Robert Pinsker

Costs and benefits of XBRL adoption: early evidence

Financial reporting via XBRL is a low-cost method for increasing transparency and compliance while potentially decreasing a firms cost of capital.

International knowledge, skills, and abilities of auditors/accountants

A domain independent perspective compares international competency studies from The Big 8 White Paper in 1989 to recent studies by the Institute of Management Accountants, Institute of Internal Auditors, International Federation of Accountants, and the American Institute of Certified Public Accountants. Educators can use these common and specialized competencies to design accounting curricula to prepare students for entry into auditing careers. Practitioners can also use them to design hiring and evaluation criteria. The job market for accounting graduates is no longer dominated by public accounting. A more generalized skill set may be taught across accounting curriculums that was previously deemed necessary. Also recent international accounting scandals have put the accounting profession under public and regulatory scrutiny. New regulation and auditing standards may regain public trust. The knowledge, skills, and abilities for entry‐level accountants are: communication skills, interpersonal skills, general business knowledge, accounting knowledge, problem‐solving skills, information technology, personal attitudes and capabilities, and computer skills.

XBRL awareness in auditing: a sleeping giant?

EXtensible Business Reporting Language (XBRL) is a revolutionary digital language that “tags” information for business reporting since it represents a universal standard for global business reporting. XBRL usage has a significant impact on auditors – both external and internal and is seen as a tool to implement the American Institute of Certified Public Accountants’ (AICPA) new reporting model. The model calls for real‐time, or continuous, reporting of company information. In order to do so reliably, continuous assurance on the data would need to be performed by external auditors. XBRL General Ledger (GL) is a taxonomy incorporating all ledger functions into XBRL. Thus, company information that typically takes days to create could be available in real‐time, anywhere in the world. This article reports on an XBRL survey conducted using accountants and auditors. Results indicate many accountants and auditors have low (if any) knowledge or experience with XBRL and do not perceive the intended benefits XBRL usage provides.

Belief Revision in Accounting: A Literature Review of the Belief-Adjustment Model

The belief-adjustment model has been an integral part of accounting research in belief revision, especially in the examination of order effects. Hogarth and Einhorn ((1992) Cognitive Psychology, 24, 1–55) created the belief-adjustment model to serve as a theoretical framework for studying individuals’ decision-making processes. The model examines several aspects of decision-making, such as encoding, response mode, and task factors. The purpose of this chapter is to provide a comprehensive examination of the accounting studies that have used the theoretical framework of the belief-adjustment model in auditing, tax, and financial accounting contexts. Roberts’ ((1998) Journal of the American Taxation Association, 20, 78–121) model of tax accountants’ decision-making is used as a guideline to organize the research into categories. By using Roberts’ categorization, we can better sort out the mixed results of some prior studies and also expand the review to include a more comprehensive look at the model and its application to accounting. While many variables have been examined with respect to their effect on accounting professionals’ belief revisions, most studies examine them in isolation and do not consider the interaction effects that these variables may have. Our framework also identifies areas of the belief-adjustment model that need further research.

XBRL-Enabled, Spreadsheet, or PDF? Factors Influencing Exclusive User Choice of Reporting Technology

ABSTRACT: U.S. adoption of eXtensible Business Reporting Language (XBRL)-enabled technology has been slow. Prior experimental evidence suggests that even when XBRL-enabled technology is available, almost 50 percent of participants do not use it. This study informs AIS researchers on the state of XBRL-enabled technology by using an exclusive choice experimental design to examine (1) which reporting technology nonprofessional investors will choose to complete a financial analysis task (XBRL-enabled, portable document file, or spreadsheet), and (2) why they choose the specific technology. Findings indicate that 66 percent of nonprofessional investors chose XBRL-enabled technology, while 34 percent chose spreadsheets. Participants who chose the former perceived that it reduces the time to complete the task (i.e., increases task efficiency), while participants who chose the latter indicated their choice was driven by prior technology experience. Study results have implications for the Securities and Exchange C...

