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The Effect Of Internal Control And Risk Management Regulation On Earnings Quality
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Book Synopsis The Effect of Internal Control and Risk Management Regulation on Earnings Quality by : Nerissa C. Brown
Download or read book The Effect of Internal Control and Risk Management Regulation on Earnings Quality written by Nerissa C. Brown and published by . This book was released on 2014 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the impact of mandatory internal control and risk management (ICRM) reform on earnings-based attributes of accounting quality in Germany. Although prior studies examine changes in accounting quality under SOX Sections 302 and 404, there is scant evidence of the accounting quality effects of ICRM reform in foreign jurisdictions. Such evidence is warranted given the ongoing global policy debate of ICRM reform in the post-SOX era. We extend existing research by examining changes in earnings quality following the 1998 German legislation on control and transparency (KTG). The KTG regime provides a unique setting in which the regulatory scope extends beyond internal control over financial reporting (ICFR) to include broad business and enterprise risk control. Using both a differences and difference-in-differences research design, we find that German firms experience an increase in timely loss recognition and a decrease in earnings smoothing after KTG. We also find some evidence of a decrease in loss avoidance behavior. Additional analyses show that the sensitivity of capital investment efficiency to earnings quality increases in the German market after KTG, suggesting that earnings quality effects of mandatory ICRM reform has positive consequences for capital resource allocation. Together, our results are consistent with the achievement of one of the intended outcomes of ICRM regulationmdash;increased accounting quality through effective ICRM systems.
Download or read book Internal Control written by Olof Arwinge and published by Springer Science & Business Media. This book was released on 2012-11-07 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt: The concept of internal control has developed along with audit practice. As demands have been made for greater accountability in corporate governance, the significance of internal control systems in companies has increased. Traditionally internal control has had a fairly direct relationship to financial reporting quality but wider approaches to internal control have expanded those boundaries much further. Stakeholders are increasingly concerned with the effectiveness of internal controls, and disclosure requirements are making firms to go public with regard to their internal control systems. From a design perspective, current research suggests that internal control designs are contingent upon variables such as company strategies, risk appetite, regulatory characteristics, and organizational size. Also there is much to learn about internal control quality, and the way internal control quality is associated with overall corporate governance quality. This book fills that gap.
Book Synopsis The Effects of Internal Control Reporting Regulation on Control Quality, Compensation and Audit Effort by : Derek Chan
Download or read book The Effects of Internal Control Reporting Regulation on Control Quality, Compensation and Audit Effort written by Derek Chan and published by . This book was released on 2018 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: New internal control reporting (ICR) requirements under the Sarbanes-Oxley Act of 2002 (SOX) imposed affirmative duties on managers and auditors to evaluate and attest to the effectiveness of internal controls. This paper studies the role of ICR regulation in alleviating accounting manipulation. My basic model with one firm emphasizes the strategic interaction between internal control and external audit in its detection, as well as the stewardship and valuation roles of accounting information in financial reporting. I investigate whether and why ICR requirements under SOX can enhance incentives for internal control quality and audit effort, and make predictions regarding their effects on audit failure rate, manager's expected compensation, audit fee and current owner's expected payoff. An extension to a multi-firm setting suggests that ICR regulation can improve social welfare in the presence of an endogenous norm of internal control quality.
Book Synopsis Intelligent Internal Control and Risk Management by : Matthew Leitch
Download or read book Intelligent Internal Control and Risk Management written by Matthew Leitch and published by CRC Press. This book was released on 2016-05-23 with total page 259 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many people in organizations resent internal control and risk management; these two processes representing unwelcome tasks to be completed for the benefit of auditors and regulators. Over the last few years this perception has been heightened by the disastrous implementation of section 404 of the Sarbanes-Oxley Act of 2002, which is generally regarded as having been too expensive for the benefits it has brought. This important book offers a way of improving this prevailing perception and increasing the value of control and risk management by bringing creativity and design skills to the fore. The value of risk and control activities is often limited by the value of the control ideas available and so Matthew Leitch provides an arsenal of 60 high performance control mechanisms. These include several alternative ways to design controls and control systems, as well as providing controls for monitoring and audit, controls for accelerated learning, and techniques for finding and recovering cash. This design material is combined with insights into the psychology of risk control, strategies for encouraging helpful behaviour and enabling change, and a surprisingly simple integration of internal control with risk management. The book is realistic, practical, original, and easier reading than most in the field. The material is not specific to any one country and has international appeal for internal auditors and all those concerned with risk management, corporate governance and security.
Book Synopsis Reliable Financial Reporting and Internal Control by : Dimitris N. Chorafas
Download or read book Reliable Financial Reporting and Internal Control written by Dimitris N. Chorafas and published by John Wiley & Sons. This book was released on 2000-05-18 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stepping Up Financial Reporting Systems in an Expanding Global Economy The United States already has the most stringent financial reporting requirements in the world due to its Generally Accepted Accounting Principles (GAAP). Now financial institutions must also contend with the global impact of new stipulations regarding auditing and reporting practices. This book provides comprehensive guidance as to what companies should now be doing to make their financial reporting more efficient and reliable, and illustrates how a sound internal control policy-based on the work of the Treadway Commission and the COSO report -will be a requirement for the organization that wants to compete in the evolving global marketplace. Based on months of research by the author, Reliable Financial Reporting and Internal Control brings together three issues crucial to risk management: * Internal control and international accounting standards * Reliable financial reporting as defined by COSO * The New Capital Adequacy Framework by the Basle Committee on Banking Supervision Also covered is the work accomplished by the Federal Reserve and the International Organizations of Securities Commissions (IOSCO). Here is a must-have guide for CFOs, controllers, and other corporate financial personnel in multinational companies and other companies who do business globally, as well as internal and external auditors, bank managers, and brokers.
Book Synopsis Beyond Internal Control over Financial Reporting by : Daoguang Yang
Download or read book Beyond Internal Control over Financial Reporting written by Daoguang Yang and published by Taylor & Francis. This book was released on 2024-02-06 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: By examining two different modes of internal control and the fundamentals of risk management, this book analyses the role of internal control in financing, investment, profit distribution, and corporate strategies through China's experience. In doing so, it confirms the effectiveness and superiority of internal control over operation and management. The book compares the various internal control methods used in China and the USA, namely, operation and management-oriented versus financial reporting-oriented approaches. It also discusses the differences in corporate risk attitudes and behaviours under the two approaches. The author then proposes the hyper-correction hypothesis and the trimming hypothesis. Empirical findings regarding corporate cash policy, mergers and acquisitions, tax avoidance, and diversification strategy reveal that internal control in China does not result in undue risk aversion but instead manages enterprise risk within a reasonable capacity. These results support the trimming hypothesis and demonstrate that internal control is a useful risk management tool. The title will appeal to students, academics, and accounting professionals interested in internal control (risk management), accounting, auditing and corporate finance, regulation and governance.
Book Synopsis Internal Controls Toolkit by : Christine H. Doxey
Download or read book Internal Controls Toolkit written by Christine H. Doxey and published by John Wiley & Sons. This book was released on 2019-07-23 with total page 421 pages. Available in PDF, EPUB and Kindle. Book excerpt: Step-by-step guidance on creating internal controls to manage risk Internal control is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations, and policies. This is a "toolkit" approach that addresses a practical need for a series of standards of internal controls that can be used to mitigate risk within any size organization. Inadequate internal controls can cause a myriad of problems that adversely affect its ability to provide reliable, timely, and useful financial and managerial data needed to support operating, budgeting, and policy decisions. Reliable data is necessary to make sound business decisions. • Toolkit approach with detailed controls and risks outlined for key business processes • Foundational for SOX 404 initiatives • Key material to improve internal control efforts • Guidance during M&A projects Poor controls over data quality can cause financial data to be unreliable, incomplete, and inaccurate—this book helps you control that quality and manage risk.
Book Synopsis Earnings Quality by : Jennifer Francis
Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.
Book Synopsis Implementing and Auditing the Internal Control System by : D. Chorafas
Download or read book Implementing and Auditing the Internal Control System written by D. Chorafas and published by Springer. This book was released on 2001-03-07 with total page 384 pages. Available in PDF, EPUB and Kindle. Book excerpt: With globalisation, deregulation and the advent of derivatives, credit institutions and the treasury operations of manufacturing, merchandising and service companies are finding that their traditional tools for management control no longer suffice. They must develop more efficient processes able to measure and monitor their risks in real-time. Internal control is a dynamic system covering all types of risk, addressing fraud, assuring transparency and making possible reliable financial reporting within such organisations. In Implementing and Auditing the Internal Control System , Dimitris N. Chorafas defines both auditing and internal control, and explains the value of internal control, why it must be audited, and how it can be most effectively achieved. He addresses top management's accountability for internal control, and uses case studies to demonstrate the application of such systems, and the importance of sound and well-informed analysis of the information gathered. Internal control systems are examined within the context of the globalization of financial markets, under the impact of the growth of information technology, and from the viewpoint of new regulations by supervisory authorities in Group of Ten countries as well as by the Basle Committee on Banking Supervision. Based on an extensive research project in the UK, US, Germany, France, Austria, Switzerland and Sweden, this book is an invaluable source of practical advice for implementing internal control systems, and making existing systems more efficient. It provides managers and professionals with guidelines for the interpretation and use of the resulting internal control intelligence.
