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Article
Publication date: 20 April 2020

Jagan Krishnan, Jayanthi Krishnan and Sophie Liang

The Dodd–Frank Act of 2010 exempts small, non-accelerated filers from compliance with Sarbanes–Oxley Act (SOX) Section 404b internal control audits. However, these firms are…

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Abstract

Purpose

The Dodd–Frank Act of 2010 exempts small, non-accelerated filers from compliance with Sarbanes–Oxley Act (SOX) Section 404b internal control audits. However, these firms are required to comply with other internal control regulations, namely, SOX Sections 302 and 404a, starting in 2002 and 2007, respectively. A small number of these firms also voluntarily adopted (and sometimes dropped) Section 404b during 2004-2010. The purpose of this study is to investigate the impact of a series of internal control regulations introduced by SOX on the financial reporting quality of small firms.

Design/methodology/approach

The research design for this study is empirical. Using unsigned and signed discretionary accruals as measures of financial reporting quality, the authors compare the financial reporting quality for adopters and non-adopters across four regulation regimes over the period 2000-2010: PRESOX, SOX 302, SOX 404a and SOX 404b.

Findings

The results indicate that most of the adopters and non-adopters benefited from SOX 302 and 404a compared with the PRESOX period. However, only the non-adopters gained incrementally when moving from SOX 302 to SOX 404a. Also, Section 404b benefited firms with material weaknesses, as well as firms without material weaknesses that had the lowest reporting quality, in the PRESOX period.

Research limitations/implications

This study helps inform the important policy debate on whether to increase the threshold that is used for the SOX 404b exemption. It shows incremental benefits for firms that adopted Section 404b audits, even when they were complying with Section 302 and Section 404a. Consequently, extending the exemption to more companies would result in a loss of the reporting quality benefit of 404b.

Originality/value

This study contributes to the literature by focusing exclusively on non-accelerated filers and by examining differences across four regulation regimes over a long window compared to prior studies. It provides evidence that the financial reporting benefit of SOX 404b is not transitional, but rather extends for a few years even after some firms discontinued the 404b audits.

Details

Review of Accounting and Finance, vol. 19 no. 2
Type: Research Article
ISSN: 1475-7702

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Book part
Publication date: 9 October 2020

Philip R. Jones, Joseph Monts and Andrew C. Spieler

Abstract

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Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

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Article
Publication date: 16 July 2020

Hongkang Xu, Trung H. Pham and Mai Dao

The purpose of this study is to examine the influence of the readability of annual reports on firms’ ability to obtain trade credit from suppliers. Particularly, the authors…

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Abstract

Purpose

The purpose of this study is to examine the influence of the readability of annual reports on firms’ ability to obtain trade credit from suppliers. Particularly, the authors conjecture that annual report readability helps firms obtain more trade credit from suppliers.

Design/methodology/approach

The authors use the Gunning Fog Index as the primary measure of annual report readability and the ratio of accounts payable to the book value of total assets as the measure of trade credit.

Findings

Results from the study of 4,754 firms during the 2004–2016 period indicate that suppliers extend more trade credit to firms with more readable financial reports. The authors’ results are robust to alternative measures of trade credit and annual report readability. The authors’ results remain robust when we control for firm fixed effects and potential endogeneity problems using the instrumental variable approach. A further test shows that the level of trade credit is higher for firms in business service industries, and that this relation is weakened when firms disclose less readable 10-K filings.

Originality/value

The authors’ findings provide new insight into the role of financial report readability in firms’ ability to obtain trade financing from suppliers. The authors’ results are also in line with the SEC’s encouragement that firms use plain English and easy language in financial reporting.

Details

Review of Accounting and Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 11 June 2020

Hamid Zarei, Hassan Yazdifar, Mohsen Dahmarde Ghaleno and Ramin azhmaneh

The purpose of the paper is to investigate the extent to which a model based on financial and non-financial variables predicts auditors' decisions to issue qualified audit reports…

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Abstract

Purpose

The purpose of the paper is to investigate the extent to which a model based on financial and non-financial variables predicts auditors' decisions to issue qualified audit reports in the case of companies listed on the Tehran Stock Exchange (TSE).

