Matching Items (5)
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- All Subjects: Accounting
- All Subjects: Audits
- Resource Type: Text
- Status: Published
Description
In this study, I examine the extent to which firms rely on relative performance evaluation (RPE) when setting executive compensation. In particular, I examine whether firms use information about peer performance to determine compensation at the end of the year, i.e. after both firm and peer performance are observed. I find that RPE is most pronounced for firms that allow little or no scope for ex post subjective adjustments to annual bonuses. Conversely, firms that rely mainly on subjectivity in determining bonus exhibit little use of RPE. These findings suggest that information about peer performance is not used at the end of the year. Instead, peer performance seems to be incorporated in performance targets at the beginning of the year, at least among firms primarily using objective performance measurements. In addition, I provide new evidence on the determinants of the use of subjectivity.
ContributorsTsui, Stephanie (Author) / Matejka, Michal (Thesis advisor) / Hwang, Yuhchang (Committee member) / Kaplan, Steven (Committee member) / Arizona State University (Publisher)
Created2013
Description
I examine the degree to which stockholders' aggregate gain/loss frame of reference in the equity of a given firm affects their response to the firm's quarterly earnings announcements. Contrary to predictions from rational expectations models of trade (Shackelford and Verrecchia 2002), I find that abnormal trading volume around earnings announcements is larger (smaller) when stockholders are in an aggregate unrealized capital gain (loss) position. This relation is stronger among seller-initiated trades and weaker in December, consistent with the cognitive bias referred to as the disposition effect (Shefrin and Statman 1985). Sensitivity analysis reveals that the relation is stronger among less sophisticated investors and for firms with weaker information environments, consistent with the behavioral explanation. I also present evidence on the consequences of this disposition effect. First, stockholders' aggregate unrealized capital gain position moderates the degree to which information-related determinants of trade (e.g. unexpected earnings, firm size, and forecast dispersion) affect abnormal announcement-window trading volume. Second, stockholders' aggregate unrealized capital gains position is associated with announcement-window abnormal returns, consistent with the disposition effect reducing the market's ability to efficiently incorporate earnings news into price.
ContributorsWeisbrod, Eric (Author) / Hillegeist, Stephen (Thesis advisor) / Kaplan, Steven (Committee member) / Mikhail, Michael (Committee member) / Arizona State University (Publisher)
Created2012
Description
This case study analyzed the internal controls of a real estate company using the widely accepted COSO framework. Testing of the internal environment and controls was completed using the COSO framework. The major internal control problem identified in the study was a lack of ethical standards in the control environment. In addition to this main problem, inadequate documentation, no separation of duties, and unqualified employees were also identified as violations of effective internal controls. The department of real estate ordered a "cease and desist" on August 8, 2013 due to illegal company activities. The company participated in illegal actions regarding: the trust account and company documentation and procedures. Material weaknesses were found in the company's internal controls; therefore the result of this study was an adverse opinion on internal controls.
ContributorsFrederick, Nicole Lorraine (Author) / Munshi, Perseus (Thesis director) / Benali, Kayla (Committee member) / Barrett, The Honors College (Contributor) / School of Accountancy (Contributor) / Department of Psychology (Contributor)
Created2013-12
Description
Given that lobbying activity by audit firms constitutes a potential advocacy threat to auditor independence, this paper seeks to provide an economic rationale for audit firm lobbying behavior. Specifically, I examine whether federal lobbying activity by audit firms contributes to their ability to retain existing clients and attract new clients. Consequently, I predict and find that greater lobbying activity is associated with a lower probability of auditor switching behavior as well longer auditor tenure when the client is in an industry with high interest in lobbying. I also find that, when switching audit firms, clients tend to choose audit firms with greater lobbying activity and that companies in industries with high interest in lobbying are more likely to choose an audit firm with greater lobbying activity than their previous auditor.
ContributorsKim, Margaret Hyun-Mee (Author) / Hillegeist, Stephen (Thesis advisor) / Reckers, Philip (Committee member) / Kaplan, Steven (Committee member) / Arizona State University (Publisher)
Created2017
Description
An audit increases the credibility of financial reports by reducing the uncertainty in financial information. A change of auditor will prompt investors to reevaluate this uncertainty. I examine the association between auditor changes and the pricing of information risk using the Fama-French asset pricing model augmented with accounting- based information risk factors. On average, I find that the pricing of information risk decreases after an auditor change, suggesting that investors are less concerned about information risk after an auditor change. However, for auditor changes that involve auditor resignations, disagreements, and movements away from a Big 4 auditor, I find an increase in the pricing of information risk, implying that these changes are associated with a weakened information environment. I also show that market returns surrounding the change announcement are correlated with the future change in perceived information risk. My study contributes to the debate surrounding mandatory auditor rotation and auditor tenure by suggesting that not all auditor changes are perceived the same way by investors.
ContributorsMyers, Noah (Author) / Lamoreaux, Phillip (Thesis advisor) / Kaplan, Steven (Thesis advisor) / Baugh, Matthew (Committee member) / Arizona State University (Publisher)
Created2021