Marilena Mironiuc

The Fraud Auditing:Empirical Study Concerning theIdentification of the FinancialDimensions of Fraud

The last two decades, marked by financial instability, economic crises, the bankruptcy of worldwide renowned companies, stock exchange speculations, financial scandals and lack of trust in capital markets, have lead to an economic downfall and have brought back into light the analysis of the responsible factors. Of these, financial fraud is a significant element regarded as a disastrous phenomenon difficult to pin under safe touchlines. Therefore, the identification of the determining factors of fraud is nowadays an important desideratum at an international level for the prevention and elimination of these events beyond the psychological approaches. This study aims to identify the main financial components of fraud in order to obtain score classification functions, as well as to determine the probability of occurrence of the risk of fraud starting from a series of consecrated economical-financial indicators by using advanced statistical methods of data analysis. The research objectives and the validation of the work hypotheses have been achieved based on the study of 65 frauded and unfrauded companies, quoted on the main financial markets in the world. In order to obtain the research results, the data have been processed with SPSS 19.0.

A Circular Causality Analysis on the Determinants of the Audit Fees within the NYSE-Quoted Companies

According to the International Standards on Auditing, audit fees are the amount that remunerates the financial auditor’s activity, the certification of financial statements. The Profession Code states that these fees should be calculated in an objective way and the auditor’s independence shouldn’t be influenced by them. This study aims to identify the determinants of the audit fees, by testing the existence of a circular causality in the connection between audit fees and the financial performance of a NYSE-quoted company. The analysis is based on a sample of the first 100 companies (NYSE quoted) of the Top 500 Fortune, except for the companies in the investment funds and insurances field. In the study there were tested and validated the following working hypothesis: “the level of the audit fees is mainly influenced by the company’s capacity to continue its activity”, “the prestige of the audited company contributes to the decrease of the audit fees” and “the reduced fees level, paid by the customer audited by one of the Big4 companies in this exercise, contributes to the future prestige increase”. For data analysis there were used linear regression analysis (simple and multiple) and the variance analysis (ANOVA). Research results indicate the existence of a circular causality, bidirectional, on the level of the relationship between audit fees and financial performance. For data processing, in the study there were used statistical software SPSS 19.0 and AMOS 16.0.

The Relevance of Financial Reporting on the Performance of Quoted Romanian Companies in the Context of Adopting the IFRS

Abstract This paper investigates, in an associative study, the value relevance of the comprehensive income in relation to that of net income, as a consequence of the application of IFRS in Romania, in companies whose securities are admitted for transactions on a regulated market, started with the fiscal year 2012. The paper also analyses in an empirical manner the influence of the Big 4 companies in the direction of improving the relevance of the reporting of the net income and of the comprehensive income for the investors on the financial market, the quality of audit being acknowledged, according to specialised literature, as a means for rendering the accounting figures more credible. The informational usefulness of the net income (pre-IFRS, 2011, and post-IFRS, 2012) and of the comprehensive income (post-IFRS, 2012) is examined on a sample of 65 companies quoted in the Bucharest Stock Exchange. The results of the empirical study confirm that the two categories of accounting results are significantly associated with the share price, reflecting an increased value relevance and usefulness for the investors on the Romanian financial market, after the adoption of the international accounting norms.

Do the Romanian and Spanish Accounting Environments Meet the Challenges Concerning the Acknowledgement of Intangible Elements

Research motivation – Our aim is to identify the extent to which companies quoted in the Romanian and Spanish stock exchanges, that must apply the International Financial Reporting Standards truly comply with the provisions of these norms in presenting, in the financial statements, the information on intangible assets. We have also studied a series of indicators of intangible capital, in order to identify the extent to which the Romanian and Spanish accounting environments meet the challenges concerning the acknowledgement of intangible elements. Methodology – In order to identify the policies used by companies in the reporting of intangible assets and to determine the extent to which companies forced to apply the IAS/IFRS comply with the IAS 38 provisions, we have analyzed the consolidated financial statements, drawn according to IFRS by 19 Romanian companies quoted in the Bucharest Stock Exchange and 27 Spanish companies quoted in the Madrid Stock Exchange, components of the IBEX 35 index. We have determined the weight of the intangible assets in the fixed assets and have computed the mean degree of dissemination of the information on intangible assets based on the scores obtained by each company to a set of questions, designed in the spirit of the IAS 38 provisions. Main findings – To the 8 questions in the set, created in the spirit of the IAS 38 provisions, the Iberian companies generally give more analytical answers. Also, they present significant weights of the intangible assets into the fixed assets. Besides the financial reporting of intangible assets, we have been concerned with analyzing non-financial information referring to human, relational, and structural capital. It is worth mentioning that, unlike the Romanian companies, the Spanish companies present in their annual reports a large amount of data and information on intangible capital.

The Evaluation of the Investment Opportunity by Analyzing the Financial Structure Influence on Company Value

Triggered by the need to make decisions concerning the purchase or investment in new economic entities, with correct and detailed information on their status and economic development conditions, the due diligence process identifies ever better its role and meaning. Knowing the impact generated by the financing strategy on organizational values, as well as the factors that play a role in the process of evaluating the financial structure are essential elements that contribute to the success of such an approach. Based on a sample made up of 60 companies quoted in the Bucharest Stock exchange, this study aims to draw a series of mathematical models that could be used as instruments for the identification and quantification of the influences generated by the financial structure on the companies’ value. At the same time, this study attempts to identify the internal factors, specific to the company, that determine the composition of the financial structure, as well as the sense and intensity of their actions upon financial leverage. This paper introduces in the analysis the influence of specific activity to the indebtedness, reflecting the need for assessing the adequacy of financing strategies based on the activity filed of the enterprises. To obtain the research results, methods of data analysis were used such as: ratios technique, multiple linear regression analysis and linear regression analysis with alternative independent variables, ANCOVA type. Data processing was performed using SPSS 19.00 and AMOS statistical software.

