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Earnings Management Of Firms Reporting Material Internal Control Weaknesses Under Section 404 Of The Sarbanes Oxley Act
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Book Synopsis Earnings Management of Firms Reporting Material Internal Control Weaknesses Under Section 404 of the Sarbanes-Oxley Act by : Kam C. Chan
Download or read book Earnings Management of Firms Reporting Material Internal Control Weaknesses Under Section 404 of the Sarbanes-Oxley Act written by Kam C. Chan and published by . This book was released on 2019 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main objectives of the Sarbanes-Oxley Act of 2002 are to improve the accuracy and reliability of corporate disclosure. Under Section 404 of the Sarbanes-Oxley Act, the external auditor has to report an assessment of the firm's internal controls and attest to management's assessment of those firm's internal controls. Material weaknesses in internal controls must be disclosed in the auditor and management reports. The objective of this study is to examine if firms reporting material internal control weaknesses under Section 404 have more earnings management compared to other firms. The results provide mild evidence that there are more positive and absolute discretionary accruals for firms reporting material internal control weaknesses than for other firms. Since the findings of ineffective internal controls by auditors under Section 404 may cause firms to improve their internal controls, Section 404 has the potential benefits of reducing the opportunity of intentional and unintentional accounting errors and of improving the quality of reported earnings.
Book Synopsis Earnings Management and Return-Earnings Association of Firms Reporting Material Internal Control Weaknesses Under Section 404 of the Sarbanes-Oxley Act by : Kam C. Chan
Download or read book Earnings Management and Return-Earnings Association of Firms Reporting Material Internal Control Weaknesses Under Section 404 of the Sarbanes-Oxley Act written by Kam C. Chan and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The main objectives of the Sarbanes-Oxley Act of 2002 are to improve the accuracy and reliability of corporate disclosure. Under Section 404 of SOX, an auditor has to report an assessment of a firm's internal controls and attest to management's assessment of the firm's internal control. Material weaknesses of internal controls must be disclosed in auditor and management reports. The objectives of this study are to examine if firms reporting material internal control weaknesses under Section 404 have more earnings management and lower return-earnings associations compared to other firms. The results provide mild evidence that there are more positive and absolute discretionary accruals for firms reporting material internal control weaknesses than for other firms. The findings also provide mild evidence that firms reporting material internal control weaknesses have lower return-earnings associations than other firms.
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 Characteristics of Firms with Material Weaknesses in Internal Control by : Stephen H. Bryan
Download or read book Characteristics of Firms with Material Weaknesses in Internal Control written by Stephen H. Bryan and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The legislation known as Sarbanes Oxley (SOX) requires firms to assess their internal controls over financial reporting and to report material weaknesses, as defined by the Public Accounting Oversight Board. Based upon early evidence, we find that firms with material weaknesses are, on average, both smaller and worse performers than their matched industry counterparts. We also find that firms with material weaknesses, on average, have higher betas, suggesting a higher discount by the market for these firms. From a macro-economic view, the total market value of firms with reported material weaknesses is only 1.28% of the market value of the S&P 500 firms. Finally, although we document negative stock returns on the date of the announcement of the material weakness, over a narrow interval, the returns are insignificant. Identifying small firms that collectively constitute a minor portion of the economy at a very high cost to all public firms seems out of balance. Whether SOX will yield benefits to corporations through better operations, reduced cost of capital, or other means remains to be seen. Moreover, if these benefits materialize, whether they should, in effect, be legislated is a matter of debate. Although some maintain that SOX will reduce earnings management, firms continue to manage earnings through pro forma earnings. Furthermore, although the SEC's Reg G, also enacted as part of SOX legislation, makes the "managed disclosure system" through pro forma earnings more transparent, it fails to exercise control over the reconciliation process that firms use both to set and to meet analyst earnings estimates.
Book Synopsis The Association Between Internal Control Material Weakness and Real Earnings Manipulation by : Isaac Bonaparte
Download or read book The Association Between Internal Control Material Weakness and Real Earnings Manipulation written by Isaac Bonaparte and published by . This book was released on 2013 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the association between internal control material weakness under Section 404 of the Sarbanes-Oxley Act of 2002 and real earnings manipulation. The results indicate that manufacturing firms reporting material weaknesses in internal control grant excessive price discounts to temporarily increase sales. They also overproduce to reduce the cost of goods sold, and reduce their discretionary expenses to enhance reported earnings. Another result that emerges from this study is that manufacturing firms in litigious industries are less likely to engage in real earnings manipulation. Segregating the sample into remediating and non-remediating firms, the results suggest that real earnings manipulation significantly attenuates when firms remediate their internal control material weaknesses. Furthermore, there is no significant difference in real earnings manipulation between firms with contained internal control material weaknesses and those with pervasive internal control material weaknesses.-- Abstract.
