Antoinette L. Smith

Information Technology Capability, Internal Control Effectiveness, and Audit Fees and Delays

ABSTRACT: We examine the role of firm IT capability in contributing to internal control and external audit in the post-SOX environment. Specifically, we measure the effectiveness of both the overall internal control and the five components of internal control as defined by the Committee of Sponsoring Organizations of the Treadway Commissions Internal Control—Integrated Framework (COSO 1992). Our findings support the concern that accounting professionals have regarding the impact of the use of IT on business risks and controls relevant to the audit. Specifically, IT capability directly mitigates audit fee increases, but not audit delay increases, indicating high IT capability signals lower business risks associated with the use of IT and reduces the auditors risk premium. Further, IT capability has pervasive impacts on both the effectiveness of internal control and the components of effective internal control, which in turn further restrain audit fee and audit delay increases. Overall, our results sugges...

IT Governance Characteristics, Electronic Medical Records Sophistication, and Financial Performance in U.S. Hospitals: An Empirical Investigation

As a result of a recent federal government mandate, an increasing number of hospitals have decided to adopt electronic medical record (EMR) systems. This initiative is expected to lead toward more efficient and higher quality health care; however, little is known about governance characteristics and organizational performance for EMR adopters. Our goal is to inform theory and practice by examining hospitals with a sophisticated EMR and comparing those hospitals to similar hospitals (with a less sophisticated EMR) to understand the association between information technology (IT) governance characteristics and the implications on financial performance. Leveraging elements of the upper echelon theory, we posit that hospitals in which the chief information officer (CIO) reports to the chief executive officer, CIO turnover is low, and an IT steering committee is present are more likely to have a sophisticated EMR. We argue that EMR sophistication leads to improved financial performance. Our results underscore the importance of continuity in the CIO position on successful EMR implementations. Results also show that hospital size and financial performance are strongly associated with EMR sophistication. In addition, we find that a sophisticated EMR appears to be a fundamental element in improving hospitals’ revenue cycle management. Moreover, we find that hospitals with a sophisticated EMR appear to be more profitable. Finally, we observe that total payroll expense adjusted by total discharges drops among the sophisticated hospitals, potentially due to an increase in employee productivity. These insights can serve as a basis for tempering expectations relative to the financial impact of EMR adoption.

The Dark Side of Online Knowledge Sharing (Retracted)

ABSTRACT : Given the growing trend of electronic networks of practice and the growing propensity of individuals to rely on the Internet for problem solving, we examine whether programmers in a hypothetical situation would be likely to disclose confidential information through an online forum in attempt to solve a programming problem. We hypothesize and find in a survey of 187 programmers that online forum commitment and trust lead to greater online forum participation, which in turn predicts a higher likelihood of confidential information disclosure. We also find that programmers with greater awareness of security policies exhibit a lower likelihood of deciding to risk disclosing confidential information. The study contributes to extant literature by raising and exploring the potentially negative, dark side of knowledge sharing through electronic networks of practice.

SEC enforcement releases and audit fees

Purpose - The purpose of this study is to examine whether firms subject to an SEC enforcement action experience audit fee premiums in subsequent years. Design/methodology/approach - The paper uses a test sample with firms that are cited in Accounting and Auditing Enforcement Releases (AAERs) by the US Securities and Exchange Commission (SEC) and two different control samples, and conducts empirical tests using cross-sectional multiple regressions. Findings - It is found that firms subject to SEC enforcement actions pay higher audit fees in subsequent periods. This finding is robust after controlling for restatements and prior material internal control weakness disclosures. Additional analyses show that executive turnover does not mitigate the audit fee premium. Research limitations/implications - This study relies on AAERs; hence, the test sample is limited by the SECs investigation selection procedures. Practical implications - Findings in this study provide insights about the consequences of an SEC investigation. Corporate managers have a better understanding of how an SEC enforcement action is likely to result in an audit fee premium in subsequent years. Also, the results provide auditors with some benchmarking data related to the impact of SEC enforcement actions. Social implications - The results highlight potential consequences of fraudulent accounting practices in the market for audit services. Originality/value - This study is the first one that investigates the effects of SEC enforcement actions on subsequent audit fees.