Financial Reporting Comparability in US Firms Issuing Debt in the US Primary Market

2020 ◽  
Author(s):  
Paula Hill ◽  
Gerald J. Lobo ◽  
Shuo Wang
Keyword(s):  
Financial Reporting ◽  
The Us ◽  
Financial Reporting Comparability

Auditor Appointment Strategy and Intragroup Value Transfers: Evidence From Family Business Groups

2021 ◽  
pp. 0148558X2199265
Author(s):  
Yan-Leung Cheung ◽  
In-Mu Haw ◽  
Weiqiang Tan ◽  
Wenming Wang
Keyword(s):  
Adverse Effect ◽  
Financial Reporting ◽  
Family Business ◽  
Business Groups ◽  
Divide And Conquer ◽  
Alternative Measure ◽  
Family Business Groups ◽  
Audit Effectiveness ◽  
Financial Reporting Comparability

Family business groups (FBGs) typically control several member firms and can hire a single auditor or multiple auditors to audit their member firms. This article examines what type of auditor appointment strategy constrains intragroup value transfers within FBGs. Analyzing related-party transactions (RPTs) within FBGs in Hong Kong, this study provides evidence that FBGs with multiple auditors undertake more intragroup value transfers than FBGs with a single auditor. However, the adverse effect of multiple-auditor appointments is mitigated by a stronger board and higher financial reporting comparability among member firms. Using an alternative measure of intragroup value transfers, we also find that the market perceives multiple-auditor appointments as impairing audit effectiveness. Overall, our findings offer the new insight that controlling families can exploit the appointment of multiple auditors as a “divide and conquer” strategy which undermines the monitoring role of auditors against intragroup value transfers, but stronger corporate governance of member firms can mitigate the adverse effect.

Accounting Standards and Earnings Quality — Evidence from Registered ADRs

2018 ◽  
Vol 21 (04) ◽  
pp. 1850022
Author(s):  
Yaseen S. Alhaj-Yaseen ◽  
Kean Wu ◽  
Leslie B. Fletcher
Keyword(s):  
Financial Reporting ◽  
Earnings Quality ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
High Quality ◽  
Reporting Standard ◽  
International Financial Reporting Standard ◽  
The Us ◽  
Us Gaap

This paper examines the changes in earnings quality of registered American Depositary Receipts (ADRs) as a result of switching accounting standards. We aim to shed light on the potential impact of International Financial Reporting Standard (IFRS) adoption on US firms. A suboptimal approach to achieve this goal is through examination of US firms’ surrogates such as ADRs. Unlike previous studies, we made a distinction between registered and unregistered ADRs and affirmed that registered ADRs are the closest surrogates with which to conduct our analysis because they are exclusively required to adhere to the Securities and Exchange Commission (SEC)’s stringent disclosure requirements. When cross-listing their equity on the US exchanges, foreign issuers can file their financial reports with the SEC using IFRS, US GAAP (generally accepted accounting principles), or their domestic GAAP with reconciliation to US GAAP. An improvement in earnings quality is documented when ADRs adopt US GAAP or IFRS versus domestic GAAP. However, when the comparison is made between US GAAP and IFRS, no difference in earnings quality is documented. These results indicate that switching to high-quality accounting standards is likely to improve earnings quality. This improvement is maximized when the difference between reporting standards is high and minimized if otherwise. Our conclusion is that the adoption of IFRS in the US is unlikely to change earnings quality of local issuers. Moreover, we drew a distinction between reconciliation with and adoption of high-quality accountings standards and find that while the former can enhance earnings quality, the latter can further improve it.

XBRL Tag Extensions and Tax Accrual Quality

2020 ◽  
Author(s):  
Stephanie Walton ◽  
Liu L Yang ◽  
Yiyang Zhang
Keyword(s):  
Financial Reporting ◽  
Relative Rate ◽  
Financial Statements ◽  
Accrual Quality ◽  
Business Reporting ◽  
Prior Literature ◽  
Tax Reporting ◽  
Financial Reporting Comparability

The adoption of eXtensible Business Reporting Language (XBRL) requires management to label all information in their firm's financial statements and corresponding notes with either standardor custom extended tags. While prior literature has found that the rate of customization is associated with increased financial reporting complexity, there could be an unintended, beneficial consequence to tax reporting. We examine how the relative use of tax-related XBRL tag extensions could highlight unique tax activity characteristics, in turn increasing tax accrual quality and improving tax reporting transparency. We find that having a higher relative rate of extended tax tags is associated with higher tax accrual quality. That is, utilizing more tax tag extensions can assist in providing useful tax information, especially when a high number of total XBRL tags are used. Our results also suggest the need to reexamine the standard taxonomy to include more tax-oriented terms to improve financial reporting comparability.

Do Global Audit Firm Networks Apply Consistent Audit Methodologies across Jurisdictions? Evidence from Financial Reporting Comparability

2019 ◽  
Vol 95 (6) ◽  
pp. 151-179 ◽  
Author(s):  
Matthew S. Ege ◽  
Young Hoon Kim ◽  
Dechun Wang
Keyword(s):  
Financial Reporting ◽  
Cash Flows ◽  
International Standards ◽  
Global Network ◽  
Global Networks ◽  
Audit Firm ◽  
Operating Cash Flows ◽  
Audit Firms ◽  
Financial Reporting Comparability

ABSTRACT Brand name audit firms are global networks of local audit firms. These networks claim to enforce consistent audit methodologies across their member firms, which, if true, should systematically affect client financial reporting. We find that clients from different countries have more (less) comparable accruals when they are audited by local audit firms from the same global network (different global networks). Furthermore, inferences are similar when we examine client accrual comparability around audit firm switches induced by the failure of Andersen, which serves as a shock that helps improve identification. In falsification tests, having auditors from the same global network is not associated with differences in operating cash flows. Results also suggest that the role of global network methodologies in global financial reporting comparability is more pronounced across stronger investor protection jurisdictions and across jurisdictions that have adopted International Standards on Auditing. JEL Classifications: M41; M42.

2. The international evolution of accounting

2014 ◽  
Author(s):  
Christopher Nobes
Keyword(s):  
Financial Reporting ◽  
Accounting Information ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Financial Position ◽  
The Us ◽  
Company Directors ◽  
Double Entry

What are the purposes of accounting? How do these purposes affect how accounting works? What is double-entry bookkeeping? ‘The international evolution of accounting’ considers these questions and outlines some examples of how different countries have contributed to the development of accounting. Double-entry bookkeeping, conceived in thirteenth-century Italy, balances the debits and credits. It enables the calculation of profit and the presentation of a business's financial position. Publication of accounting information is required to protect shareholders and creditors from potential malpractice by company directors. The globalization of world business has resulted in International Financial Reporting Standards, now used by around 90 countries. The US use their Financial Accounting Standards Board's ‘generally accepted accounting principles’.

The impact of demographic characteristics of CEOs and directors on audit fees and audit delay

2015 ◽  
Vol 30 (8/9) ◽  
pp. 963-997 ◽  
Author(s):  
Maretno Agus Harjoto ◽  
Indrarini Laksmana ◽  
Robert Lee
Keyword(s):  
Ethnic Minority ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Audit Fees ◽  
Content Type ◽  
Top Executives ◽  
The Us ◽  
Female Ceos ◽  
The Impact

Purpose – The purpose of this study is to examine the impact of gender and ethnicity of CEO and audit committee members (directors) on audit fees and audit delay in the US firms. Design/methodology/approach – Audit-related corporate governance literature has extensively examined the determinants of audit fees and audit delay by focusing on board characteristics, specifically board independence, diligence and expertise. The authors provide empirical evidence that gender and ethnicity diversity in corporate leadership and boardrooms influence a firm’s audit fees and audit delay. Findings – This study finds that firms with female and ethnic minority CEOs pay significantly higher audit fees than those with male Caucasian CEOs. The authors also find that firms with a higher percentage of ethnic minority directors on their audit committee pay significantly higher audit fees. Further, the authors find that firms with female CEOs have shorter audit delay than firms with male CEOs and firms with a higher percentage of female and ethnic minority directors on their audit committee are associated with shorter audit delay. Results indicate that female CEOs and both female and ethnic minority directors are sensitive to the market pressure to avoid audit delay. Research limitations/implications – The results suggest that gender and ethnic diversity could improve audit quality and the firms’ overall financial reporting quality. Practical implications – This study provides insights to regulators and policy-makers interested in increasing diversity within a firm’s board and top executives. Recently, the US Securities and Exchange Commission (SEC) and the European Commission have been pressing publicly traded companies to improve diversity among their directors. This study provides evidence and perspective on how diversity can enhance financial reporting quality measured by audit fees and audit delay. Originality/value – Previous studies have not given much attention on the impact of racial ethnicity in addition to gender characteristics of top executives and audit committee directors on audit fees and audit delay.

Firm Life Cycle and Financial Reporting Comparability

2016 ◽  
Vol 45 (1) ◽  
pp. 67
Author(s):  
Haewon Moon ◽  
Eunhye Jo ◽  
Kwan Choi
Keyword(s):  
Life Cycle ◽  
Financial Reporting ◽  
Firm Life Cycle ◽  
Financial Reporting Comparability

scholarly journals Influence of the Sarbanes-Oxley Act on Financial Reporting Quality: An Overview of EU Firms Cross-Listed in the USA

2021 ◽  
Author(s):  
Ujkan Bajra ◽  
Rrustem Asllanaj
Keyword(s):  
Financial Reporting ◽  
Internal Control ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Publicly Traded ◽  
Publicly Traded Companies ◽  
Sarbanes Oxley ◽  
Novel Approach ◽  
The Us ◽  
The Usa

Abstract This paper investigate whether compliance with the Sarbanes–Oxley Act of 2002 (SOX) Sect. 302 (financial reporting) and 404 (internal controls) enhances financial reporting quality (FRQ). This study focuses on EU publicly traded companies that are cross-listed in the US markets. Using a novel approach with respect to operationalization of the SOX, the empirical research integrated into this paper advances the understanding of financial reporting quality for both practitioners and policymakers. The study argues that financial reporting quality increased after SOX entered into force but, notably, we find that FRQ improves with compliance with SOX302 but not with SOX404. Examination of the latter relationship at the subsection level also reveals that compliance with certain SOX requirements is not satisfactory. We find that three out of six subsections of SOX302 are directly associated with financial reporting, while subsections (1), (5) and (6) of SOX302 are not related with FRQ, indicating that the management team, albeit not entirely, provides a reliable financial reporting systems. We also find that compliance with some SOX404’s subsections has been relatively low (i.e. subsections (1) and (3) of SOX404)), suggesting that corporations have not established and are not maintaining suitable internal control systems over financial reporting.

Sign in / Sign up

Export Citation Format

Share Document