Audit quality and information asymmetry between traders

In this study, we investigate the association between audit quality and information asymmetry between informed and uninformed traders. We employ three proxies for information asymmetry - absolute price differences, absolute volatility differences, and absolute differences in the long/short ratio of trades - between US stock and options markets and represent audit quality through the appointment of Big n and industry specialist auditors. For a sample of 4062 firm-years between 2002 to 2005, our results indicate that the appointment of Big n and industry specialist auditors is associated with lower information asymmetry measures. Our results are consistent with audit quality playing a role in the quality of financial reporting information and flowing through to the allocation of information among traders. © 2011 AFAANZ

Capitalisation of intangibles - A review of current practice and the regulatory framework

This paper reports on capitalisation practices of Australian managers for a large sample of firms in the 1993-97 period, and on accounting regulatory issues in relation to intangibles during and after this period. The data show diversity in capitalisation practices in 1993-97, which we suggest is a consequence of abstract conceptual bases for capitalisation decisions under the Australian regulatory framework. The analysis indicates the framework retains traditional emphasis on conservatism and reliable measurement while providing managers with substantial accounting discretion to capitalise intangible assets. We conclude there is an imperative for research investigating capitalisation decisions for intangibles to guide any further regulation. © 2001 CPA Australia