Book Synopsis Complying with Sarbanes-Oxley Section 404 by : Lynford Graham
Download or read book Complying with Sarbanes-Oxley Section 404 written by Lynford Graham and published by John Wiley & Sons. This book was released on 2010-03-16 with total page 317 pages. Available in PDF, EPUB and Kindle. Book excerpt: A step-by-step approach for planning and performing an assessment of internal controls Filled with specific guidance for small-business compliance to SEC and PCAOB requirements relating to Sarbanes-Oxley 404, Complying with Sarbanes-Oxley Section 404: A Guide for Small Publicly Held Companies provides you with specific guidance on working with auditors to achieve benefits and cost reductions. This practical guide helps you knowledgeably interpret and conform to Sarbanes-Oxley 404 compliance and features: Clear, jargon-free coverage of the Sarbanes-Oxley Act and how it affects you Links to current guidance online Specific guidance to companies on how to work with auditors to achieve benefits and cost reductions Coverage of IT and IT general controls Examples and action plans providing blueprints for implementing requirements of the act Easy-to-understand coverage of the requirements of the SEC and PCAOB Discussion of the requirements for assessing internal control effectiveness A look at how the new guidance will reduce your costs In-depth explanations to help professionals understand how best to approach the internal control engagement Practice aids, including forms, checklists, illustrations, diagrams, and tables Continuing to evolve and bring about business and cultural change, this area of auditing and corporate governance is demystified in Complying with Sarbanes-Oxley Section 404: A Guide for Small Publicly Held Companies, your must-have, must-own guide to SOX 404 implementation and an effective tool and reference guide for every corporate manager.
Book Synopsis Understanding Accounting Academic Research by : Stephen R. Moehrle
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.
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Book Synopsis Study of the Sarbanes-Oxley Act of 2002 Section 404 by : Barry Leonard
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.
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.
Book Synopsis Investor Perceptions of Auditor Reports Under Section 404 of the Sarbanes-Oxley Act by : Jayanthi Krishnan
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.
Book Synopsis Guide to Internal Controls by : James Hamilton
Download or read book Guide to Internal Controls written by James Hamilton and published by Wolters Kluwer. This book was released on 2007-01-01 with total page 3 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Guide to Internal Controls Under Section 404 of the Sarbanes-Oxley Act, Second Edition examines the mandate of Section 404 and subsequent rulemaking and guidance. The SEC rules implementing the statute require the management of public companies
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 The Disclosure of Material Weaknesses in Internal Control After the Sarbanes-Oxley Act by : Weili Ge
Download or read book The Disclosure of Material Weaknesses in Internal Control After the Sarbanes-Oxley Act written by Weili Ge and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on a sample of 261 companies that have disclosed at least one material weakness in internal control in their SEC filings after the effective date of the Sarbanes-Oxley Act of 2002. Based on the descriptive material weakness disclosures provided by management, we find that poor internal control is usually related to an insufficient commitment of resources for accounting controls. Material weaknesses in internal control tend to be related to deficient revenue recognition policies, lack of segregation of duties, deficiencies in the period-end reporting process and accounting policies, and inappropriate account reconciliation. The most common account-specific material weaknesses occur in the current accrual accounts, such as the accounts receivable and inventory accounts. Material weakness disclosures by management also frequently describe internal control problems in complex accounts, such as the derivative and income tax accounts. In our statistical analysis, we find that disclosing a material weakness is positively associated with business complexity (e.g., multiple segments and foreign currency), negatively associated with firm size (e.g., market capitalization), and negatively associated with firm profitability (e.g., return on assets).
Book Synopsis The 19th International Conference on Industrial Engineering and Engineering Management by : Ershi Qi
Download or read book The 19th International Conference on Industrial Engineering and Engineering Management written by Ershi Qi and published by Springer Science & Business Media. This book was released on 2013-06-03 with total page 1388 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Conference on Industrial Engineering and Engineering Management is sponsored by the Chinese Industrial Engineering Institution, CMES, which is the only national-level academic society for Industrial Engineering. The conference is held annually as the major event in this arena. Being the largest and the most authoritative international academic conference held in China, it provides an academic platform for experts and entrepreneurs in the areas of international industrial engineering and management to exchange their research findings. Many experts in various fields from China and around the world gather together at the conference to review, exchange, summarize and promote their achievements in the fields of industrial engineering and engineering management. For example, some experts pay special attention to the current state of the application of related techniques in China as well as their future prospects, such as green product design, quality control and management, supply chain and logistics management to address the need for, amongst other things low-carbon, energy-saving and emission-reduction. They also offer opinions on the outlook for the development of related techniques. The proceedings offers impressive methods and concrete applications for experts from colleges and universities, research institutions and enterprises who are engaged in theoretical research into industrial engineering and engineering management and its applications. As all the papers are of great value from both an academic and a practical point of view, they also provide research data for international scholars who are investigating Chinese style enterprises and engineering management.
Book Synopsis Material Weaknesses in Tax-Related Internal Controls and Last Chance Earnings Management by : Cristi A. Gleason
Download or read book Material Weaknesses in Tax-Related Internal Controls and Last Chance Earnings Management written by Cristi A. Gleason and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate consequences of tax-related material weaknesses in firms' internal controls over financial reporting. We hypothesize that the presence of internal control material weaknesses (i.e., ICMWs) over the tax function makes earnings management through the income tax accrual (Dhaliwal et al. 2004) easier to implement relative to firms with non-tax-related ICMWs. We also predict that the remediation of tax-related ICMWs has the effect of constraining earnings management through the tax accrual. The results provide support for our predictions and suggest that tax-related ICMWs are associated with greater tax-expense management.
Book Synopsis Sarbanes-Oxley Corporate Governance and Internal Control (section 404) by :
Download or read book Sarbanes-Oxley Corporate Governance and Internal Control (section 404) written by and published by . This book was released on 2005 with total page 438 pages. Available in PDF, EPUB and Kindle. Book excerpt:
