SFAS No. 2: Auditor evaluations and input to the home office

This study examines auditors representing their local offices in their evaluations of SFAS No. 2, Accounting for Research and Development Costs, and their decision whether or not to communicate these evaluations to the home office. Preliminary interviews with four local office representatives (LORs) indicated that LOR evaluations are related to three criteria: usefulness, theory and implementation cost. The interviews further suggested that the importance of the cost criterion depends upon the extent to which the local office's clients are affected by SFAS No. 2 as well as the LOR's rank in the firm. Finally, it was also suggested that a LOR's decision to provide input to the home office is related to the magnitude of the perceived costs associated with SFAS No. 2, the extent to which the local office's clients are affected by the standard and the LOR's rank in the firm. The importance of these factors is supported by modeling responses to a field survey which asked LORs, who represent local “Big 8” offices throughout the United States, to evaluate SFAS No. 2, and to indicate whether or not they provided input to the home office on this pronouncement. Areas for future research are also discussed.     

Financial reporting consequences of natural disasters: Evidence from the impact of resource constraints at audit offices on non-affected clients

Disaster-affected clients demand significant additional effort from their audit office, and hence strain the audit office’s resources available to other non-disaster-affected clients. We consider audit offices with disaster-affected clients to be strained offices and find that, compared with clients audited by non-strained audit offices, non-disaster-affected clients audited by strained audit offices are more likely to have their financial statements restated. This result suggests the financial reporting quality of companies not directly exposed to disasters could also be negatively affected by the disasters, due to their auditors’ strained-resource issue. We further find such a negative effect is more pronounced when the degree of resource constraints is greater and when the audit office lacks client experience or industry expertise. We offer novel evidence of financial reporting consequences of natural disasters, focusing on the externality of disasters on companies not directly affected by disasters. The findings have important implications for regulators in making disaster-related policies, for auditors in managing their client portfolios, and for companies in making auditor choice decisions.     

创建"服务型机关"——高校机关作风建设的问题和对策

创建"服务型机关"主要是以邓小平理论和"三个代表"重要思想为指导,树立和落实科学发展观.以转变观念为前提,增强服务意识;以提高素质为基础,提高服务能力;以提高效率为主线,提高服务质量;以争创先进为动力,创新服务载体;以建章立制为保证,强化服务效果,将高校机关建设成为基层服务、为教学科研服务、为师生员工服务的"服务型机关".     

Office Building Capitalization Rates: The Case of Downtown Chicago

This paper is an empirical study of the capitalization rates for 132 office building sales in downtown Chicago from 1996 to 2007. The capitalization rate is hypothesized to be a function of the classic capital asset pricing model variable and variables intended to capture the expectation that the real market value of the building will change. The results show that the capitalization rate for office buildings incorporates a very low value for “beta.” A lower capitalization rate was associated with a smaller risk-free rate, a lower borrowing rate, class A buildings, newer buildings, buildings that had been renovated, a reduction in the vacancy rate in the downtown Chicago office market, and an increase in employment in the financial sector of the metropolitan area.     

Diversification by the audit offices in the US and its impact on audit quality

Audit offices in the US exhibit a wide variation in the number of industries they service. Strategic management theory suggests that diversification can affect the quality of output, depending on the nature and circumstances of diversification. This paper examines the effect of diversification at the audit office level on audit quality. Five proxies of audit quality are examined, mainly, absolute discretionary accruals, propensity to meet-or-beat earnings expectations by a cent, propensity to restate financial statements, propensity to receive a comment letter after an SEC review and propensity to issue a going concern opinion. Results suggest that diversification has detrimental effects on audit quality. On the other hand, when the diversification is part of the audit firm level strategy, the detrimental effects on audit quality are dampened. Moreover, when the diversification at the office level is part of a revenue expansion strategy, the audit quality is adversely affected. However, there is no detrimental effect on the audit quality when revenue expansion is not the objective. Also, diversification across dissimilar industries leads to more adverse effect on audit quality than diversification to similar industries. Results also suggest that when the audit office is located in a market with more (less) diversified client base, the adverse effects of diversification on audit quality are weaker (stronger). Finally, the offices of big-4 audit firms handle diversification better with less adverse effect on audit quality. The findings are important since they identify additional factors that explain audit quality at the audit office level.     

Accounting misstatements following lawsuits against auditors

This study investigates whether an auditor's experience of litigation in the recent past affects subsequent financial reporting quality. At the audit firm level, we find accounting misstatements occur significantly less (more) often after audit firms are sued (not sued). At the audit office level, the negative association between past litigation and future misstatements is stronger for offices who were directly implicated in the litigation than for the non-accused offices of sued audit firms. Therefore, the litigation experiences of both audit firms and audit offices are incrementally significant predictors of future financial reporting quality.     

The Cost Structure of the Consumer Finance Industry

This paper estimates the cost function of the consumer finance company industry to explore the questions of existence of scale economies and elasticity of costs by loan size. Using a more appropriate functional form and much newer data than in earlier studies, this study confirms their general conclusion that economies of scale in the industry are limited at the firm level but exist at the office level. Scale economies are found only at smaller offices, however; and they become exhausted as office size increases. Elasticity of operating costs with respect to loan size is shown to be well less than unity.     

