Keywords: Internal Audit, CAATTs

(SRS-065)

Angela Walker

University of Auckland

David Hay

Professor of Auditing, Department of Accounting and Finance, The University of Auckland Business School,  Auckland, New Zealand.

ABSTRACT

The accounting profession has strongly argued against claims that the provision of non-audit services to audit clients leads to impaired auditor independence, instead claiming that the joint provision of non-audit services and audit services creates
knowledge spillovers that lead to a more efficient audit. In this paper, we seek to provide evidence concerning the knowledge spillover effect by examining the association between the audit report lag and non-audit services. We investigate whether firms which purchase larger amounts of non-audit services from their
incumbent auditor benefit from knowledge spillovers leading to a more efficient or faster audit in the form of a shorter audit report lag (or whether the opposite applies). We use New Zealand public companies to obtain a sample of 260 firm-year observations over the period 2004-2005, which allows us to examine the association in the post-Sarbanes-Oxley (SOX) period. We find evidence that non-audit services are associated with a shorter audit report lag, but in a subsequent period, not in the year in which the services are provided. The results suggest that firms purchasing non-audit services from their incumbent auditors benefit from knowledge spillovers in the form of a shorter audit report lag, but not immediately.

Key words: Auditing; auditor independence; non-audit services; audit report lag; knowledge spillovers.

(SRS-064, JEL Classification Code: M42)

Paul A. Griffina

University of California

David H. Lontb

University of Otago

ABSTRACT

This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession’s share of the risk of defective financial statements and client companies’ resources to audit a costlier accounting system.

JEL Classifications: K22, L80, M41, M42

Keywords: Sarbanes-Oxley, audit fees, SEC certification, section 404, internal control

(SRS-063)

Randall Morck

Stephen A. Jarislowsky Distinguished Professor of Finance at the School of Business, University of Alberta, Edmonton, Alberta, Canada T6G2R6; and a Research Associate with the National Bureau of Economic Research

Bernard Yeung

the Abraham Krasnoff Professor of Global Business, Professor of Economics, and Professor of Management at the Stern School of Business, New York University

ABSTRACT

Control of corporate assets by wealthy families in economies is common, and control pyramids concentrate governance powers in a tiny elite in many countries. This can have negative implications for corporate governance. It can also lead to adverse
macroeconomic effects when these problems extend across a sufficiently large part of the country’ corporate sector. We consider the reasons why such ownership predominates in emerging market economies and in some developed economies. We also discuss reasons why widely held free standing firms predominate in the United States. We conclude by discussing policies countries might adopt to discourage family control pyramids, but caution that control pyramids are but one feature of an institutionally deficient economy. A concerted effort to improve a country’s institutions is needed before diffuse ownership is desirable.

(SRS-062, World Bank Policy Research Working Paper 3406, September 2004)

M. Strydom

F. Navissi

M. Skully

M. Veeraraghavan
Department of Accounting and Finance, Monash University, Melbourne, Australia

ABSTRACT

This study investigates the relationship between corporate governance and information risk in the period post introduction of the Sarbanes Oxley Act (2002). Previous studies investigate internal control weaknesses, and discretionary accruals surrounding reforms (Doyle et al. 2007; Asbaugh-Skaife et al. 2008; Lobo & Zhou, 2006; Cohen et al. 2005) but fail to link this to a comprehensive measure of corporate governance or at information risk specifically. A weighted internal corporate governance index is developed overcoming issues with previous efforts. We find that the quality of reported earnings figures improved significantly post SOX and that better governed firms are thus likely to have less information risk. We contribute to literature by extending previous research on information risk to corporate governance and reforms. These findings provide additional insight to the importance of good corporate governance for capital markets. Investors should be aware of the quality of firm corporate governance when assessing financial statements as this provides valuable information on their quality.

JEL code: G14, G34, M38, M41

Key words: Accruals Quality, Information risk, Corporate Governance, Sarbanes Oxley Act

(SRS-061)

N Kirk C van Staden
School of Accountancy School of Accountancy College of Business College of Business Massey University Massey University New Zealand New Zealand

ABSTRACT

In this paper, grounded theory is investigated and applied to research on electronic commerce in order to demonstrate its use and potential limitations in accounting research. Grounded theory enables relevant theoretical concepts to emerge from the data and, in this way, leads to discovery. In treating ‘all as data’, grounded theory uses a pragmatic approach, combining qualitative and quantitative data and data-gathering methods to encourage a rich understanding of the situation. This enables the generation of theory rather than the confirmation of existing theory. To illustrate this process, this paper demonstrates the emergence, with the use of grounded theory, of a definition for
electronic commerce.

(SRS-060)

Michael Gaffikin,
School of Accounting & Finance, University of Wollongong

ABSTRACT

The theorising in accounting prior to 1970 was rejected as not providing sufficiently general theories. Informed by theories in economics and finance (and other disciplines such as psychology) and with the aid of computers, attempts to theorise accounting took a new direction. Large data collection and analysis emphasized a purportedly more systematic empirical approach to developing theory.

(SRS-059, The Australasian Accounting Business & Finance Journal, February 2007 Vol. 1, No.1.pp. 1-19)

Mark S. Beasley
Professor of Accounting and Director of the Enterprise Risk Management InitiativeNorth Carolina State University

Richard Clune
Assistant Professor Kennesaw State University

Dana R. Hermanson
Dinos Eminent Scholar Chair of Private Enterprise
Kennesaw State University

Abstract

This exploratory study provides evidence about factors associated with the overallimpact of enterprise risk management (ERM) on the internal audit function’s activities.Based on responses from 122 organizations in several countries, we find that ERM has the greatest impact on internal audit’s activities when (a) the organization’s ERM processis more completely in place, (b) the CFO and audit committee have called for greaterinternal audit activity related to ERM, (c) the chief audit executive’s (CAE) tenure is longer, (d) the organization is in the banking industry or is an educational institution, and (e) the internal audit function has provided more ERM leadership. We offer implications and future research directions.

Key Words: Enterprise risk management, Internal audit, Corporate governance, Risk,Control, Chief audit executive, Chief financial officer, Audit committee, Banking,Education

(SRS-056)

Anjan Kumer Roy

Keywords: Risk based internal audit (RBIA), BASEL II

(SRS-055)

professor (PhD) of Management Information Systems Department at Academy of Economic Studies, Bucharest-Romania, Faculty of Accounting and Management Information Systems

ABSTRACT

Romanian banking system has known in the last years significant changes determined by the implementation of Basel II requirements and governance principles on one hand and assimilation of the EU Directives for the banking sector on the other hand. The function of internal audit is new in the Romanian banks, being implemented as a result of the new regulation established by the Romanian National Bank in the effort to aligne the Romanian banking legislation to the international regulations and practice in the field. In the dynamic banking environment the internal audit has to define and strengthen its statute and role.
We can say that in the new context – regulatory environment for banking system and professional requirements – internal audit become one of the most influential and value added function in the bank. The present paper presents the role of internal audit in the Romanian banks and its major areas of interest.

Key words: internal audit, risk based approach, risk management.

(SRS-054)