Empirical evidence on audit quality under a dual mandatory auditor rotation rule

Regulators in the US ruled against introducing mandatory firm rotations in addition to the existing rule for periodic partner rotations. In contrast, European regulators ruled in favor of a dual mandatory rotation rule in which both audit firm and audit partner rotations are required. Employing a unique setting where a dual regime of audit and firm rotations are required, we assess the net benefit (cost), of audit firm rotation incrementally to partner rotation. Specifically, we analyze several earnings-based measures of audit quality along with the market perception of audit quality. Controlling for partner rotation, we do not find that firm rotations have a positive incremental effect. In contrast, we find audit partner rotation under the dual regime appears to improve both the earnings-based measures of audit quality, and market perceptions of earnings. Our evidence suggests that any benefit arising from dual rotation is likely to be driven by the change in partner. However, whether the audit firm rotation should still be required is unclear, given that the observed benefits arising from the audit partner rotation could potentially be preconditioned on audit firm rotation

Mouse Genome-Wide Association Mapping Needs Linkage Analysis to Avoid False-Positive Loci

We carried out genome-wide association (GWA) studies in inbred mouse strains characterized for their lung tumor susceptibility phenotypes (spontaneous or urethane-induced) with panels of 12,959 (13K) or 138,793 (140K) single-nucleotide polymorphisms (SNPs). Above the statistical thresholds, we detected only SNP rs3681853 on Chromosome 5, two SNPs in the pulmonary adenoma susceptibility 1 (Pas1) locus, and SNP rs4174648 on Chromosome 16 for spontaneous tumor incidence, urethane-induced tumor incidence, and urethane-induced tumor multiplicity, respectively, with the 13K SNP panel, but only the Pas1 locus with the 140K SNP panel. Haplotype analysis carried out in the latter panel detected four additional loci. Loci reported in previous GWA studies failed to replicate. Genome-wide genetic linkage analysis in urethane-treated (BALB/c×C3H/He)F2, (BALB/c×SWR/J)F2, and (A/J×C3H/He)F2 mice showed that Pas1, but none of the other loci detected previously or herein by GWA, had a significant effect. The Lasc1 gene, identified by GWA as a functional element (Nat. Genet., 38:888–95, 2006), showed no genetic effects in the two independent intercross mouse populations containing both alleles, nor was it expressed in mouse normal lung or lung tumors. Our results indicate that GWA studies in mouse inbred strains can suffer a high rate of false-positive results and that such an approach should be used in conjunction with classical linkage mapping in genetic crosses

SEC supervisory activity in the financial industry

This study documents a higher incidence of SEC Comment Letters among financial institutions characterized by abnormal levels of loan loss provisions (LLPs). In particular, results show that this effect is stronger for banks overestimating LLPs, suggesting an asymmetric attitude of the SEC Research Division toward overestimations compared with LLPs underestimations, especially in the pre-financial crisis period. Finally, the study demonstrates that after receiving a Comment Letter by the SEC, financial institutions change the way they account for LLPs by basing their computation more on historical data, thereby reducing the level of discretion embedded in their calculation

Audit rotation and audit quality

No abstract availabl

I Prinicipi Contabili Internazionali

Il capitolo si pone i seguenti obiettivi: - Comprendere le logiche alla base dei Principi Contabili internazionali -Apprendere la struttura dei documenti obbligatori di bilancio secondo gli IAS/IFRS -Riflettere sulle differenze fondamentali esistenti con la normativa nazionale in merito alla iscrizione e valutazione delle principali voci di bilanci

Principi contabili internazionali e società non quotate: quali conseguenze sul costo del debito?

