nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2022‒03‒21
four papers chosen by

  1. Investigating factors that influence Malaysian auditors’ ethical sensitivity By Razana Johari; Md. Mahmudul Alam; Jamaliah Said
  2. Determinants of bank income smoothing using loan loss provisions in the United Kingdom By Ozili, Peterson K
  3. Comptabilité et profit : comment saisir les pratiques comptables de l'époque Moderne By Pierre Gervais
  4. The Information Content of Corporate Earnings: Evidence from the Securities Exchange Act of 1934 By Oliver Binz; John Graham

  1. By: Razana Johari (UiTM - Universiti Teknologi MARA [Shah Alam]); Md. Mahmudul Alam (UUM - Universiti Utara Malaysia); Jamaliah Said (UiTM - Universiti Teknologi MARA [Shah Alam])
    Abstract: Purpose The primary role of auditors is to offer fiduciary services to society and users of financial reporting. With this role, users placed their trust and depend on the ability and judgement made by the auditors during their auditing works. However, recent financial scandals involving high profile companies frustrated the public's expectations, particularly in Malaysia. It is claimed that auditors are not having ethical sensitivity while executing their task in mitigating fraudulent financial reporting. Therefore, this study aims to examine the influences of ethical orientation, locus of control and the firm's ethical culture on the auditors' ethical sensitivity in Malaysia. Design/methodology/approach This study collected primary data based on a questionnaire survey among audit firms in the Klang Valley area and registered with Malaysian Institutes of Accountants. Findings The results showed ethical sensitivity has a significant negative relationship with relativism and in some cases has a significant positive relationship with idealism. Moreover, it found a significant positive relationship between ethical sensitivity and ethical culture. Originality/value This paper provides benefit to the audit firms, professional bodies, policymakers and academia in understanding the factors that might increase the sensitivity of auditors in dealing with ethical issues that could lead to fraudulent financial reporting in the company.
    Keywords: Ethical sensitivity,ethical culture,ethical orientation,locus of control,audit,fiduciary services,Malaysia
    Date: 2021
  2. By: Ozili, Peterson K
    Abstract: This paper investigates the determinants of bank income smoothing using loan loss provisions in the United Kingdom from 1999 to 2017. The findings show that UK banks use loan loss provisions for income smoothing purposes. Income smoothing is greater in times of high economic policy uncertainty. The extent of bank income smoothing is reduced by foreign bank presence, UK GAAP adoption, IFRS9 adoption, and high levels of voice and accountability. Also, there is reduced income smoothing using loan loss provisions during a financial crisis and in periods of economic prosperity. The implication is that economic conditions, institutional governance and accounting disclosure rules influence the extent of bank income smoothing in the United Kingdom. The findings of the study contribute to several studies that explore the determinants of bank income smoothing in a single country context.
    Keywords: banks, earnings management, United Kingdom, loan loss provisions, income smoothing, economic policy uncertainty, Great Britain, accounting disclosure, financial crisis.
    JEL: G21 G28 M0 M41 M42 M48 M49
    Date: 2022
  3. By: Pierre Gervais (CRAN - Centre de Recherche sur l'Amérique du Nord - CREW - CREW - Center for Research on the English-speaking World - EA 4399 - Université Sorbonne Nouvelle - Paris 3)
    Abstract: The accounting methods used in the Early Modern period are hotly debated, particularly from the point of view of a possible «capitalist spirit» (the so-called «Sombart-Weber thesis», linking accounting and the development of capitalism). Because of the diversity of these methods, from day books to single-entry and double-entry book-keeping as well as charge and discharge, and the even wider range of practices, each source needs to be critically examined. Double-entry bookkeeping in particular, a method linked to the merchant world since manufacturers and large landholders tended to rely on charge and discharge, was actually used in ways specific to the period, in spite of the apparent modernity of the vocabulary. It did not focus on balance sheets, cost accounting, profit calculations or returns on investment, but was rather a tool allowing its users to manage the highly complex credit flows which structured merchant activity, thus allowing for the proper circulation of information, and underpinning the cartels and networks which controlled market segments and generated merchant profit.
    Abstract: Les comptabilités de l'époque Moderne sont l'objet de vifs débats, particulièrement par rapport à une possible « mentalité capitaliste » (la « thèse Sombart-Weber », d'après le lien fait par Max Weber et Werner Sombart entre comptabilité et capitalisme). La diversité des modèles, livres de raison, partie simple, charge et décharge, partie double, et surtout la multiplicité des pratiques, imposent une approche critique des sources. Malgré la modernité apparente du vocabulaire, la partie double en particulier, associée au monde marchand alors que les producteurs manufacturiers et les propriétaires fonciers utilisaient plutôt le système en charge et décharge, est en réalité un outil spécifique à la période. Les acteurs de l'époque, loin de se focaliser sur les bilans, calcul de coûts, mesures du profit et autres retours sur investissement, l'utilisaient avant tout pour gérer des flux de crédit multiformes, qui structuraient l'activité marchande en garantissant la circulation de l'information et la perpétuation de réseaux cartellisés contrôlant des segments de marché.
    Date: 2021–12–27
  4. By: Oliver Binz; John Graham
    Abstract: We examine whether the Securities Exchange Act of 1934 increased the information content of corporate earnings disclosures. Prior research questions whether the Act improved disclosure quality but generally relies on long-window tests and yields mixed results. We focus on whether the Act increased earnings informativeness, improving upon prior designs by focusing on short earnings announcement windows and employing a difference-in-differences design to control for potential contemporaneous structural changes. We document an increase in earnings informativeness following the Act, which is larger for treatment firms (which withheld disclosure before the Act) than for control firms. The increase in informativeness is more pronounced for firms that are subject to stronger enforcement.
    JEL: B26 G14 G18 K22 M41 M48
    Date: 2022–02

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