Search

In 2017, KPMG discovered that several high-ranking partners in its Department of Professional Practice (DPP) had surreptitiously obtained highly confidential information on upcoming PCAOB inspections. In obtaining this information, these KPMG partners were able to anticipate and prepare for PCAOB inspections, causing the firm's inspection deficiency rate to plummet and its executives to tout the success of their efforts to improve audit quality. Once the firm discovered the scandal, the individuals involved were terminated, and six of them were ultimately convicted of felonies. This case study introduces students to relevant auditing standards, audit quality concepts, and facilitates discussion of a number of ethical issues. Learning objectives for this case include obtaining an understanding of the PCAOB and its inspection program, understanding audit documentation standards, demonstrating the ability to evaluate ethical issues, applying the fraud triangle in a unique setting, and assessing responsibility for the various parties involved. [ABSTRACT FROM AUTHOR]

Using a combination of short-selling data made available by Regulation SHO and auditor change data disclosed in companies’ SEC filings, we examine whether short sellers (a) discern between “good news” and “bad news” auditor changes and (b) increase their revenue by trading around auditor change announcements. We find that short sellers systematically increase activity following certain auditor changes, which include auditor downgrades (i.e., change from Big 4 auditor to non-Big 4 auditor), auditor resignations, and auditor changes involving a disagreement between management and the departing auditor. Our results indicate that short sellers are able to generate significant returns by systematically taking short positions pursuant to specific types of “bad news” changes. [ABSTRACT FROM PUBLISHER]

This case provides students an introductory experience to substantive analytical procedures in a realistic audit setting. Students are presented with a scenario, adapted from a real-world example, requiring them to (1) research relevant auditing standards, (2) develop an independent expectation for a client's revenue account, and (3) consider the precision of the estimate, additional audit procedures, and the reliability of the underlying data and evidence obtained. In completing the case, students will learn to: (1) explain the benefits and challenges of using substantive analytical procedures, (2) research relevant auditing standards, (3) create and analyze relevant substantive analytics, (4) evaluate the appropriateness of data aggregation in substantive analytical procedures, and (5) discuss factors affecting the reliability of data used by the auditor. The case is typically assigned as an out-of-class assignment, combined with a subsequent in-class discussion. It can be used in either undergraduate or graduate auditing courses. [ABSTRACT FROM AUTHOR]

In this paper, we study spatial competition in the U.S. audit market while accounting for its two-tiered nature. We provide evidence on the differential impact that market share distances within and between the players in the large and small audit markets have on competition. We find that the market share distance from small audit firm competitors has a greater effect on the Big 4's audit fees than distances from other Big 4 competitors. This finding suggests that small audit firms play a significant part in the competitive landscape in local markets. Further, we find that audit fees are increasing with the distance between a small audit firm and its closest competing small audit firm while audit fees are decreasing with the distance between a small audit firm and its closest competing large audit firm. This suggests that while obtaining separation in market space from competing small audit firms reduces competitive pressure from other small audit firms, as a small audit firm gets closer to the market space of a large audit firm it is perceived as being more like the larger audit firm and is able to obtain a fee premium like that attained by the larger audit firms. [ABSTRACT FROM AUTHOR]

The purpose of this case is to provide auditing students with an opportunity for applied learning in a realistic audit setting. The objectives of the case are: (1) to introduce students to the applied use of audit documentation, including the audit program and work papers; (2) to provide students with greater understanding of how various company records can be used by the auditor in his/her audit tests; (3) to demonstrate how the concept of materiality relates to the financial statement audit; and (4) to reinforce the importance of technical writing skills to effective and efficient communication of audit information. The case involves little class time, and students can complete the case in a very reasonable amount of time outside of class. Feedback from students has been very positive. [ABSTRACT FROM AUTHOR]

Based on survey responses from approximately 500 Chief Audit Executives (CAEs) and other internal auditors, this article provides an insider's view of the perceived strength of organizations' internal controls (i.e., internal control over financial reporting) in the Control Environment, Risk Assessment, and Monitoring components of the Committee of Sponsoring Organizations' (COSO 1992a) Internal Control—Integrated Framework. Although the respondents largely rate control strength as relatively high, we identify several areas for potential improvement of internal controls, especially related to assessing the ''tone at the top,'' as well as following up on deviations from policy and management override of controls. In analyzing individual control elements, we find that public companies' controls are consistently rated as more effective than those of other organizations. We also find a number of interesting differences across key industries, especially in the Monitoring component, where banks and other financial services firms appear to have more robust Monitoring controls than do healthcare and other services firms. The component-level analysis reveals that internal control component strength is positively related to the CAE reporting primarily to the audit committee, public company status, and the average tenure of the internal audit function staff, among other findings. Based on the survey findings, we describe key implications relevant to internal and external auditors, accounting researchers and educators, and management. [ABSTRACT FROM AUTHOR]

This paper ranks individual accounting researchers based on their research productivity in the most recent six, 12, and 20 years. We extend prior individual faculty rankings by providing separate individual faculty research rankings for each topical area commonly published in accounting journals (accounting information systems [AIS], audit, financial, managerial, and tax). In addition, we provide individual faculty research rankings for each research methodology commonly used by accounting researchers (analytical, archival, and experimental). These findings will be of interest to potential doctoral students and current faculty, as well as accounting department, business school, and university administrators as they make decisions based on individual faculty members' research productivity. [ABSTRACT FROM AUTHOR]

This paper presents rankings of accounting doctoral programs based on the research productivity of each institution's graduates in the years immediately following their graduation. We use two time periods for analysis: the first three years after graduation and the first six years after graduation. We extend previous doctoral program ranking literature by expanding rankings of accounting doctoral programs with specific rankings for topical areas (accounting information systems (AIS), audit, financial, managerial, and tax) and methodologies (analytical, archival, and experimental). We show that rankings for topical and methodological areas differ significantly from rankings produced using methodologies that create a singular doctoral program ranking. These results emphasize the importance of considering topical and methodological areas when assessing doctoral program research strengths. These rankings should be of value to Ph.D. program applicants, administrators of academic programs, and industry-such as administrators of programs like the Accounting Doctoral Scholars program, KPMG Ph.D. Project, and prospective Ph.D. students. [ABSTRACT FROM AUTHOR]

The internal audit function's (IAF) regular interaction with management and continual presence within the organization place it in a unique position to monitor the organization. Although the IAF has significant potential to evaluate and improve corporate governance, research has yet to explore how internal auditors assess an important component of corporate governance-management tone at the top. This paper reports survey evidence of 578 practicing internal auditors related to (1) current internal auditing practices regarding assessing management's tone; (2) internal auditors' current assessments of management's tone; and (3) potential future practices internal auditors could perform to improve management's tone. In addition, we examine whether the tone at the top is higher in organizations where internal auditors perform tone at the top assessments and if assessments differ based on what level of internal audit professional performs tone at the top assessments. [ABSTRACT FROM AUTHOR]