Corporate governance, accounting and finance: a review

We review accounting and finance research on corporate governance (CG). In the course of our review, we focus on a particularly vexing issue, namely endogeneity in the relationships between CG and other matters of concern to accounting and finance scholars, and suggest ways to deal with it. Given the advent of large commercial CG databases, we also stress the importance of how CG is measured and in particular, the construction of CG indices, which should be sensitive to local institutional arrangements, and the need to capture both internal and external aspects of governance. The ‘stickiness’ of CG characteristics provides an additional challenge to CG scholars. Better theory is required, for example, to explain whether various CG practices substitute for each other or are complements. While a multidisciplinary approach to developing better theory is never without its difficulties, it could enrich the current body of knowledge in CG. Despite the vastness of the existing CG literature, these issues do suggest a number of avenues for future research.

External auditors' reliance on internal auditing : further evidence.

Purpose – The purpose of this paper is to explore whether internal audit’s reporting relationship with the audit committee and the client’s business risk environment impact external auditors’ reliance on the work of internal audit. Design/methodology/approach – An experiment is conducted using a 2 £ 2 between-subjects design where we manipulate the above two factors at strong and weak levels. Participants are 66 audit partners, managers and seniors, all experienced with clients having internal audit functions. Findings – The results indicate that both factors affect external auditors’ reliance on work already undertaken by internal audit and their use of internal auditors (IA) as assistants. The results also indicate that external auditors are more likely to use internal audit for control evaluation tasks than for substantive tests of balances. The study does not find any significant interaction effects between the two factors. Originality/value – No prior studies have examined the influence of reporting relationship and client business risk on external auditors’ reliance decisions in the current governance environment. Further, the paper examines the impact of these factors on reliance on work already undertaken by internal audit and on using IA as assistants, with respect to both control evaluation work and substantive testing of balances.

Speed enforcement in Australia : a changing policy landscape shaped by public opinion

- Speeding and crash involvement in Australia - Speed management in Australia - Jurisdictional differences - National Road Safety Strategy (2011-2020) - Auditor-General reviews of speed camera programs - The role of public opinion/feedback - Implications for speed management

Repeat speeding offenders : time to stop thinking of them as just ‘unlucky normal’ drivers

- Speeding and crash involvement in Australia - Speeding recidivist research in Queensland - Challenges from an Australian perspective - Defining speeding - Community attitudes to speeding - Auditor-General reviews of speed camera programs - Implications for future speed management

Repeat speeding offenders : results from research in Queensland, Australia

- Speeding and crash involvement in Australia - Speeding recidivist research in Queensland - Challenges from an Australian perspective - Auditor-General reviews of speed camera programs - Implications for future speed management

Automated speed enforcement in Australia : recent examples of the influence of public opinion on program sustainability

In Australia, speeding remains a substantial contributor to road trauma. The National Road Safety Strategy (2011-2020) highlighted the need to harness community support for current and future speed management strategies. Australia is known for intensive speed camera programs which are both automated and manual, employing covert and overt methods. Recent developments in the area of automated speed enforcement in Australia help to illustrate the important link between community attitudes to speed enforcement and subsequent speed camera policy developments. A perceived lack of community confidence in camera programs prompted reviews in New South Wales and Victoria in 2011 by the jurisdictional Auditor-General. This paper explores automated speed camera enforcement in Australia with particular reference to the findings of these two reports as they relate to the level of public support for and community attitudes towards automated speed enforcement. It also provides comment on the evolving nature of automated speed enforcement according to previously identified controversies and dilemmas associated with speed camera programs.

Aligning off-balance sheet risk, on-balance sheet risk and audit fees: a PLS path modelling analysis

This study focuses on using the partial least squares (PLS) path modelling technique in archival auditing research by replicating the data and research questions from prior bank audit fee studies. PLS path modelling allows for inter-correlations among audit fee determinants by establishing latent constructs and multiple relationship paths in one simultaneous PLS path model. Endogeneity concerns about auditor choice can also be addressed with PLS path modelling. With a sample of US bank holding companies for the period 2003-2009, we examine the associations among on-balance sheet financial risks, off-balance sheet risks and audit fees, and also address the pervasive client size effect, and the effect of the self-selection of auditors. The results endorse the dominating effect of size on audit fees, both directly and indirectly via its impacts on other audit fee determinants. By simultaneously considering the self-selection of auditors, we still find audit fee premiums on Big N auditors, which is the second important factor on audit fee determination. On-balance-sheet financial risk measures in terms of capital adequacy, loan composition, earnings and asset quality performance have positive impacts on audit fees. After allowing for the positive influence of on-balance sheet financial risks and entity size on off-balance sheet risk, the off-balance sheet risk measure, SECRISK, is still positively associated with bank audit fees, both before and after the onset of the financial crisis. The consistent results from this study compared with prior literature provide supporting evidence and enhance confidence on the application of this new research technique in archival accounting studies.

Aligning off-balance sheet risk, on-balance sheet risk and audit fees: a PLS path modelling analysis

This study focuses on using the partial least squares (PLS) path modelling methodology in archