Assessments of the Expert Evidence of Accountants

The capacity of expert accounting witnesses to provide understandable evidence has been challenged by Australian judges. They have assessed expert accounting evidence as the most difficult evidence, from eight disciplinary areas, for them to evaluate adequately. This paper reports the responses of a sample of ten expert accounting witnesses to such assessment. We reveal the difficulties these accounting experts have experienced in presenting evidence. These include the unfamiliarity of judges and barristers with commercial principles; the intimidatory environment of courts; and outmoded attitudes to the use of modern communication aids. Several ways of improving expert accounting evidence are canvassed, including the provision of communications skills training for accountants and financial literacy training for judges and barristers.     

Sarbanes-Oxley and the Future of Accounting

Following the Enron debacle, massive public pressure led the United States government to enact the Sarbanes-Oxley Act of 2002. While this act was intended to protect investors and improve the accuracy and reliability of corporate disclosures, it also contained provisions which could have a major impact on the public accounting profession in the United States. It is possible that these effects could extend to Australia, where the public accounting profession is also subject to scrutiny following revelations of corporate misconduct. This paper explores the provisions of the Sarbanes-Oxley Act relating to the accounting profession, the reaction of the profession and possible ramifications for public accounting in Australia.     

Making company directors liable: a comparative analysis of wrongful trading in the United Kingdom and insolvent trading in Australia

The separate legal entity doctrine in corporate law means that directors are not generally liable for their company's liabilities. However, there have been actions taken by governments and courts to make directors liable in certain cases. This article examines and compares legislative provisions in the United Kingdom and Australia to make directors liable for the debts of their companies. These provisions, namely section 214 of the UK's Insolvency Act 1986 (wrongful trading) and section 588G of the Australian Corporations Act 2001 (insolvent trading), had the same starting point, but now differ substantially, even though, arguably, they retain very similar objectives. The article investigates: the reasons for these differences; the criteria on which each of the provisions focus; and the ramifications for the different approaches. It also endeavours to evaluate the strengths and weaknesses of the respective approaches adopted in each country. Copyright © 2005 John Wiley & Sons, Ltd.     

The politics of tax accounting in the United States: evidence from the Taxpayer Relief Act of 1997

The purpose of this study is to utilize prior research in US Congressional politics, the accounting/state relationship, and corporate political activity to analyze corporations' political activities during the development and passage of the United States' Taxpayer Relief Act of 1997. Our study provides evidence consistent with the notion that large corporations exercise considerable political power during the state's formulation of new tax accounting laws. These findings lead us to question the applicability of a strict pluralist model in accounting policy research and have implications for future research in corporate political activity, corporate tax accounting, and the political economy of accounting.     

Individual investors’ attitudes towards listing requirements for foreign entities on U.S. stock exchanges and the promulgation of international accounting standards

The Securities and Exchange Commission (SEC) currently requires foreign issuers of securities listed on U.S. securities exchanges to either employ U.S. generally accepted accounting principles (U.S. GAAP) or include a statement of reconciliation to U.S. GAAP if they use their home country's accounting standards. With some exceptions, they are also required to comply with the provisions of the Sarbanes-Oxley Act of 2002 (SOA). John Thain, CEO of the New York Stock Exchange, states that these requirements hamper U.S. investments, economic growth, and employment opportunities. The Chairman of the International Accounting Standards Board (IASB), Sir David Tweedie, echoed Thain's comments. An important stakeholder who is affected significantly by the U.S. listing requirements is the U.S. individual investor. Accordingly this study examines their attitudes involving the extant rules for foreign listings on U.S. exchanges and other aspects of the issue. The study also examines their perceptions regarding accounting standard promulgation authority and the use of a global set of accounting principles. The results indicate that although U.S. investors are very much in favor of the listing of foreign companies on U.S. exchanges, they also endorse the current rule requiring either employment of U.S. GAAP or reconciliation to it as well as mandatory adherence to the SOA. In the area of accounting standards, although a large majority believed that the U.S. should control the accounting standards for U.S. listings, a smaller majority also believed that there should be a universal set of accounting principles for all stock exchanges.     