Design/methodology/approach

The authors utilized data from the financial statements of 96 Iranian firms as the sample over a period of five years (2012–2016). A total of 480 observations were analysed using a probit model through 11 primary financial ratios accompanying non-financial variables, including the type of audit firm, auditor turnover and corporate performance, which affect the issuance of audit reports.

Findings

The results demonstrated high explanatory power of financial ratios and type of audit firm (the national audit organization vs other local audit firms) in explaining qualifications through audit reports. The predictive accuracy of the estimated model is evaluated using a regression model for the probabilities of qualified and clean opinions. The model is reliable, with 72.9% accuracy in classifying the total sample correctly to explain changes in the auditor's opinion.

Research limitations/implications

This study contains some limitations. First, it is likely that similar researches in developed countries set a large sample (e.g. over 1,000 firms) including more years, but the authors cannot follow such a trend due to data access restrictions. Second, banks and financial institutions, investment and holding firms are removed from the sample, because their financial structure is diverse. The third limitation of the study represents the different economic and cultural conditions of Iran compared to other countries. Future studies could focus on internal control material weaknesses or earnings management to predict audit opinion in emerging economies including Iran.

Practical implications

The paper has practical implications and can assist auditors in identifying factors motivating audit report qualifications, mainly in emerging economies.

Originality/value

The paper contributes to auditing research, since very little is known about the determinants of audit opinion in emerging markets including Iran; it also constitutes an addition to previous knowledge about audit opinion in the context of TSE. The paper is one of the rare studies predicting auditor opinions using both financial variables and non-financial metrics.

Details

Journal of Accounting in Emerging Economies, vol. 10 no. 3
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 10 August 2023

Dahlia Robinson, Thomas Smith, James Devin Whitworth and Yiyang Zhang

This study aims to investigate whether accounting-related litigation is associated with a break in the client’s earnings string and the auditor’s response to a break in the…

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Abstract

Purpose

This study aims to investigate whether accounting-related litigation is associated with a break in the client’s earnings string and the auditor’s response to a break in the earnings string.

Design/methodology/approach

The authors use regression models on a sample of publicly-traded USA companies with earnings strings.

Findings

The authors find that clients’ earnings string breaks are associated with increased accounting litigation risk and audit fees. The results are more prevalent for larger breaks.

Research limitations/implications

The findings suggest auditors anticipate string breaks by clients which implies that audit fee research should consider earnings string characteristics in the fee models.

Practical implications

The auditor’s access to private information allows them to anticipate string breaks and potential increase in litigation risk.

Originality/value

An earnings string break represents a convergence of concerns highly relevant to the auditor: more users relying on the financial statements with greater expectations, increased likelihood of losses to those users, an environment where the likelihood of misstatement may increase, and explicitly stated professional responsibilities in response to the latter. Despite that, and a rich earnings string literature, prior studies have not directly examined auditors’ response to a client’s string break.

Details

Managerial Auditing Journal, vol. 38 no. 7
Type: Research Article
ISSN: 0268-6902

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Book part
Publication date: 20 December 2000

Mary Anne Gaffney and Jagan Krishnan

Abstract

Details

Advances in Accounting Education Teaching and Curriculum Innovations
Type: Book
ISBN: 978-0-76230-758-6

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Case study
Publication date: 18 November 2016

G. Raghuram and Prashanth D. Udayakumar

GMR Infrastructure Limited (GMRIL) had to make a decision on its continued role in the 555.48 km Kishangarh Udaipur Ahmedabad (KUA) Expressway Project, India's then longest road…

Abstract

GMR Infrastructure Limited (GMRIL) had to make a decision on its continued role in the 555.48 km Kishangarh Udaipur Ahmedabad (KUA) Expressway Project, India's then longest road public-private partnership (PPP) project. GMR had terminated the contract citing NHAI's failure in fulfilling Conditions Precedent (CP) of providing (i) environment clearance (EC), (ii) revised toll free notification and (iii) 80% of required land. The case intends to educate the reader on the concessionaire-authority dynamics in typical Indian infrastructure PPPs. Taking into account its internal strategy, the extant unfavourable investment climate, the Central Government's steps to revive private interest in the highways sector and NHAI's quick turnaround in fulfilling CP, GMR had to decide how to respond.