Modeling RBRT adoption and its effects on cost of capital

Abstract In the capital market, firms compete to obtain capital at a lower cost than their rivals. In order to do so, firms may try to increase their information disclosure by adopting new information technologies, such as a real-time business reporting technology (RBRT). The financial accounting literature has empirically provided positive evidence of increased transparency (e.g., resulting from RBRT adoption). We attempt to link the transparency and cost of capital literatures and extend organizational innovation adoption theory. We adapt some constructs from existing innovation adoption theory, as well as contribute some that apply to a RBRT context, to develop a mathematical model on the relationship between RBRT adoption and the cost of capital. The model considers both micro-(firm) level factors and macro-level factors that affect the adoption decision. We argue that cost of capital savings, uncertainty, risk aversion, transaction and transformation costs, and governmental policy affect a firms decision of whether and when to adopt a RBRT. A number of propositions are derived, based on our model, which may help firms formulate their adoption strategy. Our model also provides a basis for further empirical study on this new issue.

A Theoretical Framework for Examining the Corporate Adoption Decision Involving XBRL as a Continuous Disclosure Reporting Technology

For some time regulators across the globe have been advocating a more modern financial reporting process that would provide additional information (i.e., mainly nonfinancial) in a timelier manner (the AICPA’s Jenkins Committee (1994), Financial Accounting Standards Board (FASB; 2000). Recent regulation, such as Sarbanes-Oxley section 409 (henceforth, 409; 2002) in the United States and the Corporation Act in Australia, are requiring public firms to report material information more quickly than ever before.2 Since the information being reported to the regulators is also publicly available, firms need to consider the adoption and consequent use of a technology that is 1) capable of continuous disclosure (CD); 2) can work with existing Enterprise Resource Planning (ERP) systems to internally gather and then externally report required information quickly and reliably; and 3) comply with appropriate regulation.3,4

The Effects of Expanded Independent Assurance on the Use of Firm‐Initiated Disclosures by Investors with Limited Business Knowledge

ABSTRACT: While increased disclosure is helpful in reducing information asymmetry, investors tend to discount firm‐initiated disclosures due to the perception that management may be biased, resulting in lower stock prices. To reduce the perception of bias, assurances by independent auditors can be attached to firm disclosures not typically covered by the traditional audit. However, until recently, it was not technologically feasible to have independent assurances accompany all firm‐initiated disclosures (i.e., expanded assurance). In an experimental study, we investigate whether having assurances accompany all firm disclosures will be perceived by nonprofessional investors with limited business knowledge as helpful in reducing investment risk. We use liberal arts students as proxies for these investors. Findings suggest that participants discount share prices for perceived bias in firm‐initiated disclosures in the absence of independent assurance; however, in the presence of such assurance, participants s...

IT Governance and the Maturity of IT Risk Management Practices

ABSTRACT The Securities and Exchange Commissions enhanced disclosure rule on risk oversight, state laws requiring public disclosure of compromised customer information, and high-profile customer information breaches have caused Information Technology (IT) risk management practices to be a major concern for boards of directors and management. The Committee of Sponsoring Organizations of the Treadway Commissions (COSO) Enterprise Risk Management (ERM) framework emphasizes the importance of the boards oversight role while also bringing attention to the firms reporting structure. Consequently, our study examines whether the maturity of IT risk management practices depends on Chief Information Officer (CIO) reporting structure and Chief Executive Officer (CEO)/Chairman duality. We develop a scale to measure strategic and operational maturity under the larger auspice of IT risk management and distribute a survey to high-level IT professionals. Our survey also captures the reporting structure of their firms....

Do Auditor Advocacy Attitudes Impede Audit Objectivity

Biased evaluation of evidence exists when an auditor either over-emphasizes evidence that supports management assertions or over-emphasizes evidence against management assertions. This study examines if an auditor’s advocacy attitudes lead to bias in information search for audit evidence. We measure the range of advocacy attitudes of individual auditors and hypothesize that auditors at either end of the advocacy spectrum may impede the objectivity of evidence gathered. Results from 60 Big 4 auditors indicate that advocacy attitudes affect both initial judgments and consequent search strategies of auditors. When initial judgments are client-favorable, all auditors exhibit search strategies focused on finding evidence to take a more conservative position; however, when initial judgments represent an unfavorable client position, auditors with lower advocacy attitudes exhibit a stronger tendency to search for additional evidence against a client-favorable position, consistent with a confirmation bias. Conversely, auditors with more neutral attitudes plan a more objective search effectively mitigating the bias. Aggregate findings establish an important link between bias and information search that may manifest itself in auditor training procedures and be of interest to auditing regulators.