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on Accounting and Auditing |
| By: | Nicolas Véron |
| Abstract: | The US Securities and Exchange Commission has conducted a public consultation on a 'roadmap" it proposed late last year to adopt International Financial Reporting Standards in America. This debate takes particular relevance as the crisis has highlighted the importance of accounting standards as an instrument of economic policymaking, with a high-profile controversy about 'mark-to-market" accounting. Nicolas Véron responds with suggestions about how the SEC should both support IFRS, and push for reforms of standard-setting governance and globally consistent enforcement. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:316&r=acc |
| By: | Ojo, Marianne |
| Abstract: | This paper is primarily aimed at highlighting the role and significance of asymmetric information in contributing to financial contagion. Furthermore, in emphasising the importance of greater disclosure requirements and the need for the disclosure of information relating to “close links”, such disclosure being considered vital in assisting the regulator in identifying potential sources of material risks, it illustrates the fact that incentives (such as the reduction in the levels of capital to be retained by institutions), which have the potential to facilitate market based regulation (through non binding regulations), may not necessarily serve as suitable means in the realisation of some of Basel II’s objectives – namely the achievement of “prudentially sound, incentive-compatible and risk sensitive capital requirements”. The paper also attempts to raise the awareness that the operation of risk mitigants does not justify a reduction in the capital levels to be retained by banks – since banks operating with risk mitigants could still be considered inefficient operators of their management information systems (MIS), internal control systems, and risk management processes. The fact that banks possess risk mitigants does not necessarily imply that they are complying with Basel Core Principles for effective supervision (particularly Core Principles 7 and 17) – as the paper will seek to demonstrate. Core Principle 7 not only stipulates that “banks and banking groups satisfy supervisory requirements of a comprehensive management process, ensure that this identifies, evaluates, monitors and controls or mitigates all material risks and assesses their overall capital adequacy in relation to their risk profile, but that such processes correspond to the size and complexity of the institution.” Certain incentives which assume the form of capital reductions are considered by the Basel Committee to “impose minimum operational standards in recognition that poor management of operational risks (including legal risks) could render such risk mitigants of effectively little or no value and that although partial mitigation is rewarded, banks will be required to hold capital against residual risks”. Information disclosure should be encouraged for several reasons, amongst which include the fact that imperfect information is considered to be a cause of market failure – which “reduces the maximisation potential of regulatory competition”, and also because disclosure requirements would contribute to the reduction of risks which could be generated when granting reduced capital level rewards to banks who may have poor management systems. |
| Keywords: | incentives; risk; mitigants; Basel; regulation; regulatory competition; disclosure |
| JEL: | D53 K2 F3 E5 D82 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20404&r=acc |
| By: | Verwey, I.G.F. (Nyenrode Business Universiteit) |
| Abstract: | Any decision an auditor takes concerning fraud is perceived as extremely sensitive. Several enormous financial scandals at the beginning of the 21st century created doubt about the role of the auditors for these companies being questioned. Auditors were being blamed for having made mistakes with respect to fraud risks. It seems that in general auditors experience degrees of difficulties with respect to fraud risk assessment. The aim of this article is to introduce my research. It is a literature study outlining my research approach to the aforementioned problem of fraud risk assessment and the role auditors have in this. Because it is a preliminary study this article does not contain any empirical data. Over the course of the last few years there have been a substantial number of articles appearing in leading international accounting journals investigating the causes as to why auditors have difficulties with respect to fraud risk assessment. Former research indicates that forensic accountants might be better equipped than auditors to identify effective procedures to mitigate fraud risks. With my research I want to investigate why this is the case. Therefore I am identifying factors which influence the quality of the fraud risk assessment. By means of a combination of an experiment and a survey I want to investigate the (causal) relationships between these factors and an effective fraud risk assessment. |
| Keywords: | Audit planning, Forensic auditing, Fraud risk assessments, Fraud risk factors |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:nijrep:2009-23&r=acc |
| By: | Nicolas Véron |
| Abstract: | This Policy Contribution reproduces the text of a letter sent by Senior Fellow Nicolas Véron to Gerrit Zalm, the Chairman of the International Accounting Standards Committee Foundation (IASCF) in response to the Foundation's public consultation on Part 2 of its Constitution Review. Véron writes that a broader strategic readjustment on the part of the IASCF is necessary if the Foundation hopes to regain the support of the global investment community, its most crucial group of stakeholders. The Foundation must make itself more responsive and accountable to the investment community, a requirement that has become more urgent due to the crisis. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:376&r=acc |