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/ Ahsan Habib & Md. Borhan Uddin Bhuiyan
// Acounting and business research 2016, Vol46, N.2 p121-p144 The objective of this paper is to examine empirically the consequences for financial reporting quality of having audit committees that include problem directors, that is, directors with prior involvement in corporate bankruptcies, major accounting restatements, or other accounting scandals. An ordinary least squares regression model is used to examine the association between problem directors on the audit committee and financial reporting quality as proxied by accruals and real earnings management. Results reveal that there is a positive association between the presence of problem directors on the audit committee and real earnings management, and this association is more pronounced in cases where those problem directors have been involved in prior instances of accounting restatements and fraudulent reporting practices
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Auditor-provided tax services and stock price crash risk / Ahsan Habib & Mostafa Monzur Hasan
// Acounting and business research 2016, Vol46, N.1 p51-p82 This paper examines whether auditor-provided tax services affect stock price crash risk: an important consideration for stock investors. Provision of tax services by incumbent auditors could accentuate or attenuate crash risk depending on whether such services give rise to knowledge spillover or impair auditor independence. The study investigates two channels through which tax services might affect crash risk: earnings management in tax expenses and tax avoidance. Also examined is whether the association between tax services and crash risk is moderated by the particular business strategy that organizations pursue. A two-stage model is used to control for the potential endogeneity inherent in the selection of auditors for tax services. Empirical findings reveal that auditor-provided tax services attenuate crash risk by constraining both earnings management in tax expenses and tax avoidance. Further evidence shows that auditor-provided tax services reduce crash risk for firms following innovator business strategies. Taken together, empirical findings reported in this study support knowledge spillover benefits, that is, insights gained from tax services can enhance audit effectiveness
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Corporate reporting on the Internet and the expectations gap: new face of an old problem / Richard T. Fisher & Samuel T. Naylor
// Accounting and Business Research Volume 46, 2016 - Issue 2 p196-p220 While the practice of Internet financial reporting (IFR) has evolved rapidly, research has questioned the corresponding responsiveness of the auditing profession. This study investigates the existence and nature of an expectations gap that may have arisen in relation to the auditor s role and responsibilities with respect to IFR. Based on a questionnaire survey in New Zealand, results confirm the existence of an expectations gap between auditors and stakeholder groups. Specific responsibilities contributing to deficient performance, deficient standards, and unreasonable expectations components of this gap are identified. The principal pronouncement dealing with auditors’ relevant responsibilities in New Zealand is AGS 1003 Audit Issues Relating to the Electronic Presentation of Financial Statements and Related Auditor s Reports. AGS 1003 discusses, inter alia, the auditor s role and responsibilities in relation to electronic financial statements before and after online publication, and the implications of IFR for the auditor s report and other audit communications. The study argues that the authoritative status of such guidance statements may contribute to a perpetuation of the gap. Furthermore, the profession is urged to avoid ‘standard’ professional responses to the issues, which risk being labelled insufficient and/or strategically motivated. The findings have policy implications for standard-setters internationally
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Corporate social responsibility, country-level predispositions, and the consequences of choosing a level of disclosure / Charl de Villiers & Ana Marques
// Acounting and business research 2016, Vol46, N.2 p167-p195 We study the different levels of corporate social responsibility (CSR) disclosures of the largest European firms. We find that firms are more predisposed to disclose more CSR information in countries with better investor protection, higher levels of democracy, more effective government services, higher quality regulations, more press freedom, and a lower commitment to environmental policies. Our analysis of the association of different levels of CSR disclosure with share prices indicates that a high level of CSR disclosure is associated with higher share prices, whereas a low level of CSR disclosure in sensitive industries is associated with lower share prices (compared to no disclosure). These results are also present when we analyse changes in CSR disclosure and are robust to the inclusion of an accounting quality measure in our model. The overall effect of the association of higher levels of CSR disclosure with higher share prices is stronger in countries with more democracy, more government effectiveness, better regulatory quality, and more press freedom. Therefore, market participants find CSR disclosures more informative in countries where investors are in a better position to voice their concerns and where there is better regulation and more effective government implementation of regulations
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