Book Synopsis Internal Control, Enterprise Risk Management, and Firm Performance by : Chih-Yang Tseng
Download or read book Internal Control, Enterprise Risk Management, and Firm Performance written by Chih-Yang Tseng and published by ProQuest. This book was released on 2000 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Proceedings of MAC-EMM 2016 by : group of authors
Download or read book Proceedings of MAC-EMM 2016 written by group of authors and published by MAC Prague consulting. This book was released on 2016-08-04 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: Multidisciplinary Academic Conference on Economics, Management and Marketing, Czech Republic, Prague (MAC-EMM 2016)
Book Synopsis The Effect of Internal Governance on Earnings Quality by : Trung Pham
Download or read book The Effect of Internal Governance on Earnings Quality written by Trung Pham and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines the impact of internal governance on firms' earnings quality. Analytically developed by Acharya et al. (2011), internal governance is the checks-and-balances imposed by subordinates on the CEO, forcing the CEO to focus on the firm's long-term value. While there is a burgeoning literature on the impact of internal governance on various dimensions of firm performance such as investment and innovation efficiency, there is a lack of understanding about how internal governance affects the quality of reported accounting numbers. Given the importance of earnings quality for decisions such as investment, I investigate whether the above-mentioned bottom-up governance mechanism has any influence upon the quality of earnings. Specifically, I focus on the impact of internal governance on firms' earnings persistence, earning smoothness, accruals quality, internal control weaknesses, and financial restatements. Based on samples for the 2004-2018 period, I document that firms with effective internal governance have higher quality earnings. This finding is robust to firm- and year-fixed effects, an alternative measure of internal governance effectiveness, and additional control variables related to corporate governance. Additionally, I find some evidence that the impact of internal governance on earnings quality is weaker for firms with powerful or overconfident CEOs.This dissertation contributes to the literature on internal governance as well as the literature on earnings quality by documenting the effect of internal governance on earnings quality. The findings of this dissertation also have practical implications for various parties such as investors, financial analysts, auditors, management, and boards of directors.
Book Synopsis Internal Control in Accounting Research by : Keryn Chalmers
Download or read book Internal Control in Accounting Research written by Keryn Chalmers and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2001, the US moved to regulate internal control reporting by management and auditors. While some jurisdictions have followed the lead of the US, many others have not. An important question, therefore, is the relevance of internal control to stakeholders. The more specific issue of the benefits of US-style regulation of internal control reporting is also topical. We review studies on the determinants of internal control quality and its economic consequences for stakeholders including investors, creditors, managers, auditors and financial analysts. We extend previous reviews by focusing on US studies published since 2013 as well as all non-US studies investigating IC quality including countries regulating IC disclosure as well as unregulated settings and both developed and developing economies. In doing so, we identify research questions where evidence remains mixed and new directions in which there are research opportunities.Three main insights arise from our analysis. First, evidence on the economic consequences of internal control quality suggests that the quality of internal control can have a significant effect on decision making by users of financial information. Second, the results of research on the empirical association between ownership structure, certain board characteristics and internal control quality is generally mixed. Empirical evidence concerning the association between audit committee characteristics and internal control quality generally supports a positive and significant association. Finally, while studies in non-US jurisdictions are increasing, opportunities remain to explore the determinants and consequences of internal control in other jurisdictions. Our review provides evidence for policy makers of whether there are benefits from requiring management and auditors to report on internal control over financial reporting.
Book Synopsis Internal Audit Quality and Earnings Management by : Douglas F. Prawitt
Download or read book Internal Audit Quality and Earnings Management written by Douglas F. Prawitt and published by . This book was released on 2010 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Internal auditors often perform work that is relevant to their host entities' financial reporting processes, yet little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies, (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.
