Public Accountants’ Perceptions Of The Acceptability Of Earnings Management Practices Through The Employment Of GAAP In The Post-Sox Period

Over fifteen years ago, Martens and McEnroe (1992) conducted a behavioral study involving earnings management through the use of Generally Accepted Accounting Principles (GAAP). Their findings indicated that auditors issued unqualified audit opinions on those financial statements and perceived little risk to litigation as a result. A decade later they conducted a similar study (Martens and McEnroe 2002) with the expectation that increased attention to earnings management by then chairman of the Securities and Exchange Commission (SEC), Arthur Levitt, would reduce auditors’ perceptions that the letter of GAAP is in itself an aegis or “safe harbor” against litigation. Although the authors found that auditors had become more conservative, they still issued unqualified opinions on financial statements in which transactions were reported in their form rather than their substance. Given the accounting scandals of Enron and WorldCom, among others, and the enactment of the Sarbanes-Oxley Act (SOX) in 2002, especially with its officers’ certification requirements, it was posited that auditors would exhibit a much more conservative approach than in either of the two previous studies. The results indicate that although auditors are more conservative than in the 1992 study, they still allow clients to engage in earnings management practices through the use of GAAP by issuing unqualified audit opinions on their financial statements

An international reproducibility study validating quantitative determination of ERBB2, ESR1, PGR, and MKI67 mRNA in breast cancer using MammaTyper (R)

Background: Accurate determination of the predictive markers human epidermal growth factor receptor 2 (HER2/ERBB2), estrogen receptor (ER/ESR1), progesterone receptor (PgR/PGR), and marker of proliferation Ki67 (MKI67) is indispensable for therapeutic decision making in early breast cancer. In this multicenter prospective study, we addressed the issue of inter- and intrasite reproducibility using the recently developed reverse transcription-quantitative real-time polymerase chain reaction-based MammaTyper (R) test. Methods: Ten international pathology institutions participated in this study and determined messenger RNA expression levels of ERBB2, ESR1, PGR, and MKI67 in both centrally and locally extracted RNA from formalin-fixed, paraffin-embedded breast cancer specimens with the MammaTyper (R) test. Samples were measured repeatedly on different days within the local laboratories, and reproducibility was assessed by means of variance component analysis, Fleiss' kappa statistics, and interclass correlation coefficients (ICCs). Results: Total variations in measurements of centrally and locally prepared RNA extracts were comparable; therefore, statistical analyses were performed on the complete dataset. Intersite reproducibility showed total SDs between 0.21 and 0.44 for the quantitative single-marker assessments, resulting in ICC values of 0.980-0.998, demonstrating excellent agreement of quantitative measurements. Also, the reproducibility of binary single-marker results (positive/negative), as well as the molecular subtype agreement, was almost perfect with kappa values ranging from 0.90 to 1.00. Conclusions: On the basis of these data, the MammaTyper (R) has the potential to substantially improve the current standards of breast cancer diagnostics by providing a highly precise and reproducible quantitative assessment of the established breast cancer biomarkers and molecular subtypes in a decentralized workup.Peer reviewe

Cash Flow Accounting: is It Time For Increased Disclosures?

Cash flow reporting has attracted increased attention in the United States, especially in the past decade. However, despite the use of per share cash flow information by security analysts, the Financial Accounting Standards Board (FASB) has prohibited its disclosure. This article provides a historical perspective of cash flow accounting in the U.S., as well as a discussion of cash flow advocates. The final section presents arguments for increased disclosures in the area of cash flows, including operating cash flow on a per share basis and a schedule of free cash flows

A Critical Analysis of Accounting For Certain Debt Transactions

In the course of teaching intermediate accounting over the past decade, I have often had my students analyze a particular APB Opinion or FASB Standard in the belief that this exercise would not only increase their understanding of the technical provisions of the promulgation, but also the rationale of the standard-setting body in arriving at its provisions

An Empirical Investigation Of the Security Price Impact Of The FASBS R&D Policy Intervention

A number of empirical accounting research studies from the late 1960s to the present have been concerned with the effects of the policy behavior of accounting rule-making bodies on the behavior of security prices affected by the accounting pronouncement, and are occasionally referred to as policy intervention studies

Individual Investors' Perceptions Regarding the Meaning of US and UK Audit Report Terminology: 'Present Fairly in Conformity with GAAP' and 'Give a True and Fair View'

The standard unqualified audit report in the United States contains the phrase 'present fairly ... in conformity with generally accepted accounting principles' (PFGAAP), while in the United Kingdom, the corresponding phrase is 'give a true and fair view' (TFV). Despite the former phrase existing in audit reports since 1939 and the latter since 1947, there is little agreement as to what the respective phrases represent. Accordingly, this paper examined UK and US individual investors' perceptions towards various dimensions of the meanings of the phrases including whether they imply that the financial statements are not misleading and free from bias. The results indicate that a majority of both groups perceive that the UK phrase precludes misleading financial statements. A smaller percentage of both groups feel that the US terminology achieves this objective. The results are similar as to whether the respective wording implies that the financial statements are free from bias. In general, the respondents awarded a greater level of confidence to the UK 'true and fair view' than the US 'present fairly in conformity with generally accepted accounting principles.' No policy recommendation is drawn from these results, however, since there is also evidence that as long as audit report language is pre-determined by law or some official body, investors will evince indifference as to the kind of language prescribed. Copyright Blackwell Publishers Ltd 1998.