CPAs and Big 4 office audit quality

Both accounting firms and regulators recognize the importance of human capital in the audit function, yet we know little about whether and how the level of professionally qualified human capital varies across offices of an audit firm and whether it is associated with audit quality. In this paper, we examine the association between office professionally qualified human capital and audit quality. Using hand-collected data on Big 4 audit firm office CPA levels from 30 U.S. cities, we find that offices with relatively more professionally qualified human capital deliver higher quality audits, with this benefit being more pronounced for audits performed during busy season than for non-busy season audits. The results underscore the importance of the availability of professionally qualified human capital in an audit office to the office’s audit quality. Our finding of CPA levels being an office-level audit quality indicator will potentially help the PCAOB in their ongoing Audit Quality Indicator (AQI) project, whose goal is to assist audit firms, clients, and investors in measuring audit quality. Furthermore, the results lend credibility toward the CPA designation, which helps justify the AICPA’s, NASBA’s, and state Accountancy Boards’ regulatory roles of admitting and licensing qualified candidates.     

The Effect of Client Industry Agglomerations on Auditor Industry Specialization

Prior research on auditor industry specialization documents fee premiums for local audit offices that are industry specialists. This research assumes that the effects of specialization are uniform across markets. We examine industry specialization based on the economic theory of industry agglomeration (geographic areas with high industry concentration). Agglomeration economies can facilitate access to knowledge for auditors serving a specific industry in those locations. We find that industry specialists in agglomerations earn a fee premium in excess of specialists in other markets. We find that nonspecialist offices in agglomerations also earn fee premiums in that industry when compared to nonspecialists in other markets even when controlling for these groups’ absolute share of the national market. We also address whether or not this expertise can be shared among offices in an agglomeration specialist's firm. We find that audit offices that have easy connections to a within-firm office in an agglomerated market can earn a fee premium relative to more distant offices, suggesting a benefit from knowledge transfer. This fee premium accrues to offices that would not be considered a specialist using traditional market share measures in a given industry. These findings indicate that the benefit of industry specialization depends on more than local market share.     

Fiscal-audit separation and government disclosure quality

We show that the separation of the fiscal and audit offices of China’s province-level governments leads to high fiscal disclosure quality, an effect that is more pronounced when the political rank of the official in charge of auditing is higher than that of the official in charge of fiscal matters. Dynamically, disclosure quality decreases when fiscal office and audit office go from being separated to being integrated and improves when they go from being integrated to being separated. Finally, fiscal disclosure quality reduces the cost of debt and improves credit ratings of municipal investment and development bonds. We demonstrate an aspect of China’s governance that, even without adequate monitoring from the oppositions or the media, local governments can improve efficiency via horizontal separations of fiscal and audit offices.     

2010年后代表处仍是外资进入中国所青睐的商业形式吗?(英文)

自2010年起,中国政府部门陆续出台了一系列关于外国企业常驻代表机构(简称为"代表处")的规定,使得代表处在合规性与税收等方面受到了更加严格的监管。本文旨在通过对代表处有关法规出台前后的法律规制环境的介绍与比较,分析了在上述法规实施后,代表处是否仍然是外资进入中国的一种有效的、便捷的商业形式。虽然,代表处仍具有其它外商投资商业形式(如外商投资企业)所不具备的优势,如无资金要求、设立流程相对简单等,但日趋严格的监管、大幅提高的罚款金额、提升的合规要求以及增加的税负在一定程度上降低了代表处的可利用性和受欢迎程度。     

Audit office size,audit quality and audit pricing: evidence from small- and medium-sized enterprises

Using Swedish data, we investigate how audit quality and audit pricing vary with audit firm and office size. In contrast to prior studies, we use disciplinary sanctions issued against auditors not meeting the quality requirement as the measure of audit quality. We find no significant differences in the likelihood of sanctions between Big 4 audit firms and the fifth and sixth largest audit firms in Sweden (Grant Thornton and BDO). We refer to these collectively as ‘Top 6’. However, we find that the probabilities of warnings or exclusions from the profession are much higher for non-Top 6 auditors in Sweden than for Top 6 auditors. Furthermore, we find a strong negative association between the likelihood of sanctions and audit office size for non-Top 6 auditors. This association is insignificant for Top 6 audit firms. Audit fees follow a similar pattern and indicate that larger audit firms and offices put in more effort or have greater expertise. These results suggest that audit quality is differentiated in the private segment market. However, contrary to prior studies, our results suggest that the important dimensions are Top 6 versus non-Top 6 and the office size of non-Top 6 audit firms.     

