Lack Of Timeliness, Noise And Transitory Components In Earnings As Explanations For The Apparent Decline In The Value Relevance Of Earnings

Prior studies identify three factors that contribute to the low contemporaneous association between returns (prices) and earnings: lack of timeliness of earnings capturing value relevant information, noise in earnings, and transitory elements in earnings.  This study seeks to identify whether these factors contribute to the observed inter-temporal decline in the contemporaneous association between returns (prices) and earnings documented in recent literature.  Prior studies do not explicitly examine the affect of these factors on the inter-temporal decline, and the extant evidence is mixed.  Empirical evidence presented here indicates that lack of timeliness of earnings and value-irrelevant noise in earnings have increased over time, both contributing to the documented inter-temporal decline in the contemporaneous association between returns (prices) and earnings

Lack of Timeliness, Noise and Transitory Components in Earnings as Explanations for the Apparent Decline in the Value Relevance of Earnings

Prior studies identify three factors that contribute to the low contemporaneous association between returns (prices) and earnings: lack of timeliness of earnings capturing value relevant information, noise in earnings, and transitory elements in earnings. This study seeks to identify whether these factors contribute to the observed inter-temporal decline in the contemporaneous association between returns (prices) and earnings documented in recent literature. Prior studies do not explicitly examine the affect of these factors on the inter-temporal decline, and the extant evidence is mixed. Empirical evidence presented here indicates that lack of timeliness of earnings and value-irrelevant noise in earnings have increased over time, both contributing to the documented inter-temporal decline in the contemporaneous association between returns (prices) and earnings

Journal Entries As Tools For Financial Statement Disclosure Of Pension Reporting And Other Comprehensive Income

This instructional tool draws a linkage between the journal entries required to record the activity of a defined benefit pension plan and the disclosures required under authoritative guidance. The quarterly and year-end adjusting entries are presented and linked to the financial statements and supplemental financial disclosures. These entries directly tie to amounts reflected in those disclosures to provide a more comprehensive analysis of the reporting process. The resulting analysis is beneficial for the understanding of pension accounting and the reporting of accumulated other comprehensive income

The Consideration of Fraud in a Financial Statement Audit: Some Study Questions

In October 2002, the Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit in response to recommendations from the Fraud Task Force. SAS No. 99 is intended to improve auditor performance during audits and to increase the likelihood that the auditors will detect fraudulent financial reporting if any is present. Since fraud awareness is such a major part of any audit, accounting students should be well versed on the content of SAS No. 99. However, not all accounting students read SASs in detail. Then how do accounting educators get this important content to these students

Evidential Effort And Risk Assessment In Auditing

This study responds to prior literature highlighting the need for academic research to study the linkage of risks to audit procedures purported in the Audit Risk Model.  We use audit workpaper data from a Big 4 firm to examine two significant relationships implicit in authoritative audit guidance: (1) the application of the audit risk model in practice, and the relationship between preliminary risk assessments and audit procedures, and (2) the potential loss of risk information upon risk aggregation suggested in the Audit Risk Model.  Our findings indicate that preliminary risk assessments significantly affect planned audit procedures, and the potential for loss of information upon risk aggregation is not to be ignored.  These results provide important evidence useful in developing audit policy for linking risk assessments and audit procedures

Pension Accounting And Reporting With Other Comprehensive Income And Deferred Taxes: A Worksheet Approach

This instructional tool presents pension accounting using a worksheet approach where debits equal credits for both the employer and for the plan. Transactions associated with the initiation of the plan through the end of the second year of the plan are presented, including their impact on accumulated other comprehensive income and deferred taxes. This article is intended as a supplemental teaching tool that demonstrates the impact of a plan’s funded status on the employer’s financial statements in a way that, based upon anecdotal evidence, accounting students and practitioners have found extremely beneficial beyond traditional accounting textbooks

Maintaining a Budget Helps Prevent Debt

Georgia Southern faculty members L. Dwight Sneathen, Jr. and Joseph Ruhland were interviewed by Kelly Norman for the George Anne.https://digitalcommons.georgiasouthern.edu/account-facmedia/1000/thumbnail.jp

The Influence of Information Technology Control Activities on the Financial Statement Audit

This study examines the influence of assessed information technology (IT) control reliability on financial statement audit effort and fees. Since SAS 94 requires auditors to consider an auditees use of IT controls during audit planning, this study seems highly relevant. Using archived audit workpaper documentation, our results show that IT control strength assessments are inversely associated with control risk assessments, audit hours, and fees. Results also show that both the control risk and IT control strength assessments have similar influence on hours and fees

The Effects of Fraud and Going-Concern Risk on Auditor’s Assessments of Material Misstatement and Resulting Audit Procedures

This study uses audit file data to analyze the association between the auditors\u27 preliminary assessments of going‐concern and fraud risk and the planning and performance of the financial statement audit. We analyze the association between the above risks and the auditor\u27s assessment of the risk of material misstatement (RMM) within the revenue cycle, and examine whether going‐concern and fraud risk assessments have an effect on the persuasiveness, timing and extent of audit evidence gathered. Our results indicate that both fraud risk and going‐concern risk are significantly related to RMM. Our results also indicate that although the effect of fraud risk is fully mediated by the RMM, moderate going‐concern risk remains significantly related to our proxies for the persuasiveness and timing of audit evidence, even after controlling for RMM

System Controls Reliability and Assessment Effort

This study investigates whether internal control reliability affects information system audit hours and fees. Based on archived workpaper data from 60 clients of an international auditing firm we provide quantifiable evidence that well‐designed internal controls that are in place and operating effectively lead to decreased information system control assessment effort and lower assessment fees. The information system audit fee savings we document may be considered a significant benefit by companies determining the merit of an investment in information system controls