Download or read book Investor Perceptions of Auditor Reports Under Section 404 of the Sarbanes Oxley Act written by Jayanthi Krishnan and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Section 404 of the Sarbanes-Oxley Act requires firms to assess the effectiveness of internal controls over financial reporting and auditors to express an opinion on the effectiveness of such internal controls. We examine whether the first-time inclusion of additional audited information in Section 404 company filings were associated with higher earnings response coefficients (ERC) for accelerated filers. We find that the ERCs of companies with clean internal control reports were greater in the SOX 404 year of adoption than in the previous year. However, there is no difference in the ERCs in the two years for companies with material weaknesses. We interpret these results as indicating that even clean Section 404 reports - which form a majority of all internal control reports - contribute positively to investor perceptions about the quality of financial reporting.

Download or read book Investor Perceptions of Government Deregulation written by Benjamin W. Hoffman and published by . This book was released on 2020 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the stock market's reaction to events leading up to the Securities and Exchange Commission's (SEC) and Public Company Accounting Oversight Board's (PCAOB) 2007 regulatory changes that reduced the scope of and documentation requirements for assessments of firms' internal controls over financial reporting (ICFR), as required by Section 404 of the Sarbanes-Oxley Act. The stated goal of these regulations was to reduce firms' and auditors' compliance costs with mandatory ICFR assessments, while maintaining the effectiveness of these assessments. We examine abnormal returns surrounding key dates leading to the passage of these regulations and offer two main findings. First, investors reacted negatively on key event dates, suggesting that investors viewed the regulations as likely to reduce financial reporting quality rather than to drive firm and audit efficiencies. Second, this negative market reaction is larger when ICFR effectiveness should matter most - when firms are more complex, have higher litigation risk, and greater fraud risk. In additional analysis, we find that restatements increase in the post-regulation time period, consistent with investors' concerns that the effect of the legislation would be a reduction in ICFR effectiveness. Overall, our results may imply that investors prefer stronger government regulation when it comes to the assessments of a firm's internal controls over financial reporting.

Download or read book Consequences of the Sarbanes Oxley Act Financial Accounting and Reporting Quality Capital Market written by Carolin Peters and published by Grin Publishing. This book was released on 2017-12-22 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2017 in the subject Business economics - Accounting and Taxes, grade: 1,7, University of Potsdam, language: English, abstract: The Sarbanes-Oxley Act (SOX) was introduced by President George W. Bush in the year 2002. This regulation changed disclosure and reporting requirements and aims to increase trust of the investors in capital markets again, after facing several balance and accounting scandals between the years 2000 and 2002, for example at Enron and WorldCom . The SOX affects companies with a registration at the Securities and Exchange Commission (SEC). There are two sections that are considered having a high impact on the corporate governance of complying firms, Section 302 (SOX 302) and Section 404 (SOX 404). SOX 302 - "Corporate Responsibility for Financial Reports"- demands the executives to assess whether firms' financial statements represent the financial situation and the results of the operations and the period. Executives should design, establish and maintain internal controls. An evaluation of the effectiveness, disclosures of deficiencies concerning internal controls, frauds et cetera is necessary (SOX, 2002, Section 302). SOX 404 - "Management Assessment of Internal Controls"- extends prior requirements and demands that the company's external auditor must report on the reliability of management's assessment of internal control every fiscal year. It also requires an annual attestation by the management that evaluates the reliability of financial statements (SOX, 2002, Section 404). Especially SOX 404 is considered a cost driver of the SOX and demands significant changes in financial reporting. Aim of SOX 302 and 404 is to improve internal controls, and to reduce opportunistic behaviour of executives. Prior studies show evidence that there seem to be differences between the perceived benefits and the target effects of the SOX, for example regarding audit quality after the SOX. Furthermore, there is a discussion question

