scholarly journals Comments of the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Staff Consultation Paper, Auditing Accounting Estimates and Fair Value Measurements

2015 ◽  
Vol 9 (1) ◽  
pp. C1-C11 ◽  
Author(s):  
John Abernathy ◽  
Karl E. Hackenbrack ◽  
Jennifer R. Joe ◽  
Mikhail Pevzner ◽  
Yi-Jing Wu
Keyword(s):  
Fair Value ◽  
Data Availability ◽  
Public Companies ◽  
The Public ◽  
Auditing Standards ◽  
Accounting Estimates ◽  
Fair Value Measurements ◽  
Consultation Paper

SUMMARY Recently, the Public Companies Accounting Oversight Board (PCAOB) solicited public comments on its Staff Consultation Paper Auditing Accounting Estimates and Fair Value Measurements. This commentary summarizes the contributors' views on the various questions asked in the PCAOB Staff Consultation Paper. Our comments submitted to the PCAOB appear below. Data Availability: The invitation to comment (which invited comments through November 4, 2014), with links to the consultation paper, is available at: http://pcaobus.org/Standards/Pages/SCP _ Accounting _ Estimates _ Fair_Value.aspx

scholarly journals Comments of the Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Reproposed Auditing Standard on Related Parties

2013 ◽  
Vol 7 (2) ◽  
pp. C23-C29 ◽  
Author(s):  
Natalia Mintchik ◽  
Mikhail Pevzner ◽  
Gregory Sierra
Keyword(s):  
Data Availability ◽  
Public Companies ◽  
The Public ◽  
Related Information ◽  
Auditing Standards

SUMMARY On May 7, 2013, the Public Companies Accounting Oversight Board (PCAOB) solicited public comments on its reproposed exposure draft of the Auditing Standard on Related Parties (Docket 038: Proposed Auditing Standard on Related Parties and Related Amendments to PCAOB Auditing Standards). The two-month comment period ended on July 8, 2013. This commentary summarizes the contributors' views on this exposure draft. Data Availability: The exposure draft and other related information is available at: http://pcaobus.org/Rules/Rulemaking/Pages/Docket038.aspx

Extreme Estimation Uncertainty in Fair Value Estimates: Implications for Audit Assurance

2012 ◽  
Vol 31 (1) ◽  
pp. 127-146 ◽  
Author(s):  
Brant E. Christensen ◽  
Steven M. Glover ◽  
David A. Wood
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Fair Value ◽  
Data Availability ◽  
Future Research ◽  
Net Income ◽  
Public Companies ◽  
Estimation Uncertainty ◽  
Income Statement ◽  
Auditing Standards

SUMMARY The overall complexity and estimation uncertainty inherent in financial statements have increased in recent decades; however, the related reports and services have changed very little, including the format of the balance sheet and income statement, the content in the auditor's report, and the level and nature of assurance provided on estimates. We examine estimates reported by public companies and find that fair value and other estimates based on management's subjective models and inputs contain estimation uncertainty or imprecision that is many times greater than materiality. Importantly, changes in the estimates often impact net income; consequently, the extreme estimation uncertainty also resides in measures such as earnings per share. We do not question the value audits provide to the marketplace, the importance of fair value reporting, or the ability of auditors to deploy up-to-date valuation and auditing techniques. Rather, we suggest that the convergence of relatively recent events is placing an increasingly difficult, and perhaps in some cases unrealistic, burden on auditors. We consider whether the convergence of events in regulation and standard setting may have outstripped auditors' ability to provide the level and nature of assurance currently required on estimates with extreme estimation uncertainty by auditing standards and regulators. We discuss potential changes to financial reporting and auditing standards that may improve the information provided to users and also address the concerns we raise. Finally, we suggest avenues for future research that may be fruitful in addressing how changes to standards would influence the behavior of preparers, auditors, and users. JEL Classifications: M4; M40; M41; M42. Data Availability: All data are publicly available.

