Dee, Carol Callaway and Durtschi, Cindy Issues in Accounting Education; May 2010, Vol. 25 Issue 2, pp. 279-321
Your firm has been engaged to conduct a forensic investigation of the Tallahassee BeanCounters (TBC), a privately owned minor league baseball team in Tallahassee, Florida. Team owner Franklin Kennedy has told employees that the audit is related to the mortgage TBC obtained for the recently constructed training facility. However, Mr. Kennedy tells you privately that the investigation is not due to loan requirements; rather, it is due to his concerns arising from an anonymous tip he received in the mail. The assignment requires you and your investigative team to (1) analyze the financial and background data provided; (2) brainstorm the possible ways in which a fraud could be perpetrated and concealed within the organization; (3) determine the additional information you need to confirm or disprove your suspicions; and (4) request this information from the appropriate party at TBC. When your investigation is complete, you will present your written results to the owner, including (1) who committed the fraud, (2) how it was committed, (3) the economic impact of the fraud to TBC, and (4) the financial benefit your suspect(s) received from committing the crime.
Carol Callaway Dee, Cindy Durtschi Issues in Accounting Education,Vol. 25, Issue 2, Pages: 279-321.
Your firm has been engaged to conduct a forensic investigation of the Tallahassee BeanCounters (TBC), a privately owned minor league baseball team in Tallahassee, Florida. Team owner Franklin Kennedy has told employees that the audit is related to the mortgage TBC obtained for the recently constructed training facility. However, Mr. Kennedy tells you privately that the investigation is not due to loan requirements; rather, it is due to his concerns arising from an anonymous tip he received in the mail. The … [Full Text]
Michael Roberts Research in Accounting Regulation, Volume 22, Issue 1, Pages 29-39
Prior research indicates auditors’ financial reporting judgments are conservative when client preference is unknown, but auditors are less conservative (though not client-supportive) when clients’ preferred accounting methods for favorable financial reporting are explicitly communicated. This paper reports, for the first time, a situation in which experienced auditors exhibit client-supportive behavior. Professional judgments in an audit setting in which there is an explicit client preference for a material, income-increasing reporting classification and the relevant GAAP standard is principle-based are compared to a similar judgment in a tax setting. This research design contrasts the auditor’s ethical duty to exercise “judicial impartiality” toward the client with Certified Public Accountants’ ethical duty to be a client advocate in tax contexts. The results suggest experienced CPAs’ are as client-supportive in audit settings as they are in tax settings when exercising their professional judgment, and ethical standards mandating impartiality in auditing are not uniformly being followed.
Neumann, Bruce R., Roberts, Michael L. and Cauvin, Eric Journal of Corporate Accounting & Finance; Mar/Apr 2010, Vol. 21 Issue 3, pp. 61-66, 6p
Information overload has been rightly called one of the “deadly sins” of balanced scorecards. To help organizations make their scorecards balanced, this article discusses how many and what types of measures to use.
Jane Dillard-Eggers and Michael L. Roberts Advances in Accounting Behavioral Research, Vol 13, pp.89-111
In light of advances in the theory of cognition (Anderson, 1996, 2000; Anderson & Fincham, 1994; Anderson & Lebiere, 1998) and research on learning from worked examples (Atkinson et al., 2000; Cooper & Sweller, 1987; Sweller & Cooper, 1985), this study extends earlier research findings that auditors need practice and certain kinds of feedback to acquire procedural knowledge to identify causes of variations between expected and actual financial ratios. We test an alternative form of instruction: worked examples. As predicted by Anderson’s ACT-R 4.0 theory, the results indicate individuals’ pre-test declarative knowledge interacts significantly with learning method (with or without examples) on procedural knowledge acquisition. In contrast to prior findings, this study shows that improvements in auditing procedural knowledge can be achieved by passive instruction in worked examples, a potentially more efficient (cost-effective) method than practice and feedback for auditor training.
John Byrd, L. Ann Martin, and Subhrendu Rath International Journal of Managerial Finance, Volume 6 Issue 1, pp. 48-57
Purpose – The purpose of this paper is to examine the impact of high‐level‐executives joining the Board of another US company on the shareholder wealth of the firms in which these executives work. Design/methodology/approach – The “event‐study” methodology is used first to estimate the shareholder effects and then, through multivariate regression analysis, establish a relationship of these effects with executive characteristics. Findings – The paper documents that the abnormal return becomes more positive the closer the executive is to retirement and more negative as the number of other corporate Boards the executive already sits on increases. Unlike previous research, it is not found that prior performance of the employing company helps explain the cross‐sectional variation in the announcement day abnormal returns. Research limitations/implications – The result supports the concerns of shareholder activists that key executives joining the Boards of other companies do their home shareholders a disservice by being spread too thin. It supports the hypothesis that investors interpret a CEO joining the Board of another firm as value decreasing. Originality/value -The paper provides a link between managerial labor and shareholder wealth. Important and high‐level‐executives, while attempting to enhance their own personal benefits by joining other Boards, can destroy shareholder value of the company for which they work.
Hyo-Jeong Kim, Michael Mannino, and Robert J. Nieschwietz International Journal of Accounting Information Systems, Vol. 10, Issue 4, pp. 214-228
Although various information technologies have been studied using the technology acceptance model (TAM), the study of acceptance of specific technology features for professional groups employing information technologies such as internal auditors (IA) has been limited. To address this gap, we extended the TAM for technology acceptance among IA professionals and tested the model using a sample of internal auditors provided by the Institute of Internal Auditors (IIA). System usage, perceived usefulness, and perceived ease of use were tested with technology features and complexity. Through the comparison of TAM variables, we found that technology features were accepted by internal auditors in different ways. The basic features such as database queries, ratio analysis, and audit sampling were more accepted by internal auditors while the advanced features such as digital analysis, regression/ANOVA, and classification are less accepted by internal auditors. As feature complexity increases, perceived ease of use decreased so that system usage decreased. Through the path analysis between TAM variables, the results indicated that path magnitudes were significantly changed by technology features and complexity. Perceived usefulness had more influence on feature acceptance when basic features were used, and perceived ease of use had more impact on feature acceptance when advanced features were used.
Colbert, Gary, Murray, Dennis, and Nieschwietz, Robert Journal of Risk Research Vol. 12, Issue 2, p. 199-208
Previous research has examined the extent to which decisions made in binary choice situations are consistent with expected value. Li (2003) reports that decisions in multiple-play gambles are well explained by expected value, while single-play gambles are not consistent with expected value. The present study extends previous work by examining the use of expected value in the pricing of gambles. The results show that subjects’ pricing decisions are much more consistent with expected value in multiple-play situations than in single-play situations, particularly when the subjects are provided with a simple decision aid (i.e. a very brief description of expected value and the calculated amount of the expected value). Additionally, substantially fewer subjects in our study made decisions consistent with expected value than in Li’s (2003) study, suggesting that binary choice studies may overstate the extent of expected value usage.
Colbert, Gary, Murray, Dennis, and Nieschwietz, Robert Journal of Applied Business Research Vol. 24, Issue 4, p. 113-124
Recent archival studies have examined the association between auditor independence and non-audit services. The results of these studies suggest that fees for non-audit services are not associated with indicators of auditor independence in fact whereas these fees are associated with financial statement users’ perceptions of auditor independence (i.e., independence in appearance). The present study attempts to reconcile these conflicting findings by using a behavioral research methodology that provides greater control over the independent variables and measures more directly financial statement users’ perceptions. Our results indicate that fees for financial information systems development services do not affect perceptions of auditor independence, whereas, fees for tax services adversely affect perceptions of independence. Overall, the results provide mixed support for the recent Securities and Exchange Commission policy changes on auditor independence.
Nieschwietz, R. and Woolley, D. Academy of Accounting and Financial Studies Journal Volume 13, Number 3
The Sarbanes-Oxley Act of 2002 (SOX) included many components designed to increase auditor independence. Despite these intentions, research finds that many of the included provisions may not have influenced independence as intended. As recent studies focused primarily on independence in fact, not independence in appearance, we surmise that SOX influences the perception of independence. We also suspect that perceptions of users will vary with respect to various aspects of audit quality.
Arak, Marcelle, and Martin, L. Ann Financial Analysts Journal Vol. 61, Issue 2, p. 44-50
Financial analysts need accurate estimates of debt, equity, leverage, and EPS. The method proposed here, based on the probability of conversion, yields new estimates of the debt and equity in a convertible bond issue. When this method is used, the value of the equity component in a hypothetical issue is found to be substantial–larger than the value of the options and clearly larger than zero, which is assigned under current accounting rules. The estimate of the debt component is smaller than recorded under current accounting rules. Thus, the leverage of convertible bond issuers is substantially lower when this method is used.
Roberts, Michael L., Albright, Thomas L. and Hibbets, Aleecia R. Behavioral Research in Accounting, Vol. 16, Issue 1, p. 75-88
Lipe and Salterio (2000) found that superiors disregarded half of the information when using a Balanced Scorecard to evaluate the performance of two divisional managers. Only common measures affected the superiors’ holistic evaluations, defeating the purpose of the Balanced Scorecard. Our study examines whether disaggregating the Balanced Scorecard results in evaluations consistent with the intent of the Balanced Scorecard approach. Results indicate the disaggregated strategy allows superiors to utilize unique as well as common measures, thus overcoming the common-measures bias. In addition, we find Balanced Scorecard performance evaluations explain more than half the variation in subsequent compensation decisions.