Download or read book A Note on Pre Sarbanes Oxley Act Users and Auditors Perceptions of a Limitations Paragraph in the Auditor s Internal Control Report written by Benjamin P. Foster and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The auditor's internal control report format prescribed by the Auditing Standards Board (ASB) and the Public Company Accounting Oversight Board (PCAOB) includes a limitations paragraph. This study examines the impact of a limitations paragraph on users' and auditors' perceptions about readability of the report, reliability provided by the report over financial reporting, and the auditors' exposure to liability. The study uses data obtained from a field experiment conducted (with 122 audit partners and managers, and 123 professionals from the financial community) in 1991 in connection with auditors' internal control reporting. This data set should provide input for regulators to evaluate the PCAOB prescribed internal control report format, because many of the expectations gap issues experienced in the 1970s and 1980s parallel those currently faced. Analyses indicate that the limitations paragraph may be perceived by users as providing less than a reasonable degree of assurance, and that the internal control report format without the limitations paragraph (structured along the lines of the SAS 58 auditors' standard report) would significantly enhance users' perceptions about the report's readability, without increasing the liability as perceived by auditors. Policy-making bodies may find the results and approach taken in this study useful to evaluate report formats for assurance services that will strike a balance between user needs and auditors' exposure to liability.

Download or read book SarbanesOxley at four protecting investors and strengthening markets hearing written by and published by DIANE Publishing. This book was released on with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Investor Perceptions of the Earnings Quality Consequences of Hiring an Affiliated Auditor written by William R. Baber and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Sarbanes-Oxley Act of 2002 (SOX) proscribes so-called “affiliated hires” of financial executives. More specifically, SOX requires that firms wait at least one year before hiring an individual recently employed as a member of the firm's external audit team. The intent of the regulation is to reduce the perceived loss of auditor independence due to affiliated hiring. SOX provisions also require that firms establish fully independent audit committees and disclose the identity of directors with financial expertise. Using a sample of firms that employ new financial executives during the period leading up to SOX, we find that earnings response coefficients (ERCs) computed using quarterly data decline following hires of individuals recently employed by the firm's external auditor, but ERCs do not decline following hires of comparably qualified financial executives not recently employed by the external auditor. We also find that ERC declines following affiliated hires are statistically significant for firms with audit committee compositions inconsistent with SOX regulation, but not for firms with audit committees consistent with SOX regulation subsequently imposed. Further investigation using measures of earnings quality employed in prior studies suggests that the documented differences in ERC changes are attributable to perceived, rather than real, changes in earnings quality following affiliated hires.

Download or read book Sarbanes Oxley Act in Perspective written by and published by . This book was released on 2007 with total page 1046 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Auditor Going Concern Reporting written by Marshall A. Geiger and published by Routledge. This book was released on 2021-06-09 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt: Auditor reporting on going-concern-related uncertainties remains one of the most challenging issues faced by external auditors. Business owners, market participants and audit regulators want an early warning of impending business failure. However, companies typically do not welcome audit opinions indicating uncertainty regarding their future viability. Thus, the auditor’s decision to issue a "going concern opinion" (GCO) is a complex and multi-layered one, facing a great deal of tension. Given such a rich context, academic researchers have examined many facets related to an auditor’s decision to issue a GCO. This monograph reviews and synthesizes 182 recent GCO studies that have appeared since the last significant review published in 2013 through the end of 2019. The authors categorize studies into the three broad areas of GCO: (1) determinants, (2) accuracy and (3) consequences. As an integral part of their synthesis, they summarize the details of each study in several user-friendly tables. After discussing and synthesizing the research, they present a discussion of opportunities for future research, including issues created or exacerbated as a result of the global COVID-19 pandemic. This monograph will be of assistance to researchers interested in exploring this area of auditor responsibility. It will also be of interest to auditing firms and individual practitioners wanting to learn what academic research has examined and found regarding this challenging aspect of audit practice. Auditing standard-setters and regulators will find it of interest as the authors review numerous studies examining issues related to audit policy and regulation, and their effects on GCO decisions. The examination of GCO research is extremely timely given the financial and business disruption caused by the worldwide COVID-19 pandemic. This unprecedented global event has caused companies, auditors and professional bodies to revisit and reassess their approach to going concern, and to think even more deeply about this fundamental business imperative.

Download or read book The Emergence of Second Tier Auditors in the US written by Cory A. Cassell and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine changes in the association between auditor type (Big 4, Second-Tier, and Other non-Big 4) and perceived financial reporting credibility in the wake of events (e.g., Andersen's failure, the implementation of SOX, creation of the PCAOB, etc.) which led to significant growth in Second-Tier client portfolios and increased scrutiny of Second-Tier audit practices. Our results reveal that financial reporting credibility of Second-Tier clients was lower than that of Big 4 clients and was indistinguishable from that of Other non-Big 4 clients pre-Andersen. However, post-Andersen, we find that financial reporting credibility of Second-Tier clients is higher than that of Other non-Big 4 clients and is indistinguishable from that of Big 4 clients. We expect that our results will be of interest to regulators, both in the United States and in the European Union, who have expressed concerns about the current state of competition in the audit market, management and boards of directors that are contemplating switching to a Second-Tier audit firm, and academics investigating quality differences among audit firm types.

