Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability

2014 ◽  
Author(s):  
Kelsey Brasel ◽  
Marcus Doxey ◽  
Jonathan H. Grenier ◽  
Andrew Reffett
Keyword(s):  
Negative Outcomes ◽  
Risk Disclosure ◽  
Auditor Liability

scholarly journals Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability

2016 ◽  
Vol 10 (2) ◽  
pp. P1-P10 ◽  
Author(s):  
Kelsey Brasel ◽  
Marcus M. Doxey ◽  
Jonathan H. Grenier ◽  
Andrew Reffett
Keyword(s):  
Negative Outcomes ◽  
Risk Disclosure ◽  
Audit Report ◽  
Auditor Liability ◽  
Audit Firms ◽  
Audit Reports

SUMMARY The PCAOB and the IAASB recently proposed several significant changes to the audit reporting model, including requiring auditors to disclose critical audit matters (CAMs) in their audit reports. While investors appear to support such additional disclosures, some audit practitioners, academics, and attorneys contend that requiring auditors to disclose CAMs will make it easier for plaintiffs' attorneys to successfully sue auditors when audits fail to detect material misstatements. A recent study, “Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability” (Brasel, Doxey, Grenier, and Reffett 2016), reports results of an experiment that inform this issue. Contrary to the above concerns, results of the study indicate that disclosing CAMs, either related or unrelated to an undetected material misstatement, likely will not increase, and could decrease (depending on the type of misstatement), the probability of jurors holding auditors liable when audits fail to detect material misstatements. Further, results indicate that explicitly stating in the audit report that there were no CAMs, an option allowed within the PCAOB's proposal, would increase negligence verdicts against audit firms. The following article summarizes the study's motivation, method, results, and implications for both audit reporting and risk disclosure in general.

Risk Disclosure Preceding Negative Outcomes: The Effects of Reporting Critical Audit Matters on Judgments of Auditor Liability

2016 ◽  
Vol 91 (5) ◽  
pp. 1345-1362 ◽  
Author(s):  
Kelsey Brasel ◽  
Marcus M. Doxey ◽  
Jonathan H. Grenier ◽  
Andrew Reffett
Keyword(s):  
Experimental Evidence ◽  
Financial Statement ◽  
Negative Outcomes ◽  
Risk Disclosure ◽  
Auditor Liability ◽  
Current Regime ◽  
The Impact

ABSTRACT Audit practitioners, academics, and attorneys have expressed concern that disclosing critical audit matters (CAMs) will increase jurors' auditor liability judgments when auditors fail to detect misstatements. In contrast, this study provides theory and experimental evidence that CAM disclosures, under certain conditions, reduce auditor liability judgments as jurors perceive that undetected fraudulent misstatements were more foreseeable to the plaintiff (i.e., the financial statement user suing the auditor). However, we find that CAM disclosures only reduce auditor liability for undetected misstatements that, absent CAM disclosure, are relatively difficult to foresee. Finally, CAM disclosures that are unrelated to subsequent misstatements neither increase nor reduce auditor liability judgments relative to the current regime (i.e., where CAMs are not disclosed), but reduce liability judgments relative to reporting that there were no CAMs. As such, we find that, relative to stating there were no CAMs, disclosure of any CAM (i.e., related or unrelated) provides litigation protection in cases of undetected fraud. Consequently, the CAM requirement could incentivize auditors to disclose innocuous boilerplate CAMs, thereby diluting the impact of more warranted CAM disclosures. Data Availabliity: Available from authors upon request.

Feeling Like a Burden

2020 ◽  
Vol 51 (4) ◽  
pp. 219-238
Author(s):  
James H. Wirth ◽  
Ashley Batts Allen ◽  
Emily M. Zitek
Keyword(s):  
Negative Affect ◽  
Poor Performance ◽  
Self Esteem ◽  
Social Consequences ◽  
Social Costs ◽  
Negative Outcomes ◽  
Negative Effects ◽  
Self Compassion

Abstract. We examined the negative outcomes, particularly social costs that result when a person harms their group by performing poorly, and whether self-compassion could buffer against these negative outcomes. In Studies 1 and 2, participants performed poorly and harmed their group or performed equal to their group. Harmful poor-performing participants felt more burdensome, experienced more negative affect, felt more ostracized, anticipated more exclusion, and felt lowered self-esteem than equal-performing participants. Studies 3 and 4 disentangled poor performance from harming a group. Poor-performing participants either harmed the group or caused no harm. Harmful poor-performing participants felt more burdensome and anticipated more exclusion, indicating the additional social consequences of a harmful poor performance over a non-harmful performance. Across studies, trait self-compassion was associated with reduced negative effects.

