We find resignation companies differ from dismissal companies along dimensions that capture the probability of litigation: financial distress, variance of abnormal returns, auditor independence, tenure and a modified particularly going-concern opinion. Precision is normatively defined in this context as being comprised of both reliability largely utilizing definitions developed by Richardson, et. What emerges from the study is a particular local understanding of the auditor independence construct, perceived primarily as an economic concept in the context of market instability and the immature legal framework. Teaching notes are also included. If you do not have an account, please register below. Are the non-accounting experts just as competent as the accounting experts in enhancing the quality of financial reporting? In particular, the adequacy of audit committee oversight has been challenged.
The results indicate that audit committee members appreciate the importance of all audit committee members having sufficient expertise in oversight areas related to accounting, auditing and the law. Financial statement quality is the four characters of the financial statement, i. The purpose of this paper is to review current articles and research papers with regard to influences on and measures of the quality of financial reporting. In this paper the author concluded that the non-audit services impair audit independence and audit objectivity. Retrieved November 17, 2009 from Business Source Premier database. Contends that it is not clear to what extent these proposals, and other current proposals to address the problem of auditor independence, represent a real paradigm shift.
Evaluates the methods and contributions of this research - field researchers usually choose interesting, relevant topics but many of the works have weaknesses in research design, data presentation and interpretation of findings. Further, the paper offers some object lessons, and exposes the reader to different aspects of financial reporting quality. The study reveals that higher audit fees are associated to lower level of discretionary accruals and thus imply higher financial reporting quality. Our results indicate that fees for financial information systems development services do not affect perceptions of auditor independence, whereas, fees for tax services adversely affect perceptions of independence. However, these documented benefits tended to vary significantly across firms and countries. Consistent with our prediction, we find that companies with a higher level of ethical commitment are engaged in less earnings management, report earnings more conservatively, and predict future cash flows more accurately than those with a lower level of ethical commitment.
The precision term has been used often in accounting literature, perhaps because of increased scrutiny of accounting quality, but it has not been defined formally or consistently. Findings The top determinant of auditor independence was not clear; however, other researches ranked them based on importance because of their hypothesis that they chose to test. Finally, we observe substantial variation in empirical designs across papers which makes it difficult to reconcile differences in their conclusions. For several decades the industrialized world has been working toward an international set of accounting standards. Our analysis is consistent with concerns expressed by the accounting profession that litigation pressures lead to the withdrawal of audit services for a segment of the market. Nations like India and China which have great population and market potential but were earlier following socialistic trends had opened their gates for foreign direct investments.
The result also supports the resource dependence theory which proposes that higher percentage of financial experts in the board lessen the degree of accounting manipulation. Using a sample of firms disclosing internal control weaknesses during November 2003-July 2005, I find that internal control quality is negatively related to firm credit ratings and that firms disclosing internal control weaknesses are more likely to have lower credit ratings, speculative grade rating, smaller size, lower profitability, lower cash flows from operating activities, net losses in the current and prior fiscal year, higher income variability, and higher leverage than firms with no such disclosures. Consequently, it is apparently important to provide superior financial reporting quality to protect users in making rational investments choices, and to enrich market efficiency. This paper also identifies critical areas that require further dialogue between researchers, standard setters and users of general purpose financial statements. This survey suggests that a wide range of topic areas has been discussed and this learning can be incorporated in revising auditor independence related curricula.
Important Note: Please read our website. Their closeness is depicted by various examples like Coca Cola and Nike which are available almost everywhere in the world. In addition, the findings indicate that audit committee members tend not to recognize their assigned responsibilities, but agree with the proposed expansion of committee responsibilities. This article explains these findings and discusses their implications. Furthermore, additional studies can also consider other attributes of earnings quality such as earnings conservatism, predictability, comparability, persistence and timeliness. Relying on a variety of accounting literature, as well as measurement theory and research in other disciplines, this study develops a thorough definition for precision in accounting and financial reporting, considering both theoretic and measurement perspectives.
Accounting Perspectives,7 4 , 279-292. Also, the study seeks to understand how local culture impacts upon a particular understanding of auditor independence. During the last two decades, multinational companies have grown like they had never done ever in the history. For example, a company based in the United States has its branch office in China. Interestingly, this study reports higher financial reporting quality associated with firms dominated by Malay directors. The purpose of this study is to investigate whether financial reporting quality relates to national culture. Moral hazard may arise in hierarchical agency because a rational monitoring agent may accept a side payment from the monitored agent for misrepresenting information to the principal.
This is the time when issues due to difference in statutory requirements and accounting standards and policies between different nations come into existence. A single standard will also provide investors and auditors with a cohesive view of finances. Due to such a ride in the business environment, companies and people from different parts of the world have come closer to each other. This is complemented with a de facto analysis based upon interviews with audit practitioners, regulators and financial statement users in the Czech Republic and on a review of Czech media coverage. As a characteristic of individual auditors, independence is theorized as having a continuum of values. Auditors can also adjust their client portfolios by becoming more selective in their choice of new clients and by withdrawing from high-risk engagements.