会计刑事法律责任问题思考

会计刑事责任是最具威慑力的制裁形式,能够起到强大的震慑作用,但目前我国会计信息失真已经达到"公害"的地步,可见会计刑事责任存有不足。笔者运用法律基本原理分析问题,指出会计刑事法律责任不符合罪刑相适应原则、在认定上缺乏具体的技术标准,并提出完善会计刑事法律责任的建议。     

Treatment of a Debtor's Home in Insolvency: Comparative Perspectives and Potential Developments in South Africa

A debtor's home is frequently a source of conflict between the debtor and his family members and his creditors. Treatment of forced sale of a debtor's home is not uniform. Some legal systems provide for formal, statutory ‘homestead exemptions’ the monetary limits of which are in many cases capped. In a number of jurisdictions, statutory provisions regulating, inter alia, the civil process, family law, bankruptcy law, or the recognition of human rights afford a measure of protection to the debtor and his family. This occurs either through the imposition of procedural requirements before forced sale is allowed or protecting the interest in the home or the occupational rights of a spouse or partner of the debtor against creditors' claims, or by delaying the forced sale of the home in certain circumstances. Recently, in South Africa, recognition by the courts of every person's constitutional right to have access to adequate housing has impacted upon the substantive and procedural requirements for execution against a debtor's home. However, no consideration has been given to whether realisation of an insolvent debtor's home by the trustee of an insolvent estate in terms of the Insolvency Act 24 of 1936 involves similar constitutional imperatives. Consideration of the treatment of a debtor's home, especially in the context of insolvency, in various jurisdictions may provide valuable guidance for future developments in South Africa. Copyright © 2013 INSOL International and John Wiley & Sons, Ltd.     

The Inherent Power of Common Law Courts to Provide Assistance in Cross‐Border Insolvencies: From Comity to Complexity

The weighty and difficult issues associated with cross‐border insolvency have generated considerable debate over the last two decades. Legislative reform has typically proven slow and fragmented. This article analyses the inherent power of common law courts to grant assistance in cross‐border insolvency proceedings and the basis on which the inherent power is exercised. In doing so, it seeks to explore how the inherent power may continue to be of utility to common law courts. In particular, it considers the position in jurisdictions that are yet to adopt the United Nations Commission on International Trade Law Model Law on Cross‐Border Insolvency or enact a substantial statutory regime for recognising and cooperating with foreign courts or representatives in insolvency proceedings. The article considers the benefits and disadvantages of continuing to recognise – and extend – the inherent power. It suggests that although there are fundamental differences concerning the exercise of the inherent power, it may be possible to agree on a number of principles that inform the application of the inherent power and its future development. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

Assessing Conformity with Generally Accepted Accounting Principles Using Expert Accounting Witness Evidence and the Conceptual Framework

To enhance understanding of the status of the Financial Accounting Standards Board's Conceptual Framework for Financial Reporting, we analyse important rules of evidence in United States (US) courts regarding the presentation of expert accounting witness testimony. We draw on this analysis to recommend the relocation of the Conceptual Framework in the US Generally Accepted Accounting Principles (GAAP) hierarchy. For empirical support, we explore how rules of evidence in the criminal trial in 2006 of Enron's two most senior executives affected assessment of whether Enron's financial reports conformed with the FASB's GAAP. We recommend that the FASB's Conceptual Framework should be included in authoritative literature as the uppermost authority, and that it be grounded closely in user needs and the ethical principles associated with meeting those needs. Further, we recommend that accounting expert witnesses adopt an overriding concern for objectivity and impartiality in assisting courts to understand complex accounting matters within the Conceptual Framework.     

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Denmark

Abstract

I analyse the influence of IFRS on the Danish accounting regulation based on the EU Accounting Directive. In Denmark, the EU Accounting Directive is brought into force through the Danish Financial Statements Act. The analysis shows that the provisions in the Act are aligned with the IFRS to a great extent. It also shows that the Danish legislators extensively refer to IFRS and that they consider the IFRS to be the source to use for completing the national rules. I additionally show that the enforcers of the Danish Financial Statements Act look to the IFRS for guidance when they interpret the provisions, and that many important stakeholders have a positive attitude towards the use of IFRS for non-listed companies. The conclusion is that IFRS standards play a decisive role and have strong legitimacy in Denmark.     