Does the market dole out collective punishment? An empirical analysis of industry,geography, and Arthur Andersen’s reputation

Arthur Andersen’s reputation was tarnished following news that its Houston office had shredded documents related to the auditing of energy giant Enron. Earlier studies documented widespread spillover of the reputation effect, suggesting a strong commonality in Big 5 audit practices. We examine whether the market is more discriminating in its assessments. We focus on the roles industry specialization of auditors and the geography of clients’ audit offices play in accounting for the contagion. Our results are supportive of investors who differentiate audit practices by industry and who account for the location of the specific office where the audit work is done. We find that losses suffered by energy firms or firms located close to Houston are equivalent to approximately 90% of the aggregate abnormal losses suffered by Big 5 clients. Our evidence suggests the possibility of more localized impact of accounting scandals and supports accounting regulations targeted at individual industries.     

The Evolution of Office Building Research

Office building development has had a relatively short history. However, since the 1880s, we have seen tremendous growth in the number and size of office buildings and a significant change in the location of these buildings. Early research in this area centered on technological changes and innovation in construction. As the market matured, researchers began to explore other areas of interest. This article provides a brief history of office building development in the United States. It then identifies, categorizes, and appraises the major studies in this area. It concludes with discussion of topics for future research.     

The avenue effect,landmark externalities,and cubic transformation: Manhattan office valuation

A functional form for the valuation of office buildings is a third-order function that replicates the constrained cost function in which one of the inputs, land, is fixed. The third-order transformation improves a hedonic regression pricing model and reduces the autocorrelation. The presence of neighborhood landmarks, selected avenue address, and building size influence the office building value. The data set includes 103 midtown Manhattan office building sales transactions from 1980 to first quarter 1990.     

Independent director reputation incentives,accruals quality and audit fees

While prior research provides abundant evidence that independent directors are associated with favorable outcomes, researchers have only recently started to investigate the impact of independent director reputation incentives. This study examines whether the reputation incentives of independent directors are associated with accruals quality and audit fees. The results reveal a negative relationship between the proportion of independent directors with relatively low reputation incentives and accruals quality. Further, the proportion of independent directors with relatively low reputation incentives is positively associated with audit fees, suggesting that auditors view lower reputation incentives as increasing risk. We also find that Big 4/5 auditor office size moderates the relationship between independent director reputation incentives and audit fees. Specifically, our results indicate that audit fees increase less in response to lower reputation incentives as office size increases, suggesting that larger offices respond to the risks associated with lower reputation incentives more efficiently than smaller offices.     

Patent quality and incentives at the patent office

Patent examination is a problem of moral hazard followed by adverse selection: examiners must have incentives to exert effort, but also to truthfully reveal the evidence they find. I develop a theoretical model to study the design of incentives for examiners. The model can explain the puzzling compensation scheme in use at the U.S. patent office, where examiners are essentially rewarded for granting patents, as well as the variation in compensation schemes and patent quality across patent offices. It also has implications for the retention of examiners and for administrative patent review.     

Does size matter? The influence of large clients on office-level auditor reporting decisions

Large clients create an economic dependence that may cause auditors to compromise their independence and report favorably to retain valuable clients. Economic dependence is measured as a client's size relative to the size of the office that contracts for the audit and issues the audit report. We find no evidence economic dependence causes Big Five auditors to report more favorably for larger clients in their offices. However, larger clients also pose greater litigation risk, and we do find that Big 5 auditors report more conservatively for larger clients, suggesting that reputation protection dominates auditor behavior.     

Operating Expenses and the Rent Premium of Energy Star and LEED Certified Buildings in the Central and Eastern U.S.

This paper investigates the relationship between operating expenses and rents of Energy Star and LEED certified buildings in the Central and Eastern United States. Several studies have shown that sustainable buildings command a rent premium compared to comparable conventional buildings. Lower operating expenses are expected to be a major source of the rent premium that sustainable buildings command. This is especially the case for buildings with triple-net leases, where tenants directly benefit from savings in operating costs. For a large dataset of U.S. office buildings this study finds significantly lower operating expenses in LEED certified buildings. However, savings in operating expenses only explain part of the rent premium. Additional factors must be at work. Surprisingly, we find significantly higher operating expenses in Energy Star rated buildings. Hence, intangible benefits appear to be the major source of rental premiums of Energy Star rated buildings.     

The origins and development of the office of registrar in bankruptcy of the High Court

This article examines the history of the office of Bankruptcy Registrar of the High Court of England and Wales. It is argued that the power of the registrars to act judicially grew from their authorisation to act pursuant to delegated powers introduced in 1869 and that this began a major shift in their role from being largely administrative to their current status as fully fledged (and renamed) insolvency and companies court judges. The fluidity of bankruptcy offices in the nineteenth century is also examined, demonstrating that certain bankruptcy officer‐holders moved freely between functions in the course of the development in the office of registrar from what might be called its administrative phase to the judicial phase with the eventual creation of a Bankruptcy Court and more recently the creation of a specialist insolvency and companies list in the new Business and Property Courts. Finally, it is argued that a factor in the foregoing developments and the increasing reputation of the bankruptcy registrars was the extension of their jurisdiction from pure bankruptcy work to include company insolvency, directors' disqualification cases and non‐insolvency company work, a significant increase in their trial work and their acquisition of an appellate jurisdiction.