The ability of analysts’ recommendations to predict optimistic and pessimistic forecasts

Previous researches show that buy (growth) companies conduct income increasing earnings management in order to meet forecasts and generate positive forecast Errors (FEs). This behavior however, is not inherent in sell (non-growth) companies. Using the aforementioned background, this research hypothesizes that since sell companies are pressured to avoid income increasing earnings management, they are capable, and in fact more inclined, to pursue income decreasing Forecast Management (FM) with the purpose of generating positive FEs. Using a sample of 6553 firm-years of companies that are listed in the NYSE between the years 2005–2010, the study determines that sell companies conduct income decreasing FM to generate positive FEs. However, the frequency of positive FEs of sell companies does not exceed that of buy companies. Using the efficiency perspective, the study suggests that even though buy and sell companies have immense motivation in avoiding negative FEs, they exploit different but efficient strategies, respectively, in order to meet forecasts. Furthermore, the findings illuminated the complexities behind informative and opportunistic forecasts that falls under the efficiency versus opportunistic theories in literature

Percutaneous closure of atrial septal defects leads to normalisation of atrial and ventricular volumes

Background: Percutaneous closure of atrial septal defects (ASDs) should potentially reduce right heart volumes by removing left-to-right shunting. Due to ventricular interdependence, this may be associated with impaired left ventricular filling and potentially function. Furthermore, atrial changes post-ASD closure have been poorly understood and may be important for understanding risk of atrial arrhythmia post-ASD closure. Cardiovascular magnetic resonance (CMR) is an accurate and reproducible imaging modality for the assessment of cardiac function and volumes. We assessed cardiac volumes pre- and post-percutaneous ASD closure using CMR. Methods: Consecutive patients (n = 23) underwent CMR pre- and 6 months post-ASD closure. Steady state free precession cine CMR was performed using contiguous slices in both short and long axis views through the ASD. Data was collected for assessment of left and right atrial, ventricular end diastolic volumes (EDV) and end systolic volumes (ESV). Data is presented as mean ± SD, volumes as mL, and paired t-testing performed between groups. Statistical significance was taken as p < 0.05. Results: There was a significant reduction in right ventricular volumes at 6 months post-ASD closure (RVEDV: 208.7 ± 76.7 vs. 140.6 ± 60.4 mL, p < 0.0001) and RVEF was significantly increased (RVEF 35.5 ± 15.5 vs. 42.0 ± 15.2%, p = 0.025). There was a significant increase in the left ventricular volumes (LVEDV 84.8 ± 32.3 vs. 106.3 ± 38.1 mL, p = 0.003 and LVESV 37.4 ± 20.9 vs. 46.8 ± 18.5 mL, p = 0.016). However, there was no significant difference in LVEF and LV mass post-ASD closure. There was a significant reduction in right atrial volumes at 6 months post-ASD closure (pre-closure 110.5 ± 55.7 vs. post-closure 90.7 ± 69.3 mL, p = 0.019). Although there was a trend to a decrease in left atrial volumes post-ASD closure, this was not statistically significant (84.5 ± 34.8 mL to 81.8 ± 44.2 mL, p = NS). Conclusion: ASD closure leads to normalisation of ventricular volumes and also a reduction in right atrial volume. Further follow-up is required to assess how this predicts outcomes such as risk of atrial arrhythmias after such procedures.Karen SL Teo, Benjamin K Dundon, Payman Molaee, Kerry F Williams, Angelo Carbone, Michael A Brown, Matthew I Worthley, Patrick J Disney, Prashanthan Sanders and Stephen G Worthle

The Impact of Error-Management Climate, Error Type and Error Originator on Auditors’ Reporting Errors Discovered on Audit Work Papers

We examine factors affecting the auditor’s willingness to report their own or their peers’ self-discovered errors in working papers subsequent to detailed working paper review. Prior research has shown that errors in working papers are detected in the review process; however, such detection rates only rarely exceed 50% of the seeded errors. Hence, measures that encourage auditors to be alert to their own (or their peers’) potential errors any time they revisit the audit working papers may be valuable in detecting such residual errors and potentially correcting them before damage occurs to the audit firm or its client. We hypothesize that three factors affect the auditor’s willingness to report post detailed review discovered errors: the local office error-management climate (open versus blame), the type of error (mechanical versus conceptual) and who committed the error (the individual who committed the error (self) or a peer). Local office error-management climate is said to be open and supportive where errors and mistakes are accepted as part of everyday life as long as they are learned from and not repeated. In alternative, a blame error-management climate focuses on a “get it right the first time” culture where mistakes are not tolerated and blame gets attached to those admitting to or found committing such errors. We find that error-management climate has a significant overall effect on auditor willingness to report errors, as does who committed the error originally. We find both predicted and unpredicted significant interactions among the three factors that qualify these observed significant main effects. We discuss implications for audit practice and further research

Where do firms manage earnings?

Despite decades of research on how, why, and when companies manage earnings, there is a paucity of evidence about the geographic location of earnings management within multinational firms. In this study, we examine where companies manage earnings using a sample of 2,067 U.S. multinational firms from 1994 to 2009. We predict and find that firms with extensive foreign operations in weak rule of law countries have more foreign earnings management than companies with subsidiaries in locations where the rule of law is strong. We also find some evidence that profitable firms with extensive tax haven subsidiaries manage earnings more than other firms and that the earnings management is concentrated in foreign income. Apart from these results, we find that most earnings management takes place in domestic income, not foreign income.Arthur Andersen (Firm) (Arthur Andersen Faculty Fund

Meta-analysis of the diagnostic performance of stress perfusion cardiovascular magnetic resonance for detection of coronary artery disease

<p>Abstract</p> <p>Aim</p> <p>Evaluation of the diagnostic accuracy of stress perfusion cardiovascular magnetic resonance for the diagnosis of significant obstructive coronary artery disease (CAD) through meta-analysis of the available data.</p> <p>Methodology</p> <p>Original articles in any language published before July 2009 were selected from available databases (MEDLINE, Cochrane Library and BioMedCentral) using the combined search terms of magnetic resonance, perfusion, and coronary angiography; with the exploded term coronary artery disease. Statistical analysis was only performed on studies that: (1) used a [greater than or equal to] 1.5 Tesla MR scanner; (2) employed invasive coronary angiography as the reference standard for diagnosing significant obstructive CAD, defined as a [greater than or equal to] 50% diameter stenosis; and (3) provided sufficient data to permit analysis.</p> <p>Results</p> <p>From the 263 citations identified, 55 relevant original articles were selected. Only 35 fulfilled all of the inclusion criteria, and of these 26 presented data on patient-based analysis. The overall patient-based analysis demonstrated a sensitivity of 89% (95% CI: 88-91%), and a specificity of 80% (95% CI: 78-83%). Adenosine stress perfusion CMR had better sensitivity than with dipyridamole (90% (88-92%) versus 86% (80-90%), P = 0.022), and a tendency to a better specificity (81% (78-84%) versus 77% (71-82%), P = 0.065).</p> <p>Conclusion</p> <p>Stress perfusion CMR is highly sensitive for detection of CAD but its specificity remains moderate.</p