The results of this study provide insights into the rise of COSO’s ERM framework. More broadly, it highlights key features that enabled the ERM framework to successfully diffuse internationally.
Practitioners looking to “popularize” an idea or new business tool in their organization might benefit by considering a wide variety of activities to (1) disrupt the use of existing organizational practices; (2) create (or adopt) a tool with characteristics that are more likely to pique organizational members’ interest and encourage their actual use of the tool; and (3) maintain and provide guidance to address problem areas that might affect adoption. The use of groups that span multiple functional domains – either within an organization or beyond an organization’s boundaries – might also be strategically used to further the creation, adoption and implementation of ideas and business tools in an organization.
For more information on this study, please contact Christie Hayne.
Hayne, C. and C. Free. 2014. Hybridized professional groups and institutional work: COSO and the rise of enterprise risk management. Accounting, Organizations and Society 39 (5): 309-330.
Prior research suggests that the length of auditor-client relationship affects audit quality, and, therefore, the integrity and information risk associated with a clients’ financial reporting. This study attempts to examine the effects of audit engagement partner tenure and rotation on investors’ perceptions. The results of this study raise important questions for future research. It is not known to what extent investors or analysts are aware of the audit partner’s identity or pay attention to audit partner tenure. If investors or analysts do not consider partner tenure, future research may identify omitted variables that have the same nonlinear relationship with the ex ante cost of capital that we observe for non-Big 4 audit partner tenure.
Azizkhani, M., G. S. Monroe, and G. Shailer. 2013. Audit Partner Tenure and Cost of Equity Capital. Auditing 32 (1).
The results of this study have important implications for the debate on the globalization of accounting standards and for regulators that are considering a transition towards IFRS. Although the effects of IFRS adoption are not homogenous for all firms, the adoption of one set of accounting standards is likely to generate both information and comparability effects and improve the quality of information intermediation in capital markets.
For more information on this study, please contact Joanne Horton.
Horton, J., G. Serafeim, and I. Serafeim. 2013. Does Mandatory IFRS Adoption Improve the Information Environment? Contemporary Accounting Research 30 (1).
At its core, the theory proposed by the authors assumes that auditors are economic agents who provide a valuable service and can be expected to behave rationally to maximize their profits. Strategic behaviors such as under-auditing, over-auditing, or overbilling would be unobservable by an auditee in many instances. The possibility of such behaviors has important implications for the level of assurance over financial reports and can potentially affect the efficient allocation of capital resources. One of the goals of this study was to analyze how the credence aspect of audits could influence important policy decisions. Regulation may play a powerful role in mitigating the credence nature of auditing, e.g., PCAOB inspections. However, regulation can be a double-edged sword if it increases the incentive or opportunity for auditors to behave strategically. Therefore, auditors can take the theories and models presented in this study to evaluate their firms for potential profit maximizing biases that may negatively impact audit quality and efficiency. Policy makers could also use these theories and models to evaluate how new auditing policies might influence auditors’ incentives and behaviors.
For more information on this study, please contact W. Robert Knechel.
Causholli, M., and W. R. Knechel. 2012. An Examination of the Credence Attributes of an Audit. Accounting Horizons 26(4): 631-656.
This study provides an analysis of the effect of PCAOB Auditing Standard No. 5 (AS5) on internal control audit efficiency. The authors interpret their results as indicating that AS5 improved internal control audit efficiency by reducing audit fees without harming audit quality. The results of this study provide insight into the consequences of PCAOB standard setting, which is of interest to standard setters and businesses subject to their rules.
For more information on this study, please contact Dechun Wang.
Wang, D. and J. Zhou. 2012. The Impact of PCAOB Auditing Standard No. 5 on Audit Fees and Audit Quality. Accounting Horizons 26 (3): 493-511.
This paper provides insight into the effect of the global financial crisis on auditors and the relationships between large international accounting firms, regulators, and standard setters. The paper summarizes a variety of reports and policy proposals related to the global financial crisis, including the number of times auditors are mentioned in each of the reports. The paper discusses issues related to bank audits, including discussion of fair value issues and going concern reports.
Humphrey, C., A. Loft and M. Woods. 2009. The Global Audit Profession and the International Financial Architecture: Understanding Regulatory Relationships at a Time of Financial Crisis. Accounting, Organizations and Society 34 (6-7): 810-825.
This study provides insight into the way the auditing market has evolved in Russia and how modern-day audits differ from Soviet-era inspections. The author also focus on what services (i.e., consulting, tax) Russian businesses feel their auditors should provide, and how prestige is gained in the Russian audit markets. The results of this study should be of interest to accounting firms considering either initial entry into Russia or expanding current services in Russia.
Mennicken, A. 2010. From Inspection to Auditing: Audit and Markets as Linked Ecologies. Accounting, Organizations and Society 35 (3): 334-359.