The Effects of Accounting Standard Precision, Auditor Task Expertise, and Judgment Frameworks on Audit Firm Litigation Exposure

2011 ◽  
Author(s):  
Jonathan H. Grenier ◽  
Bradley Pomeroy ◽  
Matthew Stern
Keyword(s):  
Accounting Standard ◽  
Audit Firm ◽  
Standard Precision

scholarly journals The Effects of Accounting Standard Precision, Auditor Task Expertise, and Judgment Frameworks on Audit Firm Litigation Exposure

2020 ◽  
Vol 14 (2) ◽  
pp. P19-P30
Author(s):  
Jonathan H. Grenier ◽  
Bradley Pomeroy ◽  
Matthew T. Stern ◽  
Natalie B. Zielinski
Keyword(s):  
Accounting Standards ◽  
Cost Effective ◽  
Effective Alternative ◽  
Technical Expertise ◽  
High Quality ◽  
Accounting Standard ◽  
Audit Firm ◽  
Cost Effective Alternative ◽  
Professional Judgments ◽  
Standard Precision

SUMMARY This article summarizes the published study “The Effects of Accounting Standard Precision, Auditor Task Expertise, and Judgment Frameworks on Audit Firm Litigation Exposure” (Grenier, Pomeroy, and Stern 2015), where the authors examine ways that auditors can defend their judgment during litigation regarding the appropriateness of clients' application of imprecise accounting standards. The authors find that utilizing technical experts will reduce litigation exposure arising from imprecise accounting standards because it is difficult to challenge judgments made by a recognized expert. However, the study also finds that using a framework for making high-quality professional judgments represents a cost-effective alternative to technical expertise, as doing so also constrains jurors' ability to challenge auditors' judgments. In sum, the study suggests that auditors are well equipped to handle the increased litigation exposure associated with imprecise accounting standards, and the ongoing worldwide transition to such standards is unlikely to lead to auditor herding to industry norms.

scholarly journals Auditor Style Dan Komparabilitas Laporan Keuangan

2019 ◽  
Vol 1 (1) ◽  
pp. 109-122
Author(s):  
Riski Wulandari ◽  
Henri Agustin ◽  
Mayar Afriyenti
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Financial Statement ◽  
Accounting Standard ◽  
Audit Firm ◽  
Internal Working ◽  
Big 4 ◽  
Audit Firms ◽  
Reported Earnings ◽  
Working Rules

Auditor style defined as a unique set of internal working rules for the interpretation and enforcement of accounting standard within the auditor’s clienteles belongs to particular audit firm, especially Big 4 audit firms. As a consequence, financial statements of two companies audited by the same Big 4 auditor, subjected to the same audit style, tend to have comparable earnings which have a more similar accrual, than two companies audited by two different Big 4 auditors with different styles. This research attempts to examine the effect of this auditor style issue on manufacturing financial statement comparability listed in Indonesian Stock Exchange. For five years’ observations, through 2012-2016 this research demonstrated a result with auditor style affects the comparability of reported earnings within a Big 4 auditor’s clientele and found no effect of auditor style on financial statement comparability within a non-Big 4 auditor’s clientele

The Effects of Critical Audit Matter Paragraphs and Accounting Standard Precision on Auditor Liability

2016 ◽  
Vol 91 (6) ◽  
pp. 1629-1646 ◽  
Author(s):  
Christine Gimbar ◽  
Bowe Hansen ◽  
Michael E. Ozlanski
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Accounting Standard ◽  
Generally Accepted Accounting Principles ◽  
Auditor Liability ◽  
The Public ◽  
Regulatory Changes ◽  
Public Company ◽  
Standard Precision

ABSTRACT The Public Company Accounting Oversight Board recently proposed amendments to the standard audit report that would require the disclosure of critical audit matters (CAMs), and the Securities and Exchange Commission continues to evaluate the use of principles-based (imprecise) accounting standards within U.S. generally accepted accounting principles. We assert that jurors perceive precise accounting standards to constrain auditors' control over financial reporting outcomes, resulting in a lower propensity for negligence verdicts when the accounting treatment conforms to the precise standard. However, we hypothesize that the use of either imprecise standards or CAMs reduces the extent to which jurors perceive this constraint to exist, leading to increased auditor liability. We present experimental evidence supporting this argument. Our results highlight the similarities between the effects of imprecise accounting standards and CAMs on negligence assessments. These results provide insight for regulators and the auditing profession about the potential consequences of the proposed regulatory changes.

scholarly journals Determining Factors of the Level of Disclosure of Information on Business Combinations with the Entry into Force of the Accounting Standard CPC 15

2014 ◽  
Vol 25 (66) ◽  
pp. 267-280 ◽  
Author(s):  
Wilson Kazumi Nakayama ◽  
Bruno Meirelles Salotti
Keyword(s):  
Firm Size ◽  
Information Disclosure ◽  
Company Size ◽  
Private Company ◽  
Accounting Standard ◽  
Business Combinations ◽  
Audit Firm ◽  
Determining Factors ◽  
Disclosure Of Information ◽  
Business Combination

This paper aimed to investigate information disclosure on business combination transactions that took place in Brazil in 2010, when the Accounting Standard CPC 15 entered into force, and evaluate which were the determining factors of the level of disclosure of information related to it. To evaluate the disclosure level, a disclosure index of business combinations (INDCOMB) was prepared, having the disclosure index developed by Shalev (2009) as a basis. We evaluated, in the light of the literature on disclosure and business combinations, whether the following factors influenced on the disclosure level: acquiring company size, recognized percentage of overprice for expected future profitability in relation to the transaction value, dispersion of capital of the acquiring company, audit firm size, and participation of the acquiring company in American Depositary Receipts (ADRs) programs. The control variables used were listing of the acquiring company in the various segments of BM&FBOVESPA, operation sector, origin (state, private company with national capital or private company with foreign capital), and relative acquired company size in relation to the acquiring company. We analyzed business combination transactions that took place in 2010, reported by 40 open capital companies involved in 76 transactions. We conclude that the audit firm size and the relative acquired company size were factors that influenced on the level of disclosure of information regarding business combinations in 2010. The other factors showed no conclusive results.

Russian Accounting Standard (PBU) 18/02: Principles on the balance method use

2020 ◽  
Vol 23 (12) ◽  
pp. 1356-1382
Author(s):  
E.V. Olomskaya ◽  
A.A. Aksent'ev
Keyword(s):  
Balance Method ◽  
Deferred Taxes ◽  
Accounting Standard ◽  
Scientific Methods ◽  
The Public ◽  
General Scientific ◽  
The Impact ◽  
Original Approach ◽  
Descriptive Method ◽  
Tax Accounting

Subject. This article discusses the methodological features of Russian Accounting Standard (PBU) 18/02 Income Tax Accounting when using the balance method to account for deferred taxes. It considers whether the clarification of permanent tax differences is justified, and it analyzes in detail the features of accounting for temporary differences and offers a visual and descriptive method for determining and correlating them in accounts. Objectives. The article aims to justify the reason for linking permanent tax differences to such accounting categories as Income and Expenses. It also aims to develop a methodological toolkit that simplifies the perception of the balance method and demonstrates the procedure for determining temporary differences. Methods. For the study, we used the methods of analysis, synthesis, observation, comparison, and other general scientific methods. Results. The article justifies the clarification of permanent differences from the position of accounting categories. It offers an original approach that helps visually classify temporary differences. The formalization of the balance method helped identify the logic of its reflection in accounting statements. Conclusions and Relevance. To ensure that accounting is not distorted due to the impact of taxation, it is necessary to develop a unified conceptual framework, as well as develop existing methods and introduce new ones that do not contradict the public concept of interaction between accounting and tax accounting. The research results are intended for training, scientific and practical activities of specialists in the field of accounting and audit, as well as students studying under this program, in order to study the features of applying the balance method for accounting for deferred taxes.

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