Download or read book Study of the Sarbanes Oxley Act of 2002 Section 404 written by Barry Leonard and published by DIANE Publishing. This book was released on 2011-05 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Public Co. Accounting Reform and Investor Protection Act, otherwise known as the Sarbanes-Oxley Act, was enacted in July 2002 after a series of high-profile corp. scandals involving Enron and Worldcom. Section 404(a) of the Act requires management to assess and report on the effectiveness of internal control over financial reporting. It also requires that an independent auditor attest to management¿s assessment of the effectiveness of those controls. Efforts to reduce the costs while retaining the effectiveness of compliance resulted in a series of reforms in 2007. This report presents an analysis of data from publicly traded co. collected from a survey of financial exec. of co. with Section 404 experience. Charts. This is a print on demand report.

Download or read book The Effects of Section 404 of Sarbanes Oxley Act of 2002 on the Audit Fees of Foreign Firms Listed on U S Exchanges written by Kam C. Chan and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Section 404 of Sarbanes-Oxley Act requires firms to report on the effectiveness of their internal control over financial reporting. The Securities and Exchange Commission requires foreign large accelerated filers to provide both management and auditor Section 404 reports starting for fiscal years ending on or after July 15, 2006. This study examines the change in audit fees for foreign firms in their first year of providing auditor attestation reports for fiscal years ending between July 15, 2006 and July 14, 2007. During this time period, only foreign large accelerated filers have to provide both management and auditor Section 404 reports. Foreign accelerated filers only have to provide management Section 404 reports and non-accelerated filers do not have to provide any Section 404 report. We find that foreign large accelerated filers have an average of 74% increase in audit fees in this first year of Section 404 compliance, while the foreign accelerated filers and non-accelerated filers only have increases in audit fees of 33% and 42%, respectively. We also find that the increase in audit fees among foreign large accelerated filers is negatively associated with the strength of the legal environment in their home countries.

Download or read book Sarbanes Oxley at Four written by United States. Congress. House. Committee on Financial Services and published by . This book was released on 2007 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Nonprofessional Investors Reactions to the PCAOB s Proposed Changes to the Standard Audit Report written by Brian Todd Carver and published by . This book was released on 2017 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: As part of its efforts to improve the informational value of the standard audit report, the Public Company Accounting Oversight Board (PCAOB) proposed a new auditing standard that would require the auditor to report critical audit matters (CAMs) in the body of the audit report. The proposal met with approval from investor groups, while preparers have suggested the new disclosures could negatively affect the quality of the audit and the informational content of the audit report. This study examines how the proposed standard influences experienced, nonprofessional investors' perception of the readability of the audit report, their valuation judgments, and their evaluations of management's credibility. We find that the disclosure of a CAM negatively impacts the readability of the audit report, but does not, either directly or through its effect on readability, incrementally inform investors' valuation judgments. Instead, investors focused on earnings benchmark performance when making valuation judgements. The disclosure of a CAM does, however, lower investors' perceptions of management's credibility when earnings just meet expectations. Our results suggest that the PCAOB's proposed standard will have a significant, negative effect on the readability of the audit report but only a limited impact on the informational content of the audit report for investors.

Download or read book The International Corporate Governance System written by F. Lessambo and published by Springer. This book was released on 2016-01-26 with total page 476 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive approach to Corporate Governance, Audit Process and Risk Management. Furthermore, it provides an analytical and comprehensive approach of the issues facing governance directors, internal and external auditors, risk managers, and public officials conducting assessments based upon the Report on Standards and Codes.

Download or read book The Auditor s Report and Investor Behavior written by Ralph W. Estes and published by Free Press. This book was released on 1982 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Audit Reports and Stock Markets written by Kim Ittonen and published by University of Vaasa. This book was released on 2009 with total page 211 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tiivistelmä: Tilintarkastuskertomukset ja osakemarkkinat.

Download or read book The Effect of Increased Audit Disclosure on Investors Perceptions of Management Auditors and Financial Reporting written by Marcus Mason Doxey and published by . This book was released on 2013 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: