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Disclosure Of Internal Control Weaknesses And Auditors Litigation Risk
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Book Synopsis Disclosure of Internal Control Weaknesses and Auditors' Litigation Risk by : Szu-fan Chen
Download or read book Disclosure of Internal Control Weaknesses and Auditors' Litigation Risk written by Szu-fan Chen and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: In contrast to research showing that private litigation discourages audit clients from disclosing internal control weaknesses, we find that auditors' litigation concerns have a countervailing effect. Our empirical results show that adverse internal control opinions reduces the likelihood of auditors being implicated in lawsuits against their clients, which suggests that disclosing internal control weaknesses can protect auditors from litigation. Consistent with the notion that such litigation protection in turn encourages auditors to issue adverse internal control opinions, we find that both new and incumbent auditors are more likely to issue adverse internal control opinions for clients with higher ex ante litigation risk. Moreover, for restating firms that eventually acknowledge the existence of internal control weaknesses, ex ante litigation risk is positively associated with earlier adverse internal control opinions. Overall, our evidence suggests that litigation threat provides an incentive rather than a disincentive for auditors to issue adverse internal control opinions in a timely fashion. As both new and incumbent auditors have such incentives, auditors' litigation concerns suppress clients' opportunistic internal control opinion shopping.
Book Synopsis Three Essays on Material Weakness Disclosures, Restatement Announcements, and Auditor's Litigation Risk by : Nader Refat Reiad Wans
Download or read book Three Essays on Material Weakness Disclosures, Restatement Announcements, and Auditor's Litigation Risk written by Nader Refat Reiad Wans and published by . This book was released on 2012 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Economic Determinants and Consequences of the Proactive Disclosure of Internal Control Weaknesses and Remediation Progress in IPO. by : Sudipta Basu
Download or read book Economic Determinants and Consequences of the Proactive Disclosure of Internal Control Weaknesses and Remediation Progress in IPO. written by Sudipta Basu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates (a) why some IPO firms proactively disclose internal control weaknesses (ICWs) and remediation progress in their prospectuses before going public, despite being exempt from the requirements of Sections 302 and 404 of the Sarbanes-Oxley Act at the time of IPO, and (b) the association of such disclosures with IPO underpricing (i.e., the first-day return). We find that IPO firms that proactively disclose ICWs and remediation progress have higher litigation risk, are audited by industry specialist auditors, and are more likely to have audit committees prior to the IPO, compared with firms that do not disclose such information, after controlling for the ex-ante probability of having ICWs. IPO underpricing is lower for firms that disclose ICWs and remediation progress, consistent with the conjecture that the disclosure of ICWs and remediation progress signals extensive premarket due diligence, thus reducing the information asymmetry between informed and uninformed investors.
Book Synopsis Internal Control Audit and Compliance by : Lynford Graham
Download or read book Internal Control Audit and Compliance written by Lynford Graham and published by John Wiley & Sons. This book was released on 2015-01-12 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ease the transition to the new COSO framework with practical strategy Internal Control Audit and Compliance provides complete guidance toward the latest framework established by the Committee of Sponsoring Organizations (COSO). With clear explanations and expert advice on implementation, this helpful guide shows auditors and accounting managers how to document and test internal controls over financial reporting with detailed sections covering each element of the framework. Each section highlights the latest changes and new points of emphasis, with explicit definitions of internal controls and how they should be assessed and tested. Coverage includes easing the transition from older guidelines, with step-by-step instructions for implementing the new changes. The new framework identifies seventeen new principles, each of which are explained in detail to help readers understand the new and emerging best practices for efficiency and effectiveness. The revised COSO framework includes financial and non-financial reporting, as well as both internal and external reporting objectives. It is essential for auditors and controllers to understand the new framework and how to document and test under the new guidance. This book clarifies complex codification and provides an effective strategy for a more rapid transition. Understand the new COSO internal controls framework Document and test internal controls to strengthen business processes Learn how requirements differ for public and non-public companies Incorporate improved risk management into the new framework The new framework is COSO's first complete revision since the release of the initial framework in 1992. Companies have become accustomed to the old guidelines, and the necessary procedures have become routine – making the transition to align with the new framework akin to steering an ocean liner. Internal Control Audit and Compliance helps ease that transition, with clear explanation and practical implementation guidance.
Author :United States Government Accountability Office Publisher :Lulu.com ISBN 13 :0359536395 Total Pages :234 pages Book Rating :4.3/5 (595 download)
Book Synopsis Government Auditing Standards - 2018 Revision by : United States Government Accountability Office
Download or read book Government Auditing Standards - 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.
Book Synopsis Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report by : Jagan Krishnan
Download or read book Auditor Litigation Risk and Corporate Disclosure of Quarterly Review Report written by Jagan Krishnan and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Securities and Exchange Commission (SEC) recently made timely reviews of quarterly financial statements mandatory for all registrants. The objective is to improve corporate quarterly reporting. However, formal review reports are not required to be included in 10-Q filings, and may not even be issued by auditors. A priori, one would expect these reports to be useful to investors if they imply added auditor diligence or if they contain modifications to the standard report. We find that only 5.7% of the companies in our sample attached the auditor's review report in their 10-Q filings. Also the majority of these reports are clean, suggesting that clients may not be disclosing the reports when they are modified. After controlling for factors such as auditor type, agency costs, capital market transactions, and company size, we find a significant negative association between auditor's litigation risk and disclosure of a review report. In addition, we find that the disclosure of a review report is associated with auditor type and company size.
Book Synopsis Audit Committee Quality, Auditor Independence, and Internal Control Weaknesses by : Yan Zhang
Download or read book Audit Committee Quality, Auditor Independence, and Internal Control Weaknesses written by Yan Zhang and published by . This book was released on 2017 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we investigate the relation between audit committee quality, auditor independence, and the disclosure of internal control weaknesses after the enactment of the Sarbanes-Oxley Act. We begin with a sample of firms with internal control weaknesses and, based on industry, size, and performance, match these firms to a sample of control firms without internal control weaknesses. Our conditional logit analyses indicate that a relation exists between audit committee quality, auditor independence, and internal control weaknesses. Firms are more likely to be identified with an internal control weakness, if their audit committees have less financial expertise or, more specifically, have both less accounting financial expertise and non-accounting financial expertise. They are also more likely to be identified with an internal control weakness, if their auditors are more independent. In addition, firms with recent auditor changes are more likely to have internal control weaknesses.
Book Synopsis Internal Control Weaknesses and Information Uncertainty by : Messod D. Beneish
Download or read book Internal Control Weaknesses and Information Uncertainty written by Messod D. Beneish and published by . This book was released on 2014 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a sample of 330 firms making unaudited disclosures required by Section 302 and 383 firms making audited disclosures required by Section 404 of the Sarbanes-Oxley Act. We find that Section 302 disclosures are associated with negative announcement abnormal returns of -1.8 percent, and that firms experience an abnormal increase in equity cost of capital of 68 basis points. We conclude that Section 302 disclosures are informative and point to lower credibility of disclosing firms' financial reporting. In contrast, we find that Section 404 disclosures have no noticeable impact on stock prices or firms' cost of capital. Further, we find that auditor quality attenuates the negative response to Section 302 disclosures and that accelerated filers - larger firms required to file under Section 404 - have significantly less negative returns (-1.10 percent) than non-accelerated filers (-4.22 percent). The findings have implications for the debate about whether to implement a scaled securities regulation system for smaller public companies: material weakness disclosures are more informative for smaller firms that likely have higher pre-disclosure information uncertainty.
Author :Dan A. Simunic Publisher :Canadian Certified General Accountants' Research Foundation = Fondation de recherche de l'Association des comptables généraux licenciés du Canada ISBN 13 : Total Pages :90 pages Book Rating :4.3/5 (512 download)
Book Synopsis Product Differentiation in Auditing by : Dan A. Simunic
Download or read book Product Differentiation in Auditing written by Dan A. Simunic and published by Canadian Certified General Accountants' Research Foundation = Fondation de recherche de l'Association des comptables généraux licenciés du Canada. This book was released on 1987 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: A fundamental question with respect to the market for audit services is whether or not such services are homogeneous across suppliers ... In this monograph, we review the basic principles and findings concerning differentiated product markets as they have been developed in the economic literature. Using Lancaster's characteristics framework, we posit that the audit service contains several attributes which are valued by top management. A key attribute is "credibility", which is communicated by an audit firm's brand name and is identified with the power of an auditor's test ... We posit that, along with other product characteristics, the power of test varies systematically across audit firms. Hypotheses concerning the demand for different audit service specifications (qualities) are developed in a context where companies are changing their capital structure through an initial public offering of common shares. These hypotheses are tested using a sample of 469 U.S. corporations which first "went public" during 1981. The results are consistent with the existence of differential audit services.
