Download or read book The Sarbanes Oxley Act Accounting and Conservatism written by Denis Stein and published by GRIN Verlag. This book was released on 2012-10-15 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2012 in the subject Business economics - Controlling, grade: 2,0, The FOM University of Applied Sciences, Hamburg, course: Master of Business Administration, language: English, abstract: At the beginning of this millenium several economic scandals like Enron or WorldCom shocked the US economy and the stock exchanges around the world. To restore the trust of the investors the US government enacted the Sarbanes-Oxley Act. This act increased the demands on the financial reporting of companies registered at the US Securities and Exchange Commission. This act possibly changed also the accounting measurement practices that are less conservative in the US than in other countries. This assignment analysis if the accounting measurement practices changed to a more conservative accounting after the enactment of the Sarbanes-Oxley Act. This analysis is mainly based on section 404 of this act. Beyond that the assignment gives an overview about the Sarbanes-Oxley Act itself and the value of conservative accounting.

Download or read book Accounting Conservatism and Income Smoothing After the Japanese Sarbanes Oxley Act written by Ian Eddie and published by . This book was released on 2018 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Lobo and Zhou (2006) find an increase in accounting conservatism following the Sarbanes-Oxley Act of 2002. In Japan, the Financial Instruments and Exchange Act of 2006, the so-called Japanese Sarbanes-Oxley Act (J-SOX), was implemented for fiscal years ending on or after March 31, 2009. Consistent with Lobo and Zhou (2006), we first investigate the change in accounting conservatism following J-SOX and demonstrate an increase in accounting conservatism in the post-J-SOX period. In particular, using the Basu (1997) measure of conservatism, we find that the degree to which firms incorporate losses more quickly than gains in their earnings is greater in the post-J-SOX period. We also find that firms report lower discretionary accruals in the post-J-SOX period. In addition to accounting conservatism, this study focuses on income smoothing and demonstrates a decrease in income smoothing following J-SOX. The evidence suggests that J-SOX may have altered managers' accounting discretionary behavior.

Download or read book Accounting Conservatism Cost of Capital and Fraudulent Financial Reporting written by Karin A. Petruska and published by . This book was released on 2008 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting conservatism is often described as an equilibrium reaction used to moderate a decrease in value resulting from information asymmetry, uncertainty, or private information that occurs between investors and managers (LaFond and Watts, 2008). Although a qualitative characteristic of the FASB conceptual framework, standard setters have addressed concerns that accounting conservatism may lack neutrality and can lead to biased firm reporting that misrepresents economic conditions. Based on the theoretical framework of litigation proposed by Watts (2003), I address whether firms with higher thresholds of litigation risk are inclined to use higher levels of asymmetric timeliness as a choice in reducing information asymmetry. The motivation for this study is to extend the concept of accounting conservatism to a setting that investigates firms with egregious levels of litigation risk to determine if they exhibit higher levels of accounting conservatism. In terms of regulation, the Sarbanes-Oxley Act was enacted to increase transparency and disclosure in financial reporting and represents a more transparent shift in the information environment. I examine whether the asymmetric timeliness of earnings and firm-specific measures of accounting conservatism are more pronounced for alleged fraud firms in the post-SOX period, when litigation risk is expected to increase. In terms of standard setting, I examine if goodwill impairment is higher for firms accused of alleged fraudulent activity and whether these firms utilizing goodwill impairment maintain a higher degree of accounting conservatism. I investigate whether accounting conservatism, as a disclosure mechanism, can mitigate an increase in the cost of equity capital, even under the auspices of alleged fraud. Additionally, this study addresses the issue of whether there are contagion effects of asymmetric timeliness for firms in similar industries as the alleged fraud firms. The results suggest that the threat of litigation for alleged fraud firms invokes a higher degree of asymmetric timeliness surrounding the alleged fraud manipulation date in the financial statements vis-á-vis a control sample and is driven by the accrual component of earnings. The degree of asymmetric timeliness of earnings remains higher in the post-SOX period for alleged fraud firms. However, the relation between firm-specific measures of accounting conservatism and the post-SOX period vary depending on the measure used. Goodwill impairment is higher for firms accused of alleged fraudulent activity and the asymmetric timeliness of earnings is greater for alleged fraud firms that utilize goodwill impairment. The relation between accounting conservatism and the cost of equity capital varies as to the measure used to construct the cost of equity capital. This suggests that firms are not able to influence the cost of equity capital through a more conservative disclosure policy. Also, there do not appear to be industry contagion effects. The findings lend support as to the role of accounting conservatism and why the FASB should continue to monitor its increasing effects. The results can provide support to investors, analysts, and academicians in adjusting for the effects of conservatism and to auditors in understanding how accounting conservatism could be used by firms and the multiple ways that it can be measured.

Download or read book Essentials of Sarbanes Oxley written by Sanjay Anand and published by John Wiley & Sons. This book was released on 2011-07-05 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: What is the importance of Sections 302 and 404? "Implementing" SOX using COSO and COBIT SOX's impact on foreign companies andnonprofits Achieving cost-effective sustainable compliance The evolving role of the SEC and the PCAOB Praise for ESSENTIALS OF SARBANES-OXLEY "Since its enactment in 2002, the Sarbanes-Oxley Act and its Section 404 internal control requirements have caused many a great deal of 'pain and suffering!' With its emphasis on what Sanjay Anand frequently reminds us is the 'real world,' this book should reduce some of that pain as it provides a practical and very realistic approach for an effective implementation of Sarbanes-Oxley internal control processes. The book has references to the new changes in auditing standards and emphasizes achieving sustainable compliance-practical and realistic approaches." —Robert R. Moeller, President, Compliance & Control Systems, Inc. "Sanjay Anand has provided what every busy executive needs, a concise overview of Sarbanes-Oxley Act essentials. His book is a terrific reference text that I recommend to anyone who needs to quickly understand the substance of the Act." —Scott Green, Chief Administration Officer Weil, Gotshal & Manges LLP "If you are looking to put together the various pieces-finance, accounting, audit, legal, IT, ethics-and understand the 'big picture' of the Sarbanes-Oxley Act, there is no other book like this. With 'Tips & Techniques' and 'In the Real World' examples, this book brings lively, practical, tangible, and compressible dimensions to a complex, multifaceted (and often dry) subject. This is essential reading for those new to the process and old hands going into their third and fourth years of SOX. It will also help those in other countries adopting SOX-like internal controls and regulations." —Dr. Anthony Tarantino, Governance, Risk, and Compliance Center of Excellence, IBM, Financial Services Sector, Silicon Valley and New York City Written by Sanjay Anand, one of the world's leading corporate governance, risk management, and regulatory compliance experts, this simple to use book is designed with appreciation for demanding professional obligations, with information always easy to find and at your fingertips. Essentials of Sarbanes-Oxley equips you with the knowledge you and all your company members need to initiate a SOX project, allocate a budget, and help your company achieve compliance.

Download or read book Accounting Conservatism and the Stock Market written by Carlo D’Augusta and published by Springer Nature. This book was released on with total page 89 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Does the SOX Definition of an Accounting Expert Matter the Association between Audit Committee Directors Accounting Expertise and Accounting Conservatism written by Gopal V. Krishnan and published by . This book was released on 2007 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Sarbanes-Oxley Act mandates the disclosure of whether at least one member of the audit committee is a financial expert. However, the final version of the rule adopted by the SEC defined experts to include both accounting and non-accounting experts. Did the SEC do the right thing? Are the non-accounting experts just as competent as the accounting experts in enhancing the quality of financial reporting? For a sample of Samp;P 500 firms we examine whether the audit committee's financial expertise is associated with accounting conservatism, a fundamental characteristic of financial reporting. Our results suggest that an audit committee's financial expertise is positively associated with conservatism when financial expertise is defined to include only accounting experts. Our findings are consistent with the notion that accounting expertise contributes to greater monitoring by the members of the audit committee which in turn enhances conservatism. However, this finding is conditional upon the firm's overall corporate governance, i.e., in weak boards accounting financial expertise is ineffective in promoting conservative accounting. Our findings have implications for regulators, corporate boards, and the accounting profession. Our findings are also relevant to regulators in other countries who are considering adopting measures to enhance corporate governance, particularly the effectiveness of the audit committees.

Download or read book Understanding Accounting Academic Research written by Stephen R. Moehrle and published by Emerald Group Publishing. This book was released on 2013-06-25 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting scandals such as Enron and WorldCom ushered in several regulatory overhauls including Sarbanes-Oxley. This monograph summarizes and synthesize a decade of academic research to develop an evolving dominant explanation around these myriad changes.

Download or read book Conservatism in Accounting written by Ross L. Watts and published by . This book was released on 2003 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines conservatism in accounting. Conservatism is defined as the differential verifiability required for recognition of profits versus losses. In its extreme form the definition incorporates the traditional conservatism adage: quot;anticipate no profit, but anticipate all losses.quot; Despite criticism from many quarters, including standard-setters, conservatism appears not only to have survived in accounting for many centuries, but also to have increased in the last 30 years.The paper lays out the various alternative explanations for conservatism: contracting; shareholder litigation; taxation and accounting regulation (e.g., SEC and FASB). It also summarizes the empirical evidence on the existence of conservatism and the extent to which it is consistent with the alternative explanations for conservatism. The evidence is consistent with both the existence of conservatism and its increase in recent years. Contracting and shareholder litigation explanations appear to be important in these results. The evidence on the effect of taxation and regulation is weaker, but is still consistent with those explanations playing a role. Earnings management could also produce some of the evidence on conservatism, but it is unlikely to be the major explanation.The explanations and evidence have important implications for accounting regulators (SEC and FASB). First, the contracting explanation implies that conservatism will exist even in the absence of formal contractual use of financial statements. As long as income and net asset measures have meaning and are used in a way that affects management's welfare, conservatism is likely to be an optimal accounting principle. Absent differential verifiability, financial measures such as income and net assets are likely to be subject to sufficient manipulation to render them meaningless. Second, recent FASB moves to apply rules such as mark-to-market without appropriate concern for verifiability are likely to be disastrous for the FASB and capital markets. Third, attempts to introduce unverifiable estimates of future cash flows into the financial statements are likely to just as disastrous.

Download or read book Principles of Accounting Volume 1 Financial Accounting written by Mitchell Franklin and published by . This book was released on 2019-04-11 with total page 1056 pages. Available in PDF, EPUB and Kindle. Book excerpt: The text and images in this book are in grayscale. A hardback color version is available. Search for ISBN 9781680922929. Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today's college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the "why" as well as the "how" aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

Download or read book Conservatism in Accounting written by Idil Raife Burat Impink and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: The principle of conservatism is a major feature embedded in the financial reporting system. Recently, there have been numerous empirical attempts to measure the extent of conservatism that exists across firms and countries. The results of the empirical studies based on different measures of conservatism are conflicting. This study explores the principle of conservatism from analytic and behavioral perspectives. The analytic section of this study attempts to unravel the conflicting results of the archival studies and questions the extent to which accounting conservatism can be measured empirically. The results of the analytic study show that a single measure of conservatism does not exist and empirical studies that employ a single measure of conservatism can not be relied upon to draw conclusions about the degree of conservatism inherent in financial reporting. In addition to quantitative factors, qualitative factors also need to be considered in determining the degree of conservatism when decisions are made under uncertainty or when decisions are made between parties that have a conflict of interest. The behavioral section of this study explores two factors that may influence the degree of conservatism that is observed in financial reporting. Specifically, this part explores the effects of rules- vs. principles-based accounting standards and the influence of familiarity on conflict resolution when auditors and their clients collectively decide on how an ambiguous accounting issue should be reported in the financial statements. The results of the experiment indicate that the type of standards and the degree of familiarity jointly have an effect on the degree of conservatism inherent in the reported numbers. This is important in showing how quantitative measures are affected by qualitative factors that surround the decision making process.

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 Research in Accounting Regulation written by Gary Previts and published by Elsevier. This book was released on 2008-04-09 with total page 333 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research in Accounting Regulation

Download or read book Conservatism in Accounting Good Or Bad written by Raghunathan Venugopalan and published by . This book was released on 2001 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Conditional and Unconditional Conservatism written by Julia Nasev and published by Gabler Verlag. This book was released on 2009-12-11 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Julia Nasev examines the impact of conservative accounting numbers on valuation estimates and on real economic decisions such as cost stickiness.

Download or read book Corporate Managers Experiences Related to Implementing Section 404 of the Sarbanes Oxley Act written by Lois D. Bryan and published by . This book was released on 2006 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: The impact of the Sarbanes-Oxley Act of 2002 (SOX) with regard to information systems' compliance and the economic and organizational impact of such compliance is featured. A survey was used to generate feedback on a variety of SOX/information systems issues. Specifically, information systems' training, information systems' documentation, and recommendations for the use of more conservative accounting practices are discussed.

Download or read book Regulating Capitalism written by J. Zimmermann and published by Springer. This book was released on 2013-09-26 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: By exploring how financial, legal and wider socio-economic systems can accelerate or decelerate the harmonization in financial markets, this book connects issues both of contemporary political science and accounting research.

Download or read book Accounting Rule Reform and Conditional Conservatism written by Juan Zhang and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how accounting rule reform affects the usage of conditional conservatism in the property-liability (P&L) insurance industry. More specifically, whether the accounting rule changes that strengthen the internal control over financial reporting and improve the financial reporting transparency reduce insurers' incentives for conservatively reserving. The P&L insurance industry is a perfect setting for studying accruals and accounting conservatism because it has specific and detailed firm-year level data about loss accrual development. We develop a new method of assessing conditional conservatism, measuring it as the concavity of an insurer's loss development curve. We study the U.S. domiciled P&L insurance companies from 1995 to 2015. Using a diff-in-diff identification strategy, we find that the level of conditional conservatism is significantly reduced after the enactment of the Sarbanes-Oxley Act (SOX) Section 404 and the Model Audit Rule (MAR), both of which increased board oversight of internal risk management. Our result indicates that complying with additional disclosure requirements reduces P&L insurers' incentives to use conditional conservatism to mitigate regulatory monitoring costs. With fewer reserves, insurers may become less resistant to unexpected or catastrophic losses and face greater insolvency risk. The paper's results also shed light on the question of which should be an appropriate measure of financial reporting quality given a goal of reducing bankruptcy risk: transparency and accuracy or conservatism.