Book Synopsis The Internal Control Provisions of Sarbanes-Oxley Act and Quality of Interim Earnings by : Lei Han
Download or read book The Internal Control Provisions of Sarbanes-Oxley Act and Quality of Interim Earnings written by Lei Han and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the change in the quality of interim earnings around the enactment of Sarbanes-Oxley Act (SOX) and whether the change differs between interim and annual earnings by focusing on the impact of internal control provisions. In particular, two hypotheses are tested in this study. First, the quality of interim earnings improves after the SOX. Second, the gap in earnings quality between annual and interim reporting decreases after the SOX. Prior research indicates that the quality of interim earnings is lower because managers have more discretion in interim reporting and interim earnings are only subject to review which involves limited auditors' work. This study is motivated by the argument that the internal control provisions of SOX (SOX 302 and SOX 404) are expected to dampen the major causes that have led to the lower quality of interim earnings. Specifically, (1) SOX 302 mandates the management's certification of internal controls on a quarterly basis, and (2) SOX 404 increases the extent and amount of audit work during interim quarters. In the empirical analysis, earnings quality is measured under two approaches: the earnings-management approach and the earnings-attribute approach. Under the earnings-management approach, discretionary accruals are used to measure earnings quality. Under the earnings-attribute approach, both accrual quality and the valuerelevance of earnings are used to measure earnings quality. The results of earnings management provide strong support to both hypotheses. Specifically, earnings management with interim quarters decreases after the passage of SOX, suggesting the improvement of interim earnings quality. Moreover, such improvement for interim earnings is higher than that for annual earnings. Both SOX 302 and SOX 404 appear to play a role in decreasing earnings management with interim quarters and in reducing the gap in earnings quality between interim quarters and annual periods. The results of earnings attributes provide little support to both hypotheses. The tests based on accrual quality fail to support either hypothesis. The tests based on value relevance provide some evidence that the value relevance of interim earnings improves after SOX. However, the improvement with interim earnings is not different from that with annual earnings. In addition, only SOX 302 appears to play a role in improving the value relevance of interim earnings and in reducing the gap in value relevance between interim quarters and annual periods.
Book Synopsis Risk Management and Internal Controls by : David Phillips
Download or read book Risk Management and Internal Controls written by David Phillips and published by . This book was released on 2021-06-28 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: While there is no known evidence that Covid-19 is a weaponized virus, a bioterror attack by adversaries incapable or unwilling to risk conventional warfare has long been recognized as a viable threat. In addition, lack of inadequate preparation for the 2009 H1N1 influenza pandemic forewarned of need to prepare for a 100 years'' pandemic, regardless of cause. In the author''s opinion, compliance with Enterprise Risk Management and Internal Control principles would have identified and correctly prioritized associated risks and ensured development of appropriate responses that would have avoided issues or, at a minimum, reduced severity. Risk management and internal control principles once concentrated solely on financial risks but have expanded to include non-financial risks in recognition that all risks have financial and economic impacts. Failure to timely identify risks inherent in a pandemic for the purpose of evaluating responses and designing controls to reasonably assure efficient and effective containment is a perfect example of the need for Enterprise Risk Management (ERM) and Internal Control (IC). Risk management involves identifying and assessing probability and impact of uncertain events, both positive and negative, as a basis for determining responses and designing and implementing associated controls to reduce inherent risks to an acceptable residual level. Unabated transmissibility of Covid-19 was determined, albeit somewhat belatedly, to be highly probable with a potential impact of over 2,000,000 deaths in the United States alone if nothing were done. As a result of implementing compensating controls including masks, social distancing, remote working, and complete or partial closure of nonessential businesses, the residual impact, as of April 2021, was approximately 600,000 actual deaths or a 70% reduction in the inherent risk of doing nothing. The key control was rapid development of a vaccine that required streamlining FDA evaluation and approval processes, which is a positive impact for exploitation in expediting treatments for other life-threatening diseases. Some believe more lives might have been saved had more draconian controls been put in place, but possible collateral damage to the economy and long-term consequences of isolation were determined to be a greater risk. The objective of risk management is to decrease negative outcomes by establishing controls and increase positive outcomes by exploiting opportunities. Those objectives are at the core of risk management and internal control principles promulgated in COSO''s 2017 Enterprise Risk Management - Integrated Framework and GAO''s Standards for Internal Control in the Federal Government, commonly known as the Green Book. Each framework defines principles that together enhance efficiency and effectiveness of operational, compliance, strategic, and reporting capability to reasonably assure achievement of objectives. This book is my personal assessment of the relationship between ERM and IC principles based on 37 years'' experience in auditing and project management. COSO ERM and GAO IC frameworks and derivatives, such as fraud and information technology applications, encompass considerable detail, and it is easy to get lost in the weeds without some conceptual understanding going in, with the understanding that there is no one way to comply. Very importantly, the purpose is not to preclude need to study COSO''s and GAO''s authoritative guidance. A thorough grounding is essential for compliance with OMB Circular A-123, Management''s Responsibility for Enterprise Risk Management and Internal Control; OMB Circular A-130, Managing Information as a Strategic Resource; Federal Manager''s Financial Integrity Act (FMFIA); and other applicable laws and regulations. COSO does not review independent works and there is no implication or inference of agreement with content prepared by the author.
Book Synopsis The Turnbull Report, Internal Control and Risk Management by : Michael Page
Download or read book The Turnbull Report, Internal Control and Risk Management written by Michael Page and published by . This book was released on 2004 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt:
