Effects of Increasing Enforcement on Financial Reporting Quality and Audit Quality

A widely held assumption in policy making and empirical research is that increasing the strength of public enforcement improves financial reporting quality and audit quality. This paper provides a more nuanced view. In a model with a manager who can manage earnings, a strategic auditor, and an enforcement institution, we show that enforcement and auditing are complements in a weak enforcement regime but can be substitutes in a strong regime. Although stronger enforcement always mitigates earnings management, the effects of different instruments of strengthening enforcement are ambiguous. We show that they can improve or impair financial reporting quality and audit quality, depending on production risk, accounting system characteristics, and the scope of auditing relative to enforcement.     

专门委员会重叠与CEO运气薪酬:基于国有控股上市公司的证据

薪酬委员会和审计委员会是董事会下设的两个最重要的专门委员会,其董事人员的重叠可能从信息优势或董事迎合两种不同渠道影响高管薪酬。本文以A股国有控股上市公司为样本检验了两个专门委员会的职位重叠对CEO运气薪酬的影响,结果显示:审计委员会与薪酬委员会的董事职位重叠有助于降低CEO薪酬对运气的敏感性,但在CEO权力较大的公司,两个专门委员会的职位重叠对运气薪酬的治理效果减弱;进一步研究发现,运气薪酬呈现非对称特征,而两个专门委员会的职位重叠主要削弱了CEO薪酬对好运气的敏感度。结果表明,薪酬委员会与审计委员会的职位重叠所形成的董事内部兼任网络带来了信息优势,有利于遏制高管在薪酬上的抽租,增强对非业绩薪酬的治理。     

Audit Committee Effectiveness and Financial Reporting Quality: Implications for Auditor Independence

Auditors participating in a survey identified oversight of financial reporting and the external audit process, and ensuring quality internal controls, as the most important functions of effective audit committees. Financial literacy or expertise, independence, and a strong commitment to perform the job effectively were noted as important attributes. The results also suggest that although audit committees have enough power to confront management on contentious issues, they are not very effective in helping to resolve financial reporting disputes. Management was identified as a key influence in affecting the nature, extent, and quality of communication between the auditor and the audit committee. Most auditors believe that it is not important for each member of the audit committee to be an expert, but it is important that they are financially literate.     

虚假财务报告的审计重点

虚假财务报告包括非故意错报或漏报的错误财务报告和故意不实反映的舞弊财务报告。错误主要包括:原始记录和会计数据的计算、抄写错误,对事实的疏忽和误解,对会计政策的误用。舞弊主要包括:伪造、变造记录或凭证,侵占资产,隐瞒或删除交易或事项,记录虚假的交易或事项,蓄意使用不当的会计政策。对虚假财务报告的审计,应抓住虚假财务报告可能出现问题的环节,重点审计。下面就舞弊的资产负债表、损益表、现金流量表以及财务报表附注的审计重点进行分析。 资产负债表的审计重点对虚假资产负债表的审计,应注重搜集资产负债表以外的经济活动资料,…     

Internal Audit Quality and Financial Reporting Quality: The Joint Importance of Independence and Competence

In light of the growing importance of internal audit functions (IAF) and the limited archival evidence on internal audit quality, we examine an interactive model of IAF quality (comprised of competence and independence) to better understand the determinants of IAF effectiveness as a financial reporting monitor. Our tests support the hypothesis that the joint presence of competence and independence is a necessary antecedent to effective IAF financial reporting monitoring. In sum, our results show that, the answer to “what is the effect of internal audit competence (independence) on financial reporting quality?” is “it depends on the independence (competence) of the internal auditor.” Our study extends the understanding of IAF quality determinants in the realm of financial reporting as it relates to ongoing discussions by researchers, standard setters, regulators, and practitioners.     

Trust and Financial Reporting Quality

Using unique survey data from Great Place to Work® Institute, we investigate the association of intraorganizational trust (i.e., employees’ trust in management) with three aspects of financial reporting: accruals quality, misstatements, and internal control quality. We find that trust is associated with better accrual quality, lower likelihood of financial statement misstatements, and lower likelihood of internal control material weakness disclosures. However, these effects are not uniform across all companies. Consistent with trust improving financial reporting quality through improved information production and information sharing, we find that trust is significantly associated with financial reporting quality in relatively decentralized firms, but not in firms that are relatively centralized. Our results are robust to several analyses that attempt to control for potential alternative explanations.     

CFO Narcissism and Financial Reporting Quality

We investigate the effect of CFO narcissism, as measured by signature size, on financial reporting quality. Experimentally, we validate that narcissism predicts misreporting behavior, and that signature size predicts misreporting through its association with narcissism. Empirically, we examine notarized CFO signatures and find CFO narcissism is associated with more earnings management, less timely loss recognition, weaker internal control quality, and a higher probability of restatements. The results are consistent for within‐firm comparisons focusing on CFO changes and are robust to controlling for CFO overconfidence and CEO narcissism. The results highlight the importance of CFO characteristics in the domain of financial reporting decisions.     

Non‐Audit Service Fees and Financial Reporting Quality: A Meta‐Analysis

Auditing as a corporate governance mechanism has attracted considerable research attention. Because of the information asymmetry between corporate managers and outside shareholders, auditors are hired to provide independent assurance that financial statements are prepared following generally accepted accounting principles. The credibility of such assurance depends on the independence, both in fact and in appearance, of the auditor. Over the years, however, the independence of auditors has come under increased scrutiny because of their joint provision of both audit and non‐audit services. A sizable literature on the impact of non‐audit fees on financial reporting quality has developed. The evidence from this literature, however, remains inconclusive. This paper provides a meta‐analysis of the available literature by assessing (a) the net effect of non‐audit fees on financial reporting quality, and (b) whether there is homogeneity in the financial reporting quality proxies used in the extant literature. Findings suggest that the level of client‐specific non‐audit fees is associated with reduced financial reporting quality. However, the underlying studies used to conduct this meta‐analysis are not homogenous.     

CFO内部董事与财务报告质量

本文基于中国特色的制度背景和社会文化,实证检验了CFO内部董事对财务报告质量的影响.研究结果表明,CFO内部董事能显著提高财务报告质量.作用机理检验发现,CFO内部董事主要通过降低信息不对称、缓解代理问题和提高CFO社会地位来提高财务报告质量.本文探明了CFO内部董事对财务报告质量的积极作用及其作用发挥的内在机理,为进一步完善我国CFO制度进而提高财务报告质量提供了本土化的经验证据,据以为企业管理者、准则制定机构、国家监管部门进行相关决策提供借鉴和参考.     

国际金融危机、审计费用溢价与审计质量

以2003-2017年我国A股上市公司为样本,考量当企业受到金融危机冲击时,审计费用与审计质量之间关系的变化。研究结果表明,金融危机期间存在审计费用溢价现象,然而更多的收费却伴随着审计质量的下降。研究结论对于在市场危机环境下进行审计风险管控和审计市场的规范具有一定的借鉴意义。     

Gaps in Guidelines on Audit Committees

Since the 1940s, advocacy of the establishment of audit committees was undertaken by regulatory agencies, and subsequently by the accounting profession, and committees representing combinations of interest groups. Over time, this advocacy literature has reflected changing views about the key responsibilities of audit committees. Initially, audit committees were primarily concerned with negotiations with (or responding to) auditors, and reviewing financial statements prior to publication. Since the 1970s, formal guidelines or requirements have suggested additional responsibilities that involve oversight of the internal management of corporations. There is a pattern of renewed enthusiasm for enhanced corporate governance and for a stronger role for audit committees following spates of corporate crashes or disasters. Nevertheless, some of the lessons from those events continue to be ignored, so that arguably there are gaps in contemporary guidelines on audit committees. These gaps concern the need for audit committees to review the structure and design of delegations, and the adequacy of financial and operational information being provided to senior management and boards (particularly concerning subsidiaries and associated entities). These gaps are also reflected in the charters of the audit committees of Australia's top 200 listed entities. However, in some respects, Australian practice has gone beyond the recommendations embodied in recent guidelines. Drawing from literature and practice, this article proposes a model charter which, if adopted, may contribute to improvements in the effectiveness of audit committees.     

Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?

We examine three‐day cumulative abnormal returns around the announcement of 702 newly appointed outside directors assigned to audit committees during a period before implementation of the Sarbanes‐Oxley Act (SOX). Motivated by the SOX requirement that public companies disclose whether they have a financial expert on their audit committee, we test whether the market reacts favorably to the appointment of directors with financial expertise to the audit committee. In addition, because it is controversial whether SOX should define financial experts narrowly to include primarily accounting financial experts (as initially proposed) or more broadly to include nonaccounting financial experts (as ultimately passed), we separately examine appointments of each type of expert. We find a positive market reaction to the appointment of accounting financial experts assigned to audit committees but no reaction to nonaccounting financial experts assigned to audit committees, consistent with accounting‐based financial skills, but not broader financial skills, improving the audit committee's ability to ensure high‐quality financial reporting. In addition, we find that this positive reaction is concentrated among firms with relatively strong corporate governance, consistent with accounting financial expertise complementing strong governance, possibly because strong governance helps channel the expertise toward enhancing shareholder value. Together, these findings are consistent with financial expertise on audit committees improving corporate governance but only when both the expert and the appointing firm possess characteristics that facilitate the effective use of the expertise.     

财务报告质量评估的探讨

为了打击“数字游戏”和对付“盈利操纵” ,美国证券交易委员会原主席阿瑟·利维特 (ArthurLevitt)多次谈到高质量会计准则的重要性。什么是高质量会计准则的含义 ,或者说什么会计信息特征可以认为是对“使用者需要”和“股东 /投资人保护”有用的多层次的质量 ?本文试图审视一系列有关评估财务报告质量的不同方法 (模式或框架 ) ,包括 :美国财务会计准则委员会的概念框架、美国证券交易委员会用于评估国际会计准则质量的模式、关于改进公司审计委员会效率的“蓝带委员会”第 8号建议、美国第 6 1号审计准则公告、美国注册会计师协会的《改进企业报告———面向用户》的建议 ,特别是安达信会计师事务所合伙人Jonas&Blancher的建议框架 ;提出一份有关高质量财务报告的建议 ,重点关注透明度这一质量 ,并引用了Jonas&Blancher的“评估财务报告质量的问题”作为本文的一个附录。     

财务报表重述公司审计质量研究

以财务报表重述公司为研究对象,考察财务报表重述公司年报审计质量。结果表明:财务报表重述的幅度对非标审计意见的出具有显著的影响力;初始差错年和报表重述年,注册会计师都能在一定程度上识别上市公司的盈余管理动机,并在审计意见中有所反映;审计师任期和对财务报表重述公司出具非标审计意见之间没有显著的相关性;事务所规模和非标审计意见的相关性并不显著,结论没有支持大事务所更有可能对重述公司出具非标审计意见。     

Financial Reporting Quality and Investors' Divergence of Opinion*

The main purpose of this study is to analyze the association of financial reporting quality and investors' divergence of opinion. We focus on UK firms listed on the London Stock Exchange. Divergence of opinion is measured by two proxies based on unexpected trading volume and by dispersion in analysts' forecasts made one and two years ahead. Previous literature shows that the amount of firms' disclosure is negatively associated with the dispersion in analysts' forecasts. The results obtained in our study show that the quality of the disclosure is negatively associated with divergence of opinion, whether it is proxied by measures of unexpected trading volume or dispersion in analysts' forecasts. Financial reporting quality affects divergence of opinion not only in the months that immediately follow the disclosure of the reports but in the whole year that follows.     

对会员制征信的思考与建议

介绍会员制征信的内涵、作用及实践模式,分析会员制征信应重视的问题.为了保证会员制征信规范发展,应完善法律法规和加强制度建设,强化信息平台及会员资质管理,加强征信主体信息权益保护.     

Reforms in the Korean Financial Reporting Systems and Earnings Quality

This study examines the effect of reforms in the Korean financial reporting systems on earnings quality through an investigation of two sample periods: (1) prior to, and (2) after the 1997 financial crisis in Korea. The results indicate that financial sector reforms have reduced the opacity of Korean firms’ earnings reports.