Threat of entry and the use of discretion in banks’ financial reporting

This paper studies managers’ use of accounting discretion to deter entry. Using state-level changes in branching regulation under the Interstate Banking and Branching Efficiency Act, I find geographically-constrained community banks increased their loan loss provisions to appear less profitable when faced with the threat of entry by competitors. Additional tests rule out alternative explanations that firm economics or regulators drove the increase. I complement my analyses with survey-based evidence. Findings from the survey confirm that banks prefer to locate in markets where incumbents have high profitability and low credit losses, and that banks use competitors’ financial statements to analyze competition.     

The Unintended Consequences of the Frequency of PCAOB Inspection

After more than 50 years of self‐regulation of the US auditing profession, the Sarbanes‐Oxley Act of 2002 (SOX) created the Public Company Accounting Oversight Board (PCAOB) as a quasi‐governmental entity with statutory authority to inspect accounting firms that audit public clients. The frequency of this inspection is annual or triennial, based upon the number of public clients the firm audits. We examine the effects of these two levels of inspection frequency on financial reporting quality and audit fees for clients of small and midsize public accounting firms. Our findings provide evidence of significantly higher audit quality and audit fees for clients of annually inspected firms relative to clients of triennially inspected firms. These findings are robust to auditor‐client alignment analyses, propensity score matching, time‐series analyses, examination of firms that have changed from triennial to annual inspection, and particular examination of firms with inspection deficiencies. Overall, our study suggests that the two‐tier frequency system of PCAOB inspection may have also resulted in two‐tier audit quality and audit fee systems for small and midsize public accounting firms, with more frequent inspection leading to more rigorous and informed auditor decisions. We discuss the implications of our results for the Board and the profession at large.     

Do Loan Loss Provisions Affect the Credit Fluctuations in China’s Banking System?

ABSTRACT

The global financial crisis of 2008 sparked new ideas on pro-cyclical transmission in the financial system. The accounting treatment method of loan loss provisions differs between the accounting standards that banks use and the supervisory rules of banks. This fundamental difference has attracted wide attention from academics and regulators. This article studies whether bank loan loss provisions affect credit fluctuation in China’s banking system. We divide loan loss provisions into discretionary and non-discretionary loan loss provisions. We find that non-discretionary loan loss provisions result in greater credit fluctuation, whereas discretionary loan loss provisions have no significant impact on credit fluctuation. Further evidence shows that the relation between non-discretionary loan loss provisions and credit fluctuations does not vary among different types of banks. Overall, our study shows that non-discretionary loan loss provisions can increase credit fluctuation and therefore strengthen banks’ pro-cyclical behavior.     

CAP Forum on Forensic Accounting in the Post‐Enron World: Education for Investigative and Forensic Accounting*/FORMATION ET JURICOMPTABILITÉ

Recent financial scandals have raised the awareness that accountants should be alert to potential fraud and other economic disputes and can provide significant assistance in preventing, investigating, and resolving such matters. Forensic accountants provide these services with knowledge of court requirements and proceedings so that effective legal action is possible, even though most actions are concluded without the involvement of the courts. Although forensic accounting was growing in importance even before Enron and the Sarbanes‐Oxley Act, the ensuing tightening of the securities regulations in both Canada and the United States triggered recognition that accounting students and professionals need a fuller understanding of fraud and other economic crimes, and how to find, prevent, and resolve them, as well as the career choices that could be involved. While some of this material is covered in auditing texts and courses, emerging expectations will require the enhancement and restructuring of forensic accounting education within university programs, and will encourage more interest in graduate specialist professional designations. This paper has two objectives: to offer insights into the design and delivery of forensic accounting programs, and into the availability of professional programs; and to provide some exploratory evidence on the type of services currently rendered by investigative and forensic accountants in Canada.     

THE ROLE OF AUDITOR CULPABILITY IN NAMING AUDITOR DEFENDANTS IN UNITED STATES SECURITIES CLASS ACTIONS

Arguments for passage by the United States Congress of the Private Securities Litigation Reform Act, 1995 (Reform Act), as well as the Securities Litigation Uniform Standards Act, 1998, center on two allegations. First, that there was a general lack of merits (i.e. management culpability did not matter) in pre-Reform Act private securities class actions. Second, that nonculpable auditors were routinely named defendants in these lawsuits. A theoretical framework consisting of the constructs auditor culpability, management culpability, and nonculpability is used to investigate whether nonculpable auditors were routinely named defendants in these lawsuits. Empirical evidence based on 446 securities lawsuits filed from April 1992 to April 1995 in federal and state courts against United States companies suggests that nonculpable auditors were not routinely named defendants in these lawsuits.     

Grundfragen zu Anzeige-, Auskunfts- und Aufklärungsobliegenheiten nach dem VVG 2008

This article analyzes the disputed legal nature of the duty to notify and the duty to disclose information according to sections 30 et seq. of the German Insurance Contract Act (VVG). To the extent to which the aforementioned legal provisions impose such obligations on a third party, the author reaches the conclusion that they are to be regarded as true legal obligations, i.e. their breach may result in damage claims. As to the policyholder, however, the legal provisions must be qualified as statutory warranties (so-called Obliegenheiten) without sanctions. Therefore, in order to sanction a policyholder’s breach of his obligations, the contracting parties have to turn the statutory Obliegenheiten into contractual Obliegenheiten, which are then subject to section 28 VVG. In the second part of the article the author addresses the scope of application and the content of the Obliegenheit to instruct the policyholder according to section 28 subsection 4 VVG. This Obliegenheit is imposed on the insurer as a requirement for the sanction of a breach of the contractual duties to provide information and to disclose by the policyholder.     

Financial reporting quality and outsourcing of accounting tasks: Evidence from small private firms

This study explores whether the financial reporting quality of small firms differs between firms that outsource accounting tasks and firms that perform these tasks internally. Using accruals quality as a measure for the financial reporting quality and a sample of small Finnish limited liability firms, we find that the quality among the firms is positively related to the decision of purchasing accounting services from an external service provider. This result is also economically significant. The evidence shows that outsourcing of accounting tasks such as the preparation of the statutory financial statements and longer outsourcing relationships increases reporting quality. However, outsourcing of additional tasks, such as payroll processing, does not result in higher quality. These findings are consistent with previous studies showing that small firms in general lack the resources and expertise to prepare high quality financial reports. We provide evidence of an important yet under-researched area of financial reporting quality among small firms.     

Structure and Argument in Accounting Standards

This paper summarises the results of a detailed examination of the contents of explanatory notes of Statements of Standard Accounting Practice. The presentation of argument in the explanatory notes is discussed in the light of recent writings on rhetoric, and the Accounting Standards Committee is assessed in terms of its performance as a persuader rather than by reference to the substantive requirements of SSAPs. The paper suggests that changes in the structure of future accounting standards would be desirable, and concludes by linking the rhetorical perspective to the notion of a conceptual framework.     

信用评级业的专家责任问题

传统上,美国信用评级机构主张评级报告属于涉及公共利益的意见,援引宪法第一修正案进行抗辩。作为金融征信的重要内容,信用评级业在未来可能引发一系列专家责任案件,而现今中国法律体系对于专家责任的规定不健全。虽然专家责任的法律属性还需要进一步讨论,但是目前更重要的是先处理专家责任。中国法院在处理信用评级引发的案件时,可以借鉴美国的司法判例,以信用评级报告在商事交易中的作用认定专家责任的大小。     

Value Relevance of Environmental Provisions Pre‐ and Post‐IFRS

The purpose of this paper is to compare the value relevance of environmental provisions as recorded under Canadian/U.S. GAAP and IFRS accounting frameworks with consideration of the impact of voluntarily issuing stand‐alone sustainability reports. The value relevance of environmental provisions is tested using a modified Ohlson (1995) model. We exploit IFRS reconciliations as a quasi‐experimental setting to conduct this comparison. Results indicate that environmental provisions recorded under either framework only act as liabilities for oil and gas firms that release stand‐alone sustainability reports. For other firms in the oil and gas industry, and the mining industry, the liability nature of these provisions appears to be discounted by the market. Furthermore, for firms in the oil and gas industry that do not have stand‐alone CSR reports, provisions appear to be interpreted by the market as a costly signal about future growth. Instead of downwardly affecting market values, this information is associated with higher market values. In terms of the transition to IFRS, we find that, while the IFRS provisions are significantly higher than under former GAAP, they do not improve value relevance for investors. Accounting standard setters should consider examining the changes in the current standards from the original Canadian environmental provision reporting requirements under Capital Assets section 3060.39, as it was rightfully shown to be a relevant proxy for unbooked liabilities (Li and McConomy, 1999; Bewley, 2005) rather than earnings expectancy. The study builds upon prior research to examine the value of accounting standards that have gone through significant changes.