Wanda A. Wallace

The Economic Role of the Audit in Free and Regulated Markets: A Look Back and a Look Forward

In 1980, The Economic Role of the Audit in Free and Regulated Markets described market evidence, how the demand for auditing services can be explained and predicted by agency, information, and insurance dimensions, by-products of the audit, the nature of the audit process, and the effects of regulation. In 1987, research since 1980 was described and discussed as to implications for future research. In 2004, the time has arrived to look back and look forward to reassess the body of evidence accumulated since 1987 regarding key sources of demand for the audit, supply issues, and regulatory activities, while offering a roadmap for future inquiry.

A Framework for Determining the Influence of the Corporate Board of Directors in Accounting Studies

Accounting, auditing, and tax professionals constantly evaluate the integrity, competence, and financial performance of clients as factors in practice that influence both client acceptance decisions and the manner in which professional services are rendered. Yet, from an accounting perspective, previous research investigating the corporate board of directors as a governance mechanism has focused only on the representational role of board members. Moreover, many of these studies resulted in conflicting findings according to these attributes. Other disciplines address the particular influence of the board with respect to overall corporate performance, but arrive at little agreement on either the effect of or the most critical of board attributes. This literature review synthesizes the existing research to provide a framework in which to evaluate the effect of the board of directors in accounting settings and, in particular, when conducting future research that employs elements of corporate governance as dependent or independent variables in accounting studies.

Audit Automation in the UK and the US: A Comparative Study

The purpose of this paper is to investigate the nature and extent of the use of audit automation by audit firms in the UK and the US. In particular, the paper seeks to identify the significant differences between practices in the two countries. The authors argue in the paper that there are two main forces that might account for these differences. On the one hand, globalization tends to promote similar audit automation practices in the two countries. On the other hand, cultural factors mitigate homogeneity in audit automation practices. The research consisted of a survey of current audit automation practice in large and medium sized audit firms in the UK and the US. The principal conclusions from the research are: (1) that there are differences in the practice of audit automation in the UK and the US; (2) that these differences persist even amongst Big 6 firms. These two conclusions would suggest that cultural differences are not dominated by the forces of globalization. The authors also conclude that (3) the most important benefit of audit automation in both countries is perceived to be improvements in audit quality; and (4) the most important costs across all types of audit firm are training and staff learning time.

An International Comparison of Materiality Guidance for Governments, Public Services and Charities

This article compares international and country-specific guidance associated with the materiality concept as it applies to the public sector and charitable entities. The proliferation of multiple terms with similar meanings is evidenced in Australia, Canada, New Zealand, the United Kingdom England, Ireland and Scotland and international guidance. Alignment of terminology could enhance harmonization of standards and increase the chances that application of standards is comparable. Conceptual dimensions of materiality in the public sector emphasize qualitative considerations such as legal compliance, fiduciary responsibility, timeliness, and follow-up.

Equity market benefits to disclosure of geographic segment information: An argument for decreased uncertainty

Abstract This article explores the value of releasing geographic segment information and documents empirical evidence showing that there are equity market benefits to releasing such information. The article uses an empirical capital market analysis to evaluate the disclosure practices of U.S.-based multinational firms and finds a positive relationship between the extent of geographic segment information released and the firms equity market performance. Research into this area is important since both domestic and international standard-setting bodies have shown a renewed interest in geographic segment disclosure.

Norsk Hydro's communication to international capital markets: A blend of accounting principles

Companies operating internationally are faced with the dilemma of how to attract investors from multiple exchanges to provide capital. While each investor may prefer a report tailored to his or her countrys generally accepted accounting and auditing framework, such an approach can be prohibitively expensive. The selection of International Accounting Standards Committee (IASC) guidance for reporting suffers from its lack of acceptance to date by the International Organization of Securities Commissions (IOSCO). The choice of the United States Generally Accepted Accounting Principles (U.S.GAAP) and Generally Accepted Auditing Standards (U.S. GAAS) facilitate access to large capital markers on the New York Stock Exchange, AMEX or NASDAQ but may not communicate effectively to the European or other markets. Norsk Hydro, the subject of this paper, chose to blend its domestic and U.S. accounting principles, with some episodic integration of European audit report language. The potential communication and regulatory challenges that resulted are described, as are the plethora of topics for future research, given such experimentation in financial reporting.

Management activities in financial reports: debates and understanding standard-setters' international harmonization effort

My experience as a member of the Financial Accounting Standards Advisory Council provides the perspective to outline a framework of ten steps which I believe will help managers both organize and understand the nature of the tensions that have arisen in the past and are likely to continue into the future in the determination of how management activities will be reflected in financial reports. These themes permeate not only domestic standard-setting activities, but also those of international standard-setters as they strive for harmonization.