Book Synopsis An Investigation of Internal Control Related Frauds and Auditor Litigation by : Ifeoma Azuka Udeh
Download or read book An Investigation of Internal Control Related Frauds and Auditor Litigation written by Ifeoma Azuka Udeh and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using 629 observations of U.S. publicly listed firms with internal control related frauds from 2000 to 2006; this study investigates the change in auditor litigations in the Post- Sarbanes Oxley, Section 404 period. To the extent the conditions of the internal control in place are inadequate or non-existent, the possibility of the occurrence of internal control related fraud heightens. Thus, the inability of auditors to detect a financial statement misstatement due to internal control fraud in a timely manner exposes auditors to litigation (Barra, 2010; Heninger, 2001; Caplan, 1999). This situation was prevalent in the recent notable corporate failures that resulted in auditors being named as potential defendants. The present research finding indicates during the Post-SOX 404 period, the probability of auditor litigation due to internal control fraud increases. However, no support was shown for further increases in the likelihood of auditor litigation when both types of fraud occur in the Post-SOX 404 period. These results suggest an increase in the enforcement of accountability by the SEC, and should motivate auditors towards reassessing their audit procedures. Furthermore, the results indicate the probability of auditor litigation due to internal control fraud decreases for accelerated filers, and similarly, the probability of auditor litigation decreases for firms with management voluntary disclosures reflecting effective internal control. The overall result of this study indicates the likelihood of auditors being litigated increased in the Post-SOX 404 period, and auditors are more likely to be litigated when both types of fraud occurs simultaneously. This result further supports the argument for meritorious claims and the procedural justice theory.
Book Synopsis How to Comply with Sarbanes-Oxley Section 404 by : Michael J. Ramos
Download or read book How to Comply with Sarbanes-Oxley Section 404 written by Michael J. Ramos and published by John Wiley & Sons. This book was released on 2004-03-29 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: Designed specifically for Sarbanes-Oxley Section 404 compliance, How to Comply with Sarbanes-Oxley Section 404 features: A step-by-step approach to engagement performance Original material from a leading expert in auditing and accounting Practice aids, including forms, checklists, illustrations, diagrams, and tables In-depth explanations to help professionals understand how best to approach the internal control engagement Examples and action plans providing blueprints for implementing requirements of the Act Order your copy today!
Book Synopsis An Empirical Investigation of the Impact of Central Bank of Denver on Securities Disclosure-related Auditor Litigation Risk by : Ross D. Fuerman
Download or read book An Empirical Investigation of the Impact of Central Bank of Denver on Securities Disclosure-related Auditor Litigation Risk written by Ross D. Fuerman and published by . This book was released on 1996 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Spillover Effects of Internal Control Weakness Disclosures by : Shijun Cheng
Download or read book Spillover Effects of Internal Control Weakness Disclosures written by Shijun Cheng and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that firms are less likely to report an internal control material weakness (as mandated by the Sarbanes-Oxley Act) in a given year if one of their audit committee members is concurrently on the board of a firm that disclosed a material weakness within the prior three years. We find a similar spillover effect for financial restatement disclosures. The spillover from material weakness disclosures is evident only if a shared director has more experience with the disclosing firm or can channel more information about the disclosed material weakness. Our findings suggest that prior director experiences outside the firm influence the work of audit committees inside the firm. One rationale is that a director's prior experience with an adverse disclosure helps diffuse important insights and serves as a catalyst for improvements in a firm's internal control and financial reporting practices. An alternative explanation, which we cannot dismiss, holds that a director's prior experience helps a firm to under-report material weaknesses and financial restatements without any attendant improvements in the underlying practices.