Details

Indian Institute of Management Ahmedabad, vol. no.
Type: Case Study
ISSN: 2633-3260
Published by: Indian Institute of Management Ahmedabad

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Article
Publication date: 10 May 2011

C. Michael Hall and Michael James

The major purpose of this research note is to explore some of the potential biosecurity and nosocomial risks associated with international medical tourism.

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Abstract

Purpose

The major purpose of this research note is to explore some of the potential biosecurity and nosocomial risks associated with international medical tourism.

Design/methodology/approach

The note reviews relevant medical tourism and cognate literature.

Findings

The note finds that there are substantial risks associated with nosocomial infections and complications as a result of international tourism. Although these are clearly significant at an individual level they also represent significant biosecurity risks to the home country of medical tourists and particularly to medical facilities which they may visit if they have an infection. Medical tourists are therefore identified by the medical community as posing significant risks for the spread of pandemics, as well as further contributing to increased antibiotic resistance. Further systematic research is required to assess risk management strategies including the appropriateness of international and national regulations which currently shows considerable variability.

Social implications

The development of international medical tourism is demonstrated to have potentially significant negative implications for global public health.

Originality/value

The relevance of the paper lies in its identification of considerable risks associated with international medical tourism which may have considerable economic and personal costs associated with them. Such risks are not usually incorporated into assessments of the economic benefits of medical tourism.

Details

Tourism Review, vol. 66 no. 1/2
Type: Research Article
ISSN: 1660-5373

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Article
Publication date: 16 February 2023

David Francas, Stephan Mohr and Kai Hoberg

Disruptions and shortages of drugs have become severe problems in recent years, which has triggered strong media and public interest in the topic. However, little is known about…

751

Abstract

Purpose

Disruptions and shortages of drugs have become severe problems in recent years, which has triggered strong media and public interest in the topic. However, little is known about the factors that can be associated with the increased frequency of shortages. In this paper, the authors analyze the drivers of drug shortages using empirical data for Germany, the fourth largest pharmaceutical market.

Design/methodology/approach

The authors use a dataset provided by the German Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte [BfArM]) with 425 reported shortages for drug substances (DSs) in the 24-month period between May 2017 and April 2019 and enrich the data with information from additional sources. Using logistic and negative binomial regression models, the authors analyze the impact of (1) market characteristics, (2) drug substance characteristics and (3) regulatory characteristics on the likelihood of a shortage.

Findings

The authors find that factors like market concentration, patent situation, manufacturing processes or dosage form are significantly associated with the odds of a shortage. The authors discuss the implications of these findings to reduce the frequency and severity of shortages.

Originality/value

The authors contribute to the empirical research on drug shortages by analyzing the impact of market characteristics, DS characteristics and regulatory characteristics on the reported shortages. The authors’ analysis provides a starting point for better prioritizing efforts to strengthen drug supply as it is currently intensely discussed healthcare authorities.

Details

International Journal of Operations & Production Management, vol. 43 no. 10
Type: Research Article
ISSN: 0144-3577

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Article
Publication date: 1 March 2000

Prashant Kulkarni, Anne Marsan and Debasish Dutta

Layered manufacturing (LM) is emerging as a new manufacturing technology that can enhance the scope of manufacturing. One of the essential tasks in LM is process planning. This…

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Abstract

Layered manufacturing (LM) is emerging as a new manufacturing technology that can enhance the scope of manufacturing. One of the essential tasks in LM is process planning. This paper defines, conceptualizes and reviews the literature in this emerging area. The paper concludes with future projections on the possible directions of research in this area.

Details

Rapid Prototyping Journal, vol. 6 no. 1
Type: Research Article
ISSN: 1355-2546

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