Thomas R. Weirich

The stock market reaction to fraudulent financial reporting

Explores the impact that recent fraudulent financial reporting has had on the capital markets. Attempts to examine the stock market reaction, both to return and risk, to fraudulent financial reporting that has occurred in major corporations during the decade 1990‐1999. Finds that capital market impact is significant in dollar terms with strong negative announcement effects the day before and on the day of a news event. Concludes that auditor and regulator vigilance needs to be strongly maintained in monitoring firms’ financial reporting.

Fraud guidance for corporate counsel reviewing financial statements and reports

Purpose – With the passage of the Sarbanes‐Oxley Act of 2002, corporate legal counsel has an increasing responsibility related to fraud. The purpose of this paper is to focus on financial reporting fraud resulting in the false presentation of operating results and financial position to the public, lenders, taxing authorities or other corporate stakeholders.Design/methodology/approach – The paper reviews cases with a focus on financial reporting fraud as identified by corporate counsel.Findings – The ways in which corporations can utilise corporate counsel to protect themselves from financial statement and other reporting frauds.Practical implications – This paper provides guidance to corporate counsel as to some of the common forms of financial statement fraud and the risk factors (red flags) that may indicate the presence of fraud.Originality/value – Corporate counsel, by virtue of their natural involvement in the negotiation of contracts and customer/vendor disputes, as well as their consulting role to ...

Testing for bias in the audit committee

Establishing an audit committee presumably strengthens the external auditor’s independence. Several studies have examined how audit committees affect the selection of the company’s external auditor, negotiate audit fees and enhance the auditor’s independence. But what of the independence of the audit committee members themselves? Do audit committee members exhibit biases when they select their company’s auditors? The relationship between the entity’s external auditor and the audit committee member’s affiliated company’s auditors has not been examined. For example, are audit committee members prone to select or remain with audit firms with which they have developed a formal relationship within their own company? This study of 247 New York Stock Exchange firms finds significant relationships (at the 0.05 level of significance) between CPA firms selected by audit committees and by the CPA firm which audits the audit committee member’s own organization. Results indicate that audit committee members exhibit conscious or unconscious biases in their selection or retention of their companies’ auditors.

Implications of US Securities and Exchange Commission Rule #33‐7380 in the improvement of accounting students’ writing skills

In response to many authoritative and honorary bodies, the accounting profession has recognized the importance of accounting curricula emphasizing written and oral communications skills. Accounting practitioners expect accounting students to master communications skills as accounting curricula become more responsive to changes in the accounting environment. Discusses key provisions of the US Securities and Exchange Commission’s (SEC) recent Rule #33‐7380 that requires registrants to use “plain English” to prepare a prospectus’s cover page, summary and risk factor sections in filing with the SEC. The rule specifies six principles of clear writing and provides a handbook for use in preparing prospectuses. Accounting professors should consider adopting the suggestions of this SEC rule as a basis for improving their students’ writing skills.

The role of SEC materials in the course curriculum: Update and extension

Abstract This research updates and extends earlier work by Ketz and Kunitake (1985) by providing survey evidence on (a) the coverage that currently is given to SEC-related topics in undergraduate and graduate curricula, and (b) the importance practicing accountants and financial managers attribute to classroom coverage of various SEC-related topics. Survey responses were received from 129 certified public accountants, 59 financial managers, and 154 accounting program administrators. Results indicate that practitioners consider coverage of SEC topics less important than communication skills, about as important as computer integration and ethics, and somewhat more important than international accounting. There appears to be little support for a separate course devoted to SEC topics. In addition, we find perceptual differences among respondents concerning what constitutes “SEC materials”. We conclude the paper by offering some suggestions as to how SEC topics can be integrated into existing accounting courses.

Accounting & Auditing Research and Databases: Practitioner's Desk Reference

DESCRIPTION The easy-to-use, do-it-yourself desk accounting and auditing research database FASBs online GAAP Codification system. The convergence of U.S. GAAP and International Financial Reporting Standards. EDGAR filing and research system. RIA Checkpoint and CCH. Accounting professionals and practitioners need to understand these research databases to reach solutions and achieve maximum results for the organization. Highlighting each pertinent database, Accounting and Auditing Research Databases shows you how to conduct research using a host of databases including RIA, CCH, AICPAs Online Library, FASB Codification, GARS, and eIFRS.

Untaxed Foreign Earnings—Keep Growing!

Focusing on a lack of transparency related to untaxed foreign earnings (UFEs), this article highlights the growing balance in accumulated UFEs by the corporate sector. The authors also explain where the concept of “indefinite reinvestment assumption” comes from that has resulted in UFEs. The article further discusses that these UFEs are not really part of an entitys real earnings that are available to shareholders by discussing Schrodingers paradox.

Managing IT Change—Sales, Marketing, and Distribution

In the past, all of the budgeting and reporting required to manage information technology (IT) change for sales, marketing, and distribution was extremely tedious and often could not provide the needed level of accuracy to make the evaluation process work properly. It was considered too complex to accurately budget for and evaluate the success of each promotion. Today, with the cross-functional breadth of enterprise resource planning applications, this is simply no longer the case. It is also the case that many promotions will be essentially identical across the company or across different geographies. This allows for the reuse of much of the work required to design the collection, evaluation, and reporting process. It does, however, require significant work for management accountants to work with each of the other functions within the business to work through detailed algorithms such that changes in production and/or sales volumes can be analyzed and all of the true costs associated with each of these promotions can be identified. These are all opportunities for more analytical approaches to management afforded by the conversion to integrated business system design and the implementation of enterprise resource planning applications.

Insights on Standard Setting for 2014

Major accounting agencies and standard setters—the SEC, the PCAOB, the FASB, and the IASB—gathered at the AICPA/SEC/PCAOBs Current SEC & PCAOB Developments Conference in December 2013. What accounting and auditing concerns will they be focusing on during 2014? What pitfalls await accountants and auditors this year?

Preparing for the new reporting season: An overview of recently issued financial accounting standards

The authors help readers get ready for the upcoming reporting season, with a handy guide to the latest pronouncements and proposals.