Book Synopsis Auditor Risk and Legal Liability by : Edgar Kent St. Pierre
Download or read book Auditor Risk and Legal Liability written by Edgar Kent St. Pierre and published by . This book was released on 1983 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Role of Audit Firm Tenure in a Firm's Propensity to Disclose Material Weaknesses in Internal Controls After SOX. by : David Adu-Boateng
Download or read book The Role of Audit Firm Tenure in a Firm's Propensity to Disclose Material Weaknesses in Internal Controls After SOX. written by David Adu-Boateng and published by . This book was released on 2012 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audit firm tenure impacts the quality of audit work and the disclosure of material internal control weaknesses. Public firms are required by the Sarbanes Oxley Act of 2002 (SOX) Section 302 to disclose material internal control weaknesses. Researchers debate whether audit firm rotation is necessary for improving audit quality (Chen, Lin, & Lin, 2008). Generally, an auditor needs sufficient time to become familiar with a client's business in order to enhance effective controls and financial reporting. However, long tenure may diminish auditor independence, and in turn reduce the quality of audit work and encourage a client to violate SOX disclosure requirements. Therefore, it is expected that the disclosure of material internal control weaknesses is less likely given long audit tenure. Prior studies consider many variables that impact the disclosure of control weaknesses, except audit tenure. Further, prior studies do not address the issue of whether familiarity or independence explains non-disclosure. This dissertation investigates the role of audit firm tenure and concludes that the disclosure of material internal control weaknesses is more likely given short tenure. Further, familiarity with the client's business, which is associated with long tenure, explains non-disclosure and not the lack of independence. Therefore, audit firm rotation may not be necessary.
Book Synopsis Internal Controls by : Lynford Graham
Download or read book Internal Controls written by Lynford Graham and published by Wiley. This book was released on 2008-01-10 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In the new age of philanthropy, donors expect charities to be models of accountability and transparency...Internal controls: Guidance for Private, Government, and Nonprofit Entities is a must read for CEOs and CFOs who want to gain a clear understanding of cost-effective ways to implement the controls necessary to protect their organizations." - Elizabeth Myatt, Chief Executive Officer, World Lung Foundation "If you were looking for the silver bullet to understand and audit internal controls, you just found it. This book will prove invaluable in planning the audit internal controls, you just found it. This book will prove invaluable in planning the audit because it specifically covers COSO and the new AICPA risk assessment auditing standards. " - George I. Victor, CPA, Partner in Charge of Quality Control, Holtz Rubenstein Reminick LLP "Author Lyn Graham gives practical, easy-to-understand guidance for documenting internal controls. I recommend this book for both my clients and our staff. It is very useful for auditors and clients alike." - David E. Adams, CPA, Partner, Geffen Mesher & Company "This book is an essential guide...and provides very practical advice about what to do(and what not to do) in making an investment in internal controls. The author's expensive experience as an audit firm partner and standard-setter are evident in the details provided. I also recommend this book to teaches of auditing and systems, as it provides a useful background to...how internal controls really should work in today's business environment." - Jean C. Bedard, CPA, PhD, Timothy B. Harbert Professor of Accountancy, Bentley College
Book Synopsis Risk Disclosure Preceding Negative Outcomes by : Kelsey Brasel
Download or read book Risk Disclosure Preceding Negative Outcomes written by Kelsey Brasel and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Audit practitioners, academics, and attorneys have expressed concern that disclosing critical audit matters (CAMs) will increase jurors' auditor liability judgments when auditors fail to detect misstatements. In contrast, this study provides theory and experimental evidence that CAM disclosures, under certain conditions, reduce auditor liability judgments as jurors perceive that undetected fraudulent misstatements were more foreseeable to the plaintiff (i.e., the financial statement user suing the auditor). However, we find that CAM disclosures only reduce auditor liability for undetected misstatements that, absent CAM disclosure, are relatively difficult to foresee. Finally, CAM disclosures that are unrelated to subsequent misstatements neither increase nor reduce auditor liability judgments relative to the current regime (i.e., where CAMs are not disclosed), but reduce liability judgments relative to reporting that there were no CAMs. As such, we find that, relative to stating there were no CAMs, disclosure of any CAM (i.e., related or unrelated) provides litigation protection in cases of undetected fraud. Consequently, the CAM requirement could incentivize auditors to disclose innocuous boilerplate CAMs, thereby diluting the impact of more warranted CAM disclosures.