Obiettivo del presente lavoro è documentare se l???adozione volontaria dei principi contabili internazionali per la redazione della reportistica annuale possa impattare sul costo del debito delle società nazionali non quotate. Da un lato, i principi internazionali dovrebbero agevolare e rendere meno costoso il ricorso al finanziamento, in quanto generalmente percepiti come standard di qualità superiore rispetto ai principi domestici. D'altro canto, lasciando ampio spazio alla discrezionalità applicativa, possono incrementare l???asimmetria informativa, con conseguenze negative sull???accesso e sul costo del debito. I risultati del nostro studio mostrano come le società IFRS adopters siano caratterizzate da un minore costo del debito, suggerendo, dunque, un effettivo beneficio economico derivante dall???adozione volontaria dei principi internazionali

Come la tecnolologia aiuta i revisori e le aziende

-Le attività di auditing richiedono, e sempre più richiederanno, la disponibilità di conoscenze e competenze che permettano di analizzare e impiegare in modo corretto dati e informazioni ottenuti grazie alle nuove tecnologie. • Dalla trasformazione tecnologica ci si può attendere un impatto significativo in termini di efficacia ed efficienza del servizio di revisione prestato al cliente, ma tale impatto non necessariamente avverrà senza costi e in tempi brevi. • Le società di revisione dovranno sempre più rivolgersi a specialisti in competenze digitali e includere nuove figure professionali all’interno del team di revisione, con risvolti non facilmente prevedibili in termine di dinamiche organizzative, dinamiche di team e costi che dovranno essere accuratamente gestit

External auditor reassessment of client business risk following the issuance of a comment letter by the SEC

Following Arthur Andersen’s conviction for obstructing justice, auditors faced a one-time significant change in their regulatory environment because it was clear that: (i) major audit partnerships could be closed; (ii) post SOX, regulators would take a far more attentive (aggressive) role. In response auditors considered whether the pricing of audits should be revised to take account of the increased risk of regulatory intervention and litigation. Obviously such re-pricing would need to be targeted at those firms for which the risks were greatest. One early warning signal of such events occurring is the issuance by the SEC of a Comment Letter. We investigate whether there is any evidence that if a client receives a Comment Letter this is used to re-price audit services. Specifically, we investigate whether issuance resulted in upward pressure on audit fees, and whether this effect was simply transient around the issuance period or alternatively persisted some years into the future. This research finds that after a client receives a Comment Letter, auditors adjust audit fees upwards in the period in which the Comment Letter is received. In addition it is shown that for subsequent periods in which the auditor does not spend time assisting the client respond to a specific Comment Letter, initial rises in audit fee persist. This is consistent with the hypothesis that auditors reassess the reputation and litigation risk of the client on the basis of the SEC issuance of a Comment Letter

The audit mandatory rotation rule: the state of the art

Mandatory audit rotation imposes periodical breaks to audit engagements and is intended to avoid excessively long relationships between the auditor and the client. The E.U. has finally introduced mandatory rotation for the audit firm in addition to the already existing audit partner rotation rules. The U.S., however, has for now decided to retain the partner rotation rule without introducing mandatory audit firm rotations. After an overview of the experience of a number of countries, we summarize the pros and cons of a compulsory change in the audit firm. Moreover, we focus on the empirical evidence collected on the benefits and costs of the rule. So far, investigations into the impact of the rule at corporate and market level have not been able to prove that the benefits outweigh the costs

Comment letter frequency and CFO turnover: a dynamic survival analysis

Earlier research on chief financial officer (CFO) turnover considered whether one of detailed regulatory findings, such as restatements, affected the likelihood of CFO turnover. However, since the passing of Sarbanes–Oxley Act (SOX), the Security Exchange Commission (SEC) has revised the regulatory approach it uses. It now investigates companies on a more frequent basis and using Comment Letters (CLs) regularly asks registrants to explain disclosure practice with a view to possibly requiring enhanced or revised disclosures. In this new proactive environment, some registrants may repeatedly receive CLs asking questions about multiple disclosure issues. This research uses a dynamic hazard model specification to investigate whether through time CFO turnover increases as the registrants accumulate more CLs. In addition to CL frequency, a measure of the severity of SEC CLs is introduced to see if it moderates the effect of frequency