Applying Benford’s law to detect accounting data manipulation in the banking industry

We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital

Assessment and validation of a suite of reverse transcription-quantitative PCR reference genes for analyses of density-dependent behavioural plasticity in the Australian plague locust

<p>Abstract</p> <p>Background</p> <p>The Australian plague locust, <it>Chortoicetes terminifera</it>, is among the most promising species to unravel the suites of genes underling the density-dependent shift from shy and cryptic solitarious behaviour to the highly active and aggregating gregarious behaviour that is characteristic of locusts. This is because it lacks many of the major phenotypic changes in colour and morphology that accompany phase change in other locust species. Reverse transcription-quantitative polymerase chain reaction (RT-qPCR) is the most sensitive method available for determining changes in gene expression. However, to accurately monitor the expression of target genes, it is essential to select an appropriate normalization strategy to control for non-specific variation between samples. Here we identify eight potential reference genes and examine their expression stability at different rearing density treatments in neural tissue of the Australian plague locust.</p> <p>Results</p> <p>Taking advantage of the new orthologous DNA sequences available in locusts, we developed primers for genes encoding 18SrRNA, ribosomal protein L32 (RpL32), armadillo (Arm), actin 5C (Actin), succinate dehydrogenase (SDHa), glyceraldehyde-3P-dehydrogenase (GAPDH), elongation factor 1 alpha (EF1a) and annexin IX (AnnIX). The relative transcription levels of these eight genes were then analyzed in three treatment groups differing in rearing density (isolated, short- and long-term crowded), each made up of five pools of four neural tissue samples from 5^thinstar nymphs. SDHa and GAPDH, which are both involved in metabolic pathways, were identified as the least stable in expression levels, challenging their usefulness in normalization. Based on calculations performed with the geNorm and NormFinder programs, the best combination of two genes for normalization of gene expression data following crowding in the Australian plague locust was EF1a and Arm. We applied their use to studying a target gene that encodes a Ca²⁺binding glycoprotein, <it>SPARC</it>, which was previously found to be up-regulated in brains of gregarious desert locusts, <it>Schistocerca gregaria</it>. Interestingly, expression of this gene did not vary with rearing density in the same way in brains of the two locust species. Unlike <it>S. gregaria</it>, there was no effect of any crowding treatment in the Australian plague locust.</p> <p>Conclusion</p> <p>Arm and EF1a is the most stably expressed combination of two reference genes of the eight examined for reliable normalization of RT-qPCR assays studying density-dependent behavioural change in the Australian plague locust. Such normalization allowed us to show that <it>C. terminifera </it>crowding did not change the neuronal expression of the <it>SPARC </it>gene, a gregarious phase-specific gene identified in brains of the desert locust, <it>S. gregaria</it>. Such comparative results on density-dependent gene regulation provide insights into the evolution of gregarious behaviour and mass migration of locusts. The eight identified genes we evaluated are also candidates as normalization genes for use in experiments involving other Oedipodinae species, but the rank order of gene stability must necessarily be determined on a case-by-case basis.</p

Analyst information precision and small earnings surprises

This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts’ ability to strategically induce slight pessimism in earnings forecasts varies with the precision of their information. Accordingly, we predict that the probability that a firm reports a small positive instead of a small negative earnings surprise is negatively related to earnings forecast uncertainty, and we present evidence consistent with this prediction. Our findings have important implications for the earnings management interpretation of the asymmetry around zero in the frequency distribution of earnings surprises. We demonstrate how empirically controlling for earnings forecast uncertainty can materially change inferences in studies that employ the incidence of zero and small positive earnings surprises to categorize firms as suspected of managing earnings