Workplace Ostracism and Its Negative Outcomes

2016 ◽  
Vol 15 (4) ◽  
pp. 143-151 ◽  
Author(s):  
Xiaoming Zheng ◽  
Jun Yang ◽  
Hang-Yue Ngo ◽  
Xiao-Yu Liu ◽  
Wengjuan Jiao
Keyword(s):  
Affective Commitment ◽  
Psychological Capital ◽  
Intention To Leave ◽  
Future Research ◽  
Conservation Of Resources ◽  
Negative Consequences ◽  
Negative Outcomes ◽  
Workplace Ostracism ◽  
Using Data ◽  
The Relationship

Abstract. Workplace ostracism, conceived as to being ignored or excluded by others, has attracted the attention of researchers in recent years. One essential topic in this area is how to reduce or even eliminate the negative consequences of workplace ostracism. Based on conservation of resources (COR) theory, the current study assesses the relationship between workplace ostracism and its negative outcomes, as well as the moderating role played by psychological capital, using data collected from 256 employees in three companies in the northern part of China. The study yields two important findings: (1) workplace ostracism is positively related to intention to leave and (2) psychological capital moderates the effect of workplace ostracism on affective commitment and intention to leave. This paper concludes by discussing the implications of these findings for organizations and employees, along with recommendations for future research.

Weathering the storm: Stem training programs buffer minority students from the negative outcomes, but not the experience, of stereotype threat

2014 ◽  
Author(s):  
Paul R. Hernandez ◽  
Anna Woodcock ◽  
Mica Estrada ◽  
Maria Aguilar ◽  
Britt'ny Gonzales ◽  
...  
Keyword(s):  
Stereotype Threat ◽  
Minority Students ◽  
Training Programs ◽  
Negative Outcomes

Predicting Positive and Negative Outcomes Following Vicarious Trauma in Firefighters

2013 ◽  
Author(s):  
Deanne Armstrong ◽  
Jane Shakespeare-Finch ◽  
Ian Shochet
Keyword(s):  
Vicarious Trauma ◽  
Negative Outcomes

An exploratory study of intangibles risk disclosure in annual reports of banking companies from the UK, US, Germany and Italy - Some descriptive insights

2013 ◽  
pp. 81-120 ◽  
Author(s):  
Susanne Durst
Keyword(s):  
Intellectual Capital ◽  
Exploratory Study ◽  
The United States ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Related Risk ◽  
Potential Benefits ◽  
Report Data ◽  
Key Drivers ◽  
The Uk

Intangibles are viewed as the key drivers in most industries, and current research shows that firms voluntarily disclose information about their investments in intangibles and their potential benefits. Yet little is known of the risks relating to such resources and the disclosures firms make about such risks. In order to obtain a more balanced and complete picture of firms' activities, information about the risky side of their intangibles is also needed. This exploratory study provides some descriptive insights into intangibles-related risk disclosure in a sample of 16 large banks from the United States (US), United Kingdom (UK), Germany and Italy. Annual report data is analyzed using the three Intellectual Capital dimensions. Study findings illustrate the variety of intangibles-related risk disclosure as demonstrated by the banks involved.

Determinants of Corporate Risk Disclosure Practice: The Case of Islamic Banks in Gulf Cooperation Council Region

2018 ◽  
Vol 15 (1) ◽  
pp. 16-38 ◽  
Author(s):  
Samir Srairi
Keyword(s):  
United Arab Emirates ◽  
Composite Index ◽  
Gulf Cooperation Council ◽  
Risk Information ◽  
Rate Of Return ◽  
Islamic Banks ◽  
Risk Disclosure ◽  
Gulf Region ◽  
Corporate Risk ◽  
Level Of Risk

The paper develops a framework to explore the risk disclosure practices of 29 Islamic banks operating in the Gulf Cooperation Council countries over the period of 2013-2016 and examines the potential factors which might be affecting risk disclosure. To analyze the level of risk disclosure, the paper develops a composite index by using the content analysis technique. We also employ OLS technique to examine factors affecting Islamic banks’ risk disclosure. The results indicate a very high difference in risk disclosure between countries. Only two countries, the United Arab Emirates and Bahrain, have a higher level of risk disclosure. The findings also suggest that reporting on some risk disclosure types especially displaced commercial risk and rate of return risk is very low. The regression results show that Islamic banks with a stronger set of corporate governance mechanisms and an active Shariah board appear to disclose more risk information. Other factors that influence risk disclosure practices of Islamic banks are bank size, leverage, cross-border listings and the level of political and civil regression. The study recommends that Islamic banks have to revise their communication strategies and provide more risk information related to rate of return risk and display commercial risk. In addition, GCC regulators should establish risk disclosure regulations which have to become mandatory for all Islamic banks. To the best of our knowledge, the paper provides the first analysis related to the determinants of corporate risk disclosures of Islamic banks in the Arab Gulf region.

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