Auditor Attention to and Judgments of Aggressive Financial Reporting

1999 ◽  
Vol 37 (1) ◽  
pp. 167 ◽  
Author(s):  
Fred Phillips
Keyword(s):  
Financial Reporting ◽  
Aggressive Financial Reporting

scholarly journals The Attenuating Effect of Intelligent Agents and Agent Autonomy on Managers' Ability to Diffuse Responsibility for and Engage in Earnings Management

2020 ◽  
Vol 34 (4) ◽  
pp. 143-164
Author(s):  
Peter C. Kipp ◽  
Mary B. Curtis ◽  
Ziyin Li
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Intelligent Agents ◽  
Autonomous Agents ◽  
Ethical Conduct ◽  
Human Agent ◽  
Perception Of Control ◽  
Reporting Decisions ◽  
Aggressive Financial Reporting

SYNOPSIS Advances in IT suggest that computerized intelligent agents (IAs) may soon occupy many roles that presently employ human agents. A significant concern is the ethical conduct of those who use IAs, including their possible utilization by managers to engage in earnings management. We investigate how financial reporting decisions are affected when they are supported by the work of an IA versus a human agent, with varying autonomy. In an experiment with experienced managers, we vary agent type (human versus IA) and autonomy (more versus less), finding that managers engage in less aggressive financial reporting decisions with IAs than with human agents, and engage in less aggressive reporting decisions with less autonomous agents than with more autonomous agents. Managers' perception of control over their agent and ability to diffuse their own responsibility for financial reporting decisions explain the effect of agent type and autonomy on managers' financial reporting decisions.

Tax Reporting Aggressiveness and Its Relation to Aggressive Financial Reporting

2009 ◽  
Vol 84 (2) ◽  
pp. 467-496 ◽  
Author(s):  
Mary Margaret Frank ◽  
Luann J. Lynch ◽  
Sonja Olhoft Rego
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Tax Law ◽  
Reporting Incentives ◽  
Reporting Behaviors ◽  
Aggressive Financial Reporting ◽  
Tax Reporting ◽  
Better Than

ABSTRACT: We investigate the association between aggressive tax and financial reporting and find a strong, positive relation. Our results suggest that insufficient costs exist to offset financial and tax reporting incentives, such that nonconformity between financial accounting standards and tax law allows firms to manage book income upward and taxable income downward in the same reporting period. To examine the relation between these aggressive reporting behaviors, we develop a measure of tax reporting aggressiveness that statistically detects tax shelter activity at least as well as, and often better than, other measures. In supplemental stock returns analyses, we confirm that the market overprices financial reporting aggressiveness. We also find that the market overprices tax reporting aggressiveness, but only for firms with the most aggressive financial reporting.

An Examination of Corporate Tax Shelter Participants

2009 ◽  
Vol 84 (3) ◽  
pp. 969-999 ◽  
Author(s):  
Ryan J. Wilson
Keyword(s):  
Financial Reporting ◽  
Abnormal Returns ◽  
Wealth Creation ◽  
Corporate Tax ◽  
Managerial Opportunism ◽  
Reporting Practices ◽  
Tax Shelter ◽  
Ex Post ◽  
Tax Shelters ◽  
Aggressive Financial Reporting

ABSTRACT: Recent evidence suggests that corporate tax shelters have become important corporate instruments for reducing tax burden. Based on a sample of identified tax shelter participants, I develop a profile of the type of firm that likely engages in tax sheltering. The model detects tax shelter participants through the use of variables predicted to be either affected by or associated with tax sheltering. I find that firms actively engaged in tax sheltering exhibit larger ex post book-tax differences and more aggressive financial reporting practices. Using this model of tax shelter firm characteristics, I identify a broad sample of predicted tax shelter firms from the population of firms. I then examine whether tax sheltering is associated with wealth creation for shareholders or with managerial opportunism. I find that active tax shelter firms with strong corporate governance exhibit positive abnormal returns. This finding is consistent with tax sheltering being a tool for wealth creation in well-governed firms.

scholarly journals AGRESIVITAS PELAPORAN KEUANGAN DAN PENGHINDARAN PAJAK

2021 ◽  
Vol 5 (2) ◽  
pp. 90-101
Author(s):  
Andyan Zakiy Pradhana ◽  
Arif Nugrahanto
Keyword(s):  
Financial Reporting ◽  
Critical Analysis ◽  
Tax Avoidance ◽  
Tax Compliance ◽  
Financial Statements ◽  
Financial Reports ◽  
Aggressive Financial Reporting ◽  
High Level ◽  
Business Sectors ◽  
Positive Effect

Identification of tax avoidance is one of the substantial issues for tax authorities. Success in this stage ensure optimal tax compliance. To do that, financial statements become the object of critical analysis. This study seeks to identify the effect of financial statements (aggressive) on tax avoidance. The mineral and coal mining sector is chosen as the sample because it is one of the business sectors with a fairly high level of tax avoidance. There are 26 companies on the IDX that are the samples of this study. By regressing fixed effect panel data in the form of financial reports for 2012-2018, the results show that aggressive financial reporting has a positive effect on tax avoidance. With a confidence level of 99%, every 1% increase in the level of aggressiveness of financial reporting equivalent to an increase in tax avoidance efforts of 4.6%. For tax authorities, these findings can be used to assess the risk of non-compliance by taxpayers.

The Effects of Client Status and the Auditor's Presentation of Multiple Estimation Alternatives on Client Financial Reporting Aggressiveness

2020 ◽  
Vol 32 (2) ◽  
pp. 1-14
Author(s):  
Sanaz Aghazadeh ◽  
Andrew M. Collins ◽  
Chad M. Stefaniak
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Accounting Estimates ◽  
Aggressive Financial Reporting

ABSTRACT Accounting estimates are highly subjective and multiple estimation alternatives often exist for a single account. When addressing audit-related adjustments with clients, auditors must decide whether to discuss all possible estimation alternatives or approach the client with only a single, auditor-preferred estimation alternative. In an experiment with experienced CFOs and controllers, we find clients with relatively higher status (operationalized as those with a CPA license) take more aggressive financial reporting positions when the auditor approaches the client with multiple adjustment options based on various estimation alternatives. Our study provides the first evidence that client status is a significant factor in auditor-client negotiations. We also demonstrate how auditors' approach to client negotiations involving multiple allowable estimation alternatives can influence audit quality.

Construal of self and Chinese accountants’ aggressive financial reporting judgments

2017 ◽  
Vol 30 (8) ◽  
pp. 1771-1795 ◽  
Author(s):  
Peipei Pan ◽  
Chris Patel
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Cultural Influences ◽  
Significant Loss ◽  
Reporting Standards ◽  
Personality Variable ◽  
Content Type ◽  
Personality Variables ◽  
Financial Reporting Standards ◽  
Aggressive Financial Reporting

Purpose The purpose of this paper is to respond to calls in the literature to examine personality variables which may provide sharper insights into accountants’ judgments in applying principles-based International Financial Reporting Standards (IFRS). This paper contributes to the literature on the global convergence of financial reporting by examining the influence of an important personality variable, construal of self, on Chinese accountants’ aggressive financial reporting judgments. Design/methodology/approach A between-subjects quasi-experiment was applied. In total, 122 Chinese professional accountants were categorized as either independents or interdependents, on the basis of their scores on construal of self scales. Subjects made their consolidation reporting judgments in the manipulated situations based on the financial performance of the investee entity, which refers to the situation where the investee entity makes a significant profit or a significant loss in the reporting period. Findings Compared to interdependent accountants, independent accountants used the flexibility allowed in the principles-based standards to make more aggressive consolidation reporting judgments. Also, adoption of IFRS may not necessarily ensure consistent judgments even within China. Originality/value This paper provides empirical evidence of the importance of construal of self in examining accountants’ aggressive judgments. The authors suggest that it may be premature to assume that adoption of IFRS will lead to comparable financial reporting. The findings are relevant to researchers who are interested in examining personality and cultural influences on accountants’ judgments both within and across countries. Companies and organizations may incorporate appropriate strategies to recruit and train independent and interdependent accountants, particularly by addressing the influence of construal of self on aggressive financial reporting judgments.

Attention to Evidence of Aggressive Financial Reporting and Intentional Misstatement Judgments: Effects of Experience and Trust

2007 ◽  
Vol 19 (1) ◽  
pp. 215-229 ◽  
Author(s):  
Jacob M. Rose
Keyword(s):  
Financial Reporting ◽  
Experimental Analysis ◽  
Reporting Practices ◽  
Specific Experience ◽  
Aggressive Financial Reporting ◽  
Dispositional Trust

This study extends prior research by examining the effects of dispositional trust, induced skepticism, and fraud-specific audit experience on attention to aggressive financial reporting practices and judgments of potential misstatement. In an experimental analysis using 125 practicing auditors, this study finds that auditors who are less trusting of others attend more to evidence of aggressive reporting than do more trusting auditors, and higher levels of induced skepticism increase attention to aggressive reporting. Further, auditors who pay more attention to evidence of aggressive reporting are more likely to believe that intentional misstatement occurred. General audit experience was not a predictor of auditors' attention to aggressive reporting or auditors' judgments about intentional misstatements. Auditors with more fraud-specific experience, however, were more likely than auditors with less fraud-specific experience to believe that intentional misstatement had occurred when evidence of aggressive reporting exists.

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