Independence in Appearance and in Fact: An Experimental Investigation*

In this study, we use experimental markets to assess the effect of the Security and Exchange Commission's (SEC's) new independence rule on investors' perceptions of independence, investors' payoff distributions, and market prices. The new rule requires client firms to disclose in their annual proxy statements the amount of nonaudit fees paid to their auditors. The new disclosure is intended to inform investors of auditors' incentives to compromise their independence. Our experimental design is a 2 3 between‐subjects design, where we control the presence (unbiased reports) or absence of auditor independence in fact (biased reports). While independence in fact was not immediately observable to investors, we controlled for independence in appearance by varying the public disclosure of the extent of nonaudit services provided by the auditor to the client. In one market setting, investors were not given any information about whether the auditor provided such nonaudit services; in a second setting, investors were explicitly informed that the auditor did not provide any non‐audit services; and in a third setting, investors were told that the auditor provided nonaudit services that could be perceived to have an adverse effect on independence in fact. We found that disclosures of nonaudit services reduced the accuracy of investors' beliefs of auditors' independence in fact when independence in appearance was inconsistent with independence in fact. This then caused prices of assets to deviate more from their economic predictions (lower market efficiency) in the inconsistent settings relative to the no‐disclosure and consistent settings. Thus, disclosures of fees for nonaudit services could reduce the efficiency of capital markets if such disclosures result in investors forming inaccurate beliefs of auditor independence in fact ‐ that is, auditors appear independent but they are not independent in fact, or vice versa. The latter is the maintained position of the American Institute of Certified Public Accountants (AICPA), which argued against the new rule. Further research is needed to assess the degree of correspondence between independence in fact and independence in appearance.     

The Effect of Child Care Costs on the Employment and Welfare Recipiency of Single Mothers

This paper considers the effect of child care costs on two labor market outcomes for single mothers—whether to work for pay and whether to receive welfare. Hourly child care expenditures are estimated using data drawn from the 1992 and 1993 panels of the Survey of Income and Program Participation (SIPP). These expenditures are then used to predict the probability of welfare recipiency and employment. While the direction and significance of key variables are robust to changes in specification, the quantitative results are found to be sensitive to identification restrictions. All results show a substantial positive effect of child care costs on welfare recipiency, with the child care price elasticity of welfare recipiency varying from 1.0 to 1.9. Similarly, we find a significant negative effect of child care price on employment with elasticity estimates from -.3 to -1.1, showing that controlling for the welfare choice does not reduce the price elasticity of employment found in other studies.     

Consumer use of the internet for health information: a survey of primary care patients

An increasing number of patients use the internet to obtain information about health. Although some information is available about how health professionals use the internet, little is known about how patients utilize this information. Some patients may actively seek information to assume more responsibility for their health. However, others may feel obliged to do so because of failing confidence in health care provision. Health professionals have the potential to assist patients to make sense of health information from the internet; however, they may not necessarily welcome this role. This study aims to evaluate patients’ use of such information in a primary care setting. The sample consisted of adult patients (n = 851) from two general practice populations at different levels of the socio‐economic spectrum in South Wales (UK). Patients were surveyed by questionnaire about the health information they use, including the internet. The majority of patients preferred to use their general practitioner as the main source of health information. The internet was jointly the second preferred source for information about an illness (6%). Just over half (51%) of patients in this study had access to the internet, of which about half use it to access health information. Just under a quarter (24%, n = 55) of health internet users had discussed information accessed from the internet during a subsequent consultation with a health professional. Of these, three‐quarters felt more prepared and able to participate in decision‐making about treatments. This study provides a greater understanding of how patients are making use of health‐related information from the internet. These findings can be used to help prepare health care professionals for dealing appropriately with internet‐informed patients.     

Determinants of audit report modifications in Finnish municipalities

Although municipalities are major economic and social actors in most countries, remarkably little is known about their audits, particularly the determinants of their audit report modifications. The existing evidence is ambiguous at best and scarce, which provides opportunities for further accounting studies in this area. Therefore, based on an agency theory framework, we fill this important research gap by exploring three determinants of audit report modifications in municipalities: (1) economic performance, (2) decentralization of decision-making across different decision-making bodies, and (3) political competition between political parties in local councils. These determinants are examined based on a large panel of data on Finnish municipalities for the period from 2009 to 2013, covering virtually all of the country’s municipalities. We find that a striking 33 percent of audit reports had modifications during this period, which raises serious concerns about the state of municipal management, accounting, and auditing in Finland. Regarding the above determinants, the following conclusions can be made based on our analyses. First, we find partial evidence that weak economic performance increases the likelihood of audit report modifications. Second, the lower the competition among political parties in a local council, the lower the likelihood of audit report modifications. Finally, the more decentralized decision making is across the different decision-making bodies under the local council, the higher the probability of audit report modifications. These results are consistent with agency theory’s explanations regarding the value of auditing.     

The Global MRIO Lab – charting the world economy

ABSTRACT

We describe the creation of the Global Multi-Region Input–Output (MRIO) Lab, which is a cloud-computing platform offering a collaborative research environment through which participants can use each other’s resources to assemble their own individual MRIO versions. The Global MRIO Lab’s main purpose is to harness and focus previously disparate resources aimed at compiling large-scale MRIO databases that provide comprehensive representations of interregional trade, economic structure, industrial interdependence, as well as environmental and social impact. Based on the operational Australian Industrial Ecology Lab, a particularly important feature of this cloud environment is a highly detailed regional and sectoral taxonomy called the ‘root classification’. The purpose of this root is to serve as a feedstock from which researchers can choose any combination of regions and economic sectors to form a model of the economy that is suitable to address their particular research questions. Thus, the Global MRIO Lab concept enables enhanced flexibility in MRIO database construction whilst at the same time saving resources and avoiding duplication, by sharing time- and labour-intensive tasks amongst multiple research teams. We explain the concept, architecture, development and preliminary results of the Global MRIO Lab, and discuss its ability to continuously deliver some of the most prominent world MRIO databases.     

Marital history and home ownership: Evidence from Australia

The relative cost of owning and renting housing and housing affordability have been clearly established as important determinants of home ownership. But the roles of marital status and history have been largely ignored. In this paper we show that both current marital status and past history affect ownership. Past history matters because wealth accumulation is greater among couple households than singles owing largely to economies of scale in housing consumption. Moreover, wealth is lost upon divorce. In effect, past marital history affects the affordability of owner housing. This result is shown in the estimation of model explaining wealth, leverage and tenure choice using Australian datasets.     

Measuring something real and useful in consumer involvement in health and social care research

Actively involving service users, patients and carers in the creation and development of health research in the UK has recently come under pressure to articulate why involvement is a good use of resources. This has led to a growing interest in creating ways to measure the impact of involving patients, service users and carers in research. However, there is a concern that fundamentally important issues about why we should meaningfully involve service users, patients and carers are missing from the current measurement discourses and activities undertaken in relation to measurement. This paper argues three distinct points, and is based on the experience of the authors working with Folk.us as well as other fields of involvement. Firstly, there should be an open and honest debate about what is meant by the need to measure and assess the effects of involving people in research, addressing issues such as who benefits from the measurement and assessment and why the involvement is being done. Secondly, if at the conclusion of the debate it is deemed necessary to measure and assess, there must be a full and frank discussion about what criteria are appropriate for the proper reporting of involvement activities. This discussion would need to include the less obvious activities that are crucial to active involvement, such as administrative tasks, and where such activities would sit within these criteria. Thirdly, we will consider when such criteria should be applied, at the beginning or end of projects and, indeed, whether one can categorize the ‘beginning’ or ‘end’ of involvement.