E. Lee. 2009. Audit Committee Financial Expertise, Litigation Risk, and Corporate Governance. Auditing: A Journal of Practice and Theory 28 (May): 241-261.

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  • Jennifer M Mueller-Phillips
    Audit committee stock options and financial reporting...
    research summary posted July 30, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.05 Impact of SOX, 13.0 Governance, 13.04 Board/Audit Committee Compensation 
    Title:
    Audit committee stock options and financial reporting quality after the Sarbanes-Oxley Act of 2002.
    Practical Implications:

    This study contributes to existing literature by re-examining the relationship between audit committee compensation and financial reporting quality. The findings indicate the continuance of a negative relationship between audit committee members’ stock-option compensation and financial reporting quality in the post-SOX era. These results are relevant to regulators, compensation committees, and auditors because they imply that shifting audit committee director compensation away from stock options has the potential to improve financial reporting quality.

    Citation:

    Campbell, J. L., J. Hansen, C. A. Simon, and J. L. Smith. 2015. Audit Committee Stock Options and Financial Reporting Quality after the Sarbanes-Oxley Act of 2002. AUDITING: A Journal of Practice & Theory 34 (2):91-120.

  • Jennifer M Mueller-Phillips
    Auditing Related Party Transactions: A Literature Overview...
    research summary posted March 31, 2016 by Jennifer M Mueller-Phillips, tagged 06.0 Risk and Risk Management, Including Fraud Risk, 06.01 Fraud Risk Assessment, 13.0 Governance 
    Title:
    Auditing Related Party Transactions: A Literature Overview and Research Synthesis.
    Practical Implications:

    In this paper, the authors link academic research and other pertinent literature to issues raised in the PCAOB briefing paper on auditing related party transactions. Overall, the authors believe that the findings in academic research and the significance of related party transactions in recent prominent fraud cases are consistent with the PCAOB’s reconsideration of auditing of related party transactions.

    Citation:

    Gordon, E. A., E. Henry, T. J. Louwers, and B. J. Reed. 2007. Auditing Related Party Transactions: A Literature Overview and Research Synthesis. Accounting Horizons 21 (1): 81-102.

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