Christine Jubb

Earnings management and the audit opinion: evidence from Malaysia

Purpose – This study aims to examine auditor reporting behaviour in the presence of aggressive earnings management (EM) in the context of the Asian Economic Crisis as it affected Malaysia. In the vein of Bartov, Gul and Tsui, the interaction between discretionary or abnormal accruals and audit quality (AQ), as indicated by auditor size and auditor industry specialisation, is examined.Design/methodology/approach – A logistic regression model adapted from various prior studies is utilised to test the hypotheses.Findings – As per earlier findings using Western data, Big 5 auditors in Malaysia appear to qualify more frequently than their non‐Big 5 counterparts when high levels of abnormal accruals are present. However, the interaction between auditor industry specialisation and abnormal accruals is not significant in predicting the incidence of qualification.Originality/value – This study extends the current literature on AQ differentiation and specifically it attempts to address the gaps in the literature wi...

Materiality in the context of audit: the real expectations gap

Purpose - This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are drawn from the words of users of audited financial reports, auditee managements, suppliers to the market for audit services and auditing standard setters and regulators. Design/methodology/approach - This paper reports findings arising from face-to-face office interviews with individuals representing identified groups of stakeholders in the market for audit services about the issue of “materiality” as this concept is applied in auditing. The interviews canvassed many issues related to audit as part of a larger project entitled “The future of audit”. Findings - In general, stakeholders perceive that the concepts involved in audit materiality are not well understood and they point to the difficulty in providing educative materiality about it, especially in relation to qualitative materiality, to retail investors in particular. There are mixed views as to whether the actual level of tolerable error, as per one of the meanings of materiality in the audit space, should be disclosed, with some feeling that it might be detrimental or dangerous. Practical implications - If incremental information about materiality is to be disclosed, the issue of where, what to whom, by whom and when arise. Various suggestions are made by stakeholders in respect of these questions. Originality/value - The paper concludes by drawing from the insights gained by the authors through the comments of participant stakeholders to make recommendations that deal with the issue of audit materiality.

The CLERP 9 Audit Reforms: Benefits and Costs Through the Eyes of Regulators, Standard Setters and Audit Service Suppliers

Over the past decade or more Australia amongst other jurisdictions has experienced substantial reforms to auditing regulation in an effort to boost public confidence in the auditing profession. This paper aims to examine whether these changes in the Australian regulatory environment for audits have (a) provided enhanced confidence in reported financial data, (b) impacted audit costs and (c) not limited competition in the market for audit services. Using qualitative interview data, this study reports on the perceptions of auditors, auditing standard setters and regulators in relation to the CLERP 9 reforms to the Australian auditing regime in the later part of the 2000s. A theoretical framework is developed to evaluate whether these reforms are substantive enough in nature to effect public confidence in reported financial data and market competition in audits.

Poverty Alleviation with Microfinance: Bangladesh Evidence

This study provides evidence of the impact of membership of a microfinance institution (MFI) in Bangladesh on poverty alleviation . Using a quasi-experimental approach with a control group the members of which had never been members of a MFI, interviews with members of a prominent Bangladesh MFI were conducted in relation to their material possessions. In almost every aspect of material well-being, including income, ownership of assets, savings and food intake, members of the MFI are significantly better off than non-members when examined on a univariate basis. In multivariate tests, MFI membership is found to be associated with household income and, further, household wealth, measured in terms of savings, is associated with longer membership of a MFI.

Risk governance and performance: a developing country perspective

Purpose - – The purpose of this paper is to investigate the association between risk governance and bank performance in a country where disclosure of risk information is virtually voluntary. Design/methodology/approach - – Using 210 bank-year observations comprising hand-collected data for the period 2006-2012, the study uses regression analysis to test whether a significant relationship exists between risk governance and banks’ accounting- and market-based performance. Findings - – This paper investigates risk governance in terms of risk disclosure, number of risk committees and existence of a risk management unit, controlling for other corporate governance variables. Accounting-based performance is measured by return on equity and return on assets; market-based performance is measured by Tobin’s q and buy-and-hold returns. The results show that there is a significant relationship between risk governance and bank performance measures used in this study. Research limitations/implications - – This paper complements the governance literature by incorporating agency and neo-institutional theory to provide robust evidence that risk monitoring and management are associated with bank performance, which has become extremely important following the global financial crisis (2007-2008). Practical implications - – Empirical evidence in this paper suggests that risk governance characteristics can be used as channels to improve bank performance. In addition, stakeholders may find these results useful in selecting their preferred bank. Originality/value - – The uniqueness of this paper lies in its country setting. Most studies on governance and performance involve developed countries. This paper’s contribution is to examine the association of risk governance characteristics for both accounting-based and market-based performance in a developing economy setting, with virtually voluntary compliance mechanisms in place.

Productivity analysis of Australian universities

Purpose Facing budgetary challenges, successive Australian Governments have chosen to proportionally reduce public expenditure on universities relative to levels of activity in both teaching and research. The question asked in this paper is whether Australia’s universities increased their efficiency in a manner consistent with the demands of government to provide productivity “dividends” or efficiencies? Design/methodology/approach Using archival data for 37 Australian universities from 2007 to 2013, this paper examines changes in productivity of university groups and individual institutions using the data envelopment analysis technique. Findings Results show a statistically significant system-wide (or technological) productivity improvement of 15.2 per cent from 2007 to 2013, but there was little average individual institutional change in efficiency. Productivity improvements were clearly observable for the Group of 8 institutions with an improvement of 25.1 per cent. Research limitations/implications Universities, like other public sector bodies, can both improve individually and as an overall system. The system has improved greatly in terms of productivity at higher levels than may be anticipated. Originality/value Using data contemporaneous with a period of great change in university funding and sector competition, this study reveals how some universities benefited, whereas others struggled to maintain their relative position.

The determinants of risk disclosure by banking institutions: Evidence from Bangladesh

Purpose - The purpose of this paper is to investigate the extent of risk disclosure and the factors determining this for all listed banks in Bangladesh. Design/methodology/approach - Relying on a theoretical framework based on agency theory and the creation of a risk disclosure index (RDI) based on International Financial Reporting Standard (IFRS) 7, Basel II: market discipline, and prior literature, hand-collected data from the annual reports of all 30 banks traded on the Dhaka Stock Exchange over 2007-2012, creating 180 bank-year observations, are analysed. Findings - The study suggests that implementation of IFRS 7 and Basel II: market discipline standards in a non-mandated environment raised the extent of risk disclosure in every category of financial institution risk (market, credit, liquidity, operational and equities). The effect can be attributed to regulatory concerns and voluntary adoption of international disclosure standards in the banking industry in Bangladesh. Specifically, whilst the determinants of disclosure vary across types of risk, the number of risk committees, leverage, company size, the existence of a risk management unit, board size and a Big4 affiliate auditor are significant determinants of at least one category of risk disclosure. Research limitations/implications - The source of risk disclosures is limited to listed banks’ annual reports. Practical implications - The RDI, developed in this paper, contributes to the literature by: first, quantifying the extent of each of five types of risk disclosure; and second, identifying the factors determining them. Stakeholders, particularly depositors and investors, can use this index to select or monitor their bank of interest. Originality/value - The RDI was developed according to the most relevant standards – IFRS 7 and Basel II: market discipline, plus prior scholarly literature. This type of benchmarking has not been conducted to date in previous studies. Inferences about risk disclosure are based on archival data derived from all listed banks in a virtually unregulated environment. Further, the study complements the literature by providing support for the applicability of agency theory in investigating the level of risk disclosure by banks.

Analysing and evaluating integrated reporting: Insights from applying a normative benchmark

Purpose The integrated reports published by companies vary significantly in quality in spite of them claiming to be compliant with the integrated reporting (IR) Framework issued by the International Integrated Reporting Council (IIRC). The purpose of this paper is to develop and apply a normative benchmark against which compliance with the IR Framework, and the extent to which integrated reports make visible how organisations create value, can be evaluated. Design/methodology/approach The three pillars of the IR Framework – Capitals, Content Elements and the Guiding Principles – are operationalised by the way of a set of disclosure items that capture the extent to which they manifest within integrated reports. The created disclosure index is applied to analyse reports of five companies that are expected to be superior integrated reporters. Findings The normative benchmark that was created to operationalise the IR Framework identifies a vast amount of potentially communicable information and various degrees to which information may be disclosed. The integrated reports analysed differ significantly in the extent to which value-creation stories are made visible, despite some of the companies promoting to have actively engaged with IR as participants of the IIRC Pilot Program Business Network. All selected companies performed poorly in comparison to the normative benchmark. Originality/value This paper is the first to provide a comprehensive normative benchmark for analysing and evaluating compliance with the IR Framework and the extent to which integrated reports make visible how organisations create value.

Bank and product selection - an Australian student perspective

Purpose Investigate and comment on the factors used by Australian students to select their bank and the products and services they utilise, based on responses to an online questionnaire. Design/methodology/approach A mixed methods approach, incorporating both qualitative and quantitative methods, was used to investigate this research issue. Convenience sampling resulted in 276 completed online responses. Mean ranking and factor analysis methods were employed to identify the key factors used in selecting a bank and frequency analysis used to examine the products and services utilised by students. Findings The key factors used by students to select a bank in Australia were bank competence, recommendations and outside influences, bank costs, returns and services, and finally location. The main bank products and services used by students were automated teller machines (ATMs), savings accounts, internet and telephone banking, and debit cards. Research limitations/implications The use of an online survey which ...

Regulatory Impact on Voluntary Climate-Change-Related Reporting by Australian Government-Owned Corporations

This paper concerns voluntary climate change–related reporting of government-owned corporations (GOCs). We investigate whether the Australian National Gresenhouse and Energy Reporting Scheme (NGERS), a regulation stipulating the disclosure of greenhouse gas emissions to government, subsequently made publicly available on a Website, has a positive impact on the voluntary disclosure of climate change–related information not required by the regulation. We find that implementation of NGERS has a positive effect on voluntary climate change-related disclosures by GOCs. Hence, mandating disclosure of organisations’ negative environmental performance, such as greenhouse gas emissions, can influence voluntary disclosures of a broad range of related information particularly in organisations that are not subject to capital markets incentives. However, upon later but concurrent implementation of a Carbon Tax after a highly partisan and divisive political debate, climate change–related disclosures by GOCs reduce, consistent with the de Villiers and van Staden (2006) argument that when disclosures might increase awareness of sensitive issues, avoidance of attention to the issue might be the best strategy to retain legitimacy.