Empirical Study on the Assessment of the Auditor's Responsibility Regarding the Risk of Financial Fraud

The recent famous financial frauds have demonstrated that in many cases the auditor was either responsible for or an accomplice in their manifestation. Thus, the auditor plays an important role in ensuring a true and fair view regarding the financial position and performance of the company. International standards on auditing indicate that the financial auditor’s main objective is to serve the stakeholders’ interests by expressing an independent, objective and competent opinion regarding the accuracy of information from financial statements. Also, according to audit standards, the auditor has the responsibility to assess fraud risk and how it could influence his opinion. The purpose of this study is to test if there is a connection between the affiliation of the client-company to an auditor who is member of Big4 and the incidence of financial fraud. The research results indicate the existence of a company profile that is defrauded or not defrauded. Starting from a series of factors associated to the financial auditor, a deterministic model was proposed in the study for estimating the probability of being defrauded. For the validation of the working hypotheses, a sample consisting of 200 defrauded and not defrauded companies was selected, quoted on New York Stock Exchange. Research results were obtained by processing the data with SPSS 19.0.

The Impact of Reported Financial Information on the Transfer Prices of Securities. Comparative Empirical Study

Abstract The present paper aims to achieve a comparative analysis of the informational contribution of the financial reports drawn by Romanian companies quoted on the autochthonous capital market, and the contribution to supporting the investment process brought by the financial statements drawn in an international context. The elements of the comparison are the levels of value relevance of the financial statements drawn according to US GAAP (for North America), respectively of the reports issued in conformity with the International Financial Reporting Standards (IFRS) (for the European regions). By using econometric models consecrated in specialized literature, respectively Easton & Harris (1991) and Ohlson (1995) , we identified a differentiated contribution according to the accounting norms and to the economic environment where companies perform their activity, for the financial data in making investment / disinvestment decisions. This stresses, after testing the first model, a stronger deterministic connection between financial-accounting information and the stock performance recorded for LSE quoted companies compared to those on the USA capital market, respectively quoted Romanian companies that report in conformity of IFRS. Drawing the financial statements according to RAS provides the investors in the non-regulated section of the Romanian stock market with a better informational basis than in the case of the equivalent clusters analyzed. The second model, based on prices, reveals an increased intensity of the connection in the case of Romanian companies quoted in the main section of the BSE, whose dimension exceeds the association observed in the context of the other stock markets.

Empirical Study on the Efficiency of the Companies Financing Process through Statistical Analysis

The current economic context, characterized by strong slippages, at the real and financial flows, request, in order to maintain stability and favorable evolution of the enterprise, a fair and efficient substantiation of the decision process. Such need is found, especially, in the area of corporate finance. In this respect, managers must be given tools used in assessing the adequacy of existing financial structure construction and to indicate future directions of action regarding release of funds demand. This article addresses this area by focusing on two coordinates: the study of links that are established between the characteristics of entities (capital structure ratios, activity field) and the development of the dimension of corporate value, expressed by increase / decrease index of asset capitalization, obtaining in this way a profile of the enterprises related to the efficiency of the financing policy, and develop a mathematical model to classify firms in performance group, using the as the same efficiency criterion in choosing the financing sources. Data considered in the study are taken from financial statements of listed companies to Bucharest Stock Exchange, considering a sample of 80 units that constitute the working group. To achieve the research objectives were used as working methods: ratios technique, multiple correspondence factorial analysis, principal component analysis and discriminant analysis. Data processing was performed using the statistical software SPSS 19.00.

Influence of Local Versus Foreign Corporations, as Shareholders, on Financial Performance of Romanian Listed Companies

Abstract In the actual context of global mobility of investors and capitals, diverse categories of local and foreign shareholders (institutional investors, governmental agencies, corporations or individual investors) influence business activities, management and results of the owned entities. Shareholders’ monitoring ability is related to their interests and their involvement in the investee’s business. This study contributes to the on-going debate referring to local and foreign shareholders and investigates the influence of both local and foreign corporate shareholders on financial performance of Romanian listed companies during 1997-2016. Results of fixed-effects panel regression analysis reveal that local corporations positively influence the profitability of their affiliates, as measured by ROE. However, foreign corporate shareholders do not significantly influence financial performance of Romanian entities. Thus, the expected benefits associated with foreign ownership do not enhance the performance of local companies. These findings helps future privatisation or investment decisions in Romanian listed companies. Moreover, the results raise further questions regarding the interests of foreign companies investing in Romanian stock market.

Study on the association between earnings management and value relevance based on the reporting method used for operating cash flows

This paper analyses the association between earnings management and value relevance of accounting information, for a number of 556 observations from a sample of 65 companies listed on the Bucharest Stock Exchange during a 10 year period: 2006-2015. Sampled companies are classified according to the method used for the reporting of operating cash flows. Findings confirm that entities using the indirect method have a higher level of discretionary accruals and are more tempted to opportunistically increase their earnings. As far as value relevance is concerned, results show that participants on the Romanian capital market place more weight on the information reported by entities experiencing higher levels of discretionary accruals.