scholarly journals The Auditing Standards Committee of the Auditing Section of the American Accounting Association is Pleased to Provide Comments on PCAOB Staff Consultation Paper No. 2015-01, The Auditor's Use of the Work of Specialists

2015 ◽  
Vol 9 (2) ◽  
pp. C18-C37 ◽  
Author(s):  
Jennifer R. Joe ◽  
Diane J. Janvrin ◽  
Dereck Barr-Pulliam ◽  
Stephani Mason ◽  
Marshall K. Pitman ◽  
...  
Keyword(s):  
Data Availability ◽  
Accounting Firms ◽  
Economic Implications ◽  
The Public ◽  
Public Company ◽  
Auditing Standards ◽  
Potential Improvement ◽  
Consultation Paper ◽  
Current Practices

SUMMARY On May 28, 2015 the Public Company Accounting Oversight Board (hereafter, the Board) issued Staff Consultation Paper No. 2015-01 (hereafter, the Staff Consultation Paper) to seek information and input on the potential need to improve standards related to the auditor's use of the work of specialists. The Board requested input from investors, accounting firms, specialists, companies, and others (such as academics) about (1) current practices, (2) the potential need for changes, and (3) possible alternative regulatory approaches, and any associated economic implications, for potential improvement in standards related to oversight and assessing the objectivity of employed and engaged specialists. The comment period ended July 31, 2015. This commentary summarizes the contributors' views on selected questions posed in the Staff Consultation Paper. Data Availability: The invitation to comment (through July 31, 2015), with links to the Consultation Paper, is available at: http://www.pcaobus.org/Standards/Pages/SCP_Specialists.aspx

Compensation Disclosures and Corporate Governance through Shareholder Voting

2019 ◽  
Vol 32 (3) ◽  
pp. 27-48 ◽  
Author(s):  
Brian Cadman ◽  
Richard Carrizosa ◽  
Xiaoxia Peng
Keyword(s):  
Corporate Governance ◽  
Fair Value ◽  
Data Availability ◽  
Shareholder Voting ◽  
Compensation Committee ◽  
The Public ◽  
Equity Compensation ◽  
Ceo Pay ◽  
Jel Classifications

ABSTRACT There are several measures of equity compensation that may provide shareholders with distinct and useful information for evaluating CEO pay. We examine whether shareholders consider additional disclosures of equity compensation measures beyond the grant date fair value when participating in corporate governance. We find that CEO equity compensation expense, a distinct measure of equity compensation, is a determinant of shareholder voting for management sponsored equity plans and voting for directors that serve on the compensation committee. After controlling for ISS recommendations, we find that voting outcomes remain significantly related to abnormal equity compensation expense. Consistent with shareholders considering the equity compensation expense, we document that firms shorten equity compensation vesting periods when they are no longer required to disclose the equity compensation expense. Our findings suggest that shareholders rely on multiple, distinct measures of equity compensation when participating in corporate governance. JEL Classifications: M12; M52; G34. Data Availability: Data are available from the public sources cited in the text.

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on the PCAOB Rulemaking Docket Matter 029: PCAOB Release No. 2011-007, Improving Transparency Through Disclosure of Engagement Partner and Certain Other Participants in Audits

2012 ◽  
Vol 6 (1) ◽  
pp. C1-C6 ◽  
Author(s):  
Keith L. Jones ◽  
Jagadison K. Aier ◽  
Duane M. Brandon ◽  
Tina D. Carpenter ◽  
Paul Caster ◽  
...  
Keyword(s):  
Exposure Period ◽  
Data Availability ◽  
Audit Report ◽  
Public Accounting ◽  
Accounting Firms ◽  
The Public ◽  
Public Comment ◽  
Public Company ◽  
Public Accounting Firms ◽  
Auditing Standards

SUMMARY In October 2011, the Public Company Accounting Oversight Board (PCAOB or Board) issued a release to solicit public comment on amendments to its standards that would improve the transparency of pubic company audits. The objective of the release was to solicit public comments on a proposed standard that would (1) require registered public accounting firms to disclose the name of the engagement partner in the audit report, (2) amend the Board's Annual Report Form to require registered firms to disclose the name of the engagement partner for each audit report already required to be reported on the form, and (3) require disclosure in the audit report of other independent public accounting firms and other persons that took part in the audit. The PCAOB provided for a 91-day exposure period (from October 11, 2011, to January 9, 2012) for interested parties to examine the release and provide comments. The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below to the PCAOB on PCAOB Rulemaking Docket Matter 029: PCAOB Release No. 2011-007, Improving Transparency Through Disclosure of Engagement Partner and Certain Other Participants in Audits. Data Availability: Information about and access to the release is available at: http://pcaobus.org/Rules/Rulemaking/Docket029/PCAOB_Release_2011-007.pdf

Fair Value Measurements and Audit Fees: Evidence from the Banking Industry

2014 ◽  
Vol 33 (3) ◽  
pp. 33-58 ◽  
Author(s):  
Michael L. Ettredge ◽  
Yang Xu ◽  
Han S. Yi
Keyword(s):  
Positive Association ◽  
Audit Fees ◽  
Fair Value ◽  
Data Availability ◽  
Publicly Traded ◽  
Cost Efficiencies ◽  
Level 3 ◽  
Level 1 ◽  
Fair Value Measurements ◽  
Level 2

SUMMARY: Using publicly traded bank holding company data from 2008 through 2011, this paper documents that the proportions of fair-valued assets held by banks are positively associated with audit fees. The positive association between audit fees and the proportions of total assets that are fair-valued using Level 3 inputs is greater than its positive association with the proportions of total assets that are fair-valued using Level 1 or Level 2 inputs. These results are consistent with a hypothesized scenario in which audit effort increases in the difficulty of verifying asset fair values. We also document that bank specialist auditors, defined as in Behn, Choi, and Kang (2008), charge lower audit fees to bank clients on average, suggesting cost efficiencies passed to clients as lower fees. However, bank expert auditors charge more for auditing the proportions of total assets that are fair-valued. Overall, the results support concerns expressed by some observers that greater use of fair value measurements for financial instruments will trigger increased audit fees. Data Availability: All data used in this study are publicly available from the sources identified in the text.

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Release No. 2013-009, Proposed Rule on Improving the Transparency of Audit: Proposed Amendments to PCAOB Auditing Standards to Provide Disclosure in the Auditor's Report of Certain Participants in the Audit

2014 ◽  
Vol 8 (2) ◽  
pp. C1-C7 ◽  
Author(s):  
Urton L. Anderson ◽  
Lisa Milici Gaynor ◽  
Karl E. Hackenbrack ◽  
Ling Lei Lisic ◽  
Yi-Jing Wu
Keyword(s):  
Data Availability ◽  
Public Accounting ◽  
Accounting Firms ◽  
The Public ◽  
Related Information ◽  
Public Company ◽  
Public Accounting Firms ◽  
Auditing Standards

SUMMARY On December 4, 2013 the Public Company Accounting Oversight Board (PCAOB) solicited public comments on its reproposed amendments to its standards that would improve the transparency of public company audits. The amendments would require (1) disclosure in the auditor's report of the name of the engagement partner, and (2) disclosure in the auditor's report of the names, locations, and extent of participation of other independent public accounting firms that took part in the audit and the locations and extent of participation of other persons not employed by the auditor that took part in the audit. The comment period initially ended on February 3, 2014, but was subsequently extended to March 17, 2014. This commentary summarizes the contributors' views on these amendments. Data Availability: The exposure drafts of the proposed and reproposed rules and related information are available at: http://pcaobus.org/Rules/Rulemaking/Pages/Docket029.aspx

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Rulemaking Docket Matter No. 37: PCAOB Release No. 2011-006, Concept Release on Auditor Independence and Audit Firm Rotation

2012 ◽  
Vol 6 (1) ◽  
pp. C15-C27 ◽  
Author(s):  
Keith L. Jones ◽  
Jagadison K. Aier ◽  
Duane M. Brandon ◽  
Tina D. Carpenter ◽  
Lisa M. Gaynor ◽  
...  
Keyword(s):  
Exposure Period ◽  
Auditor Independence ◽  
Data Availability ◽  
Professional Skepticism ◽  
Audit Firm ◽  
The Public ◽  
Public Comment ◽  
Public Company ◽  
Auditing Standards ◽  
Mandatory Audit Firm Rotation

SUMMARY In August 2011, the Public Company Accounting Oversight Board (PCAOB or Board) issued a concept release to solicit public comment on the potential direction of a proposed standard-setting project on means to enhance auditor independence, objectivity, and professional skepticism. The Concept Release sought comments on and explores in detail the possibility of mandatory audit firm rotation. The PCAOB provided for a 121-day exposure period (from August 16 to December 14, 2011) for interested parties to examine and provide comments on the concept release. The Auditing Standards Committee of the Auditing Section of the American Accounting Association provided the comments in the letter below (dated December 13, 2011) to the PCAOB on PCAOB Rulemaking Docket Matter No. 37: PCAOB Release No. 2011-006, Concept Release on Auditor Independence and Audit Firm Rotation. Data Availability: Information about and access to the release are available at: http://pcaobus.org/Rules/Rulemaking/Docket037/Release_2011-006.pdf

scholarly journals Comments by the Auditing Standards Committee of the Auditing Section of the American Accounting Association on PCAOB Release No. 2015-004, Supplemental Request for Comment: Rules to Require Disclosure of Certain Audit Participants on a New PCAOB Form

2015 ◽  
Vol 10 (1) ◽  
pp. C1-C10 ◽  
Author(s):  
Marcus M. Doxey ◽  
Marshall A. Geiger ◽  
Karl E. Hackenbrack ◽  
Sarah E. Stein
Keyword(s):  
Data Availability ◽  
The Public ◽  
Related Information ◽  
Audit Firms ◽  
Public Company ◽  
Auditing Standards ◽  
New Form

SUMMARY On June 30, 2015 the Public Company Accounting Oversight Board (PCAOB) issued a supplemental request for comment on its 2013 reproposal to require auditors to disclose in the auditor's report the name of the engagement partner and information about certain other participants in the audit. The supplemental request solicited public comments on an alternative to disclosure of this information in the auditor's report, namely that audit firms report (1) the name of the engagement partner, and (2) the names, locations, and extent of participation of other audit participants in a new form (Form AP) to be filed with the PCAOB within 30 days of the date the auditor's report is first included in a document filed with the SEC. The comment period ended on August 31, 2015. This commentary summarizes the participating committee members' views on the alternatives presented in the supplemental request for comment. Data Availability: The exposure drafts of the proposed and reproposed rules, the supplemental request for comment, and related information are available at: http://pcaobus.org/Rules/Rulemaking/Pages/Docket029.aspx

scholarly journals Extreme Estimation Uncertainty and Audit Assurance

2013 ◽  
Vol 7 (1) ◽  
pp. P36-P42 ◽  
Author(s):  
Brant E. Christensen ◽  
Steven M. Glover ◽  
David A. Wood
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Fair Value ◽  
Public Companies ◽  
Estimation Uncertainty ◽  
Auditing Standards

SUMMARY The overall uncertainty inherent in financial statements has increased in recent decades, but the related reports and required level of audit assurance have changed very little. In our study, “Extreme Estimation Uncertainty in Fair Value Estimates: Implications for Audit Assurance” (Christensen et al. 2012a), we examine estimates reported by public companies and find that estimates based on management's subjective models and inputs contain estimation uncertainty that is many times greater than typical audit materiality. We do not question the value that audits provide to the marketplace or the ability of auditors to deploy up-to-date auditing techniques. Rather, we suggest that the convergence of relatively recent events is placing an increasingly difficult and perhaps, in some cases, unrealistic burden on auditors. We discuss potential changes to financial reporting and auditing standards that may improve the information provided to users, and also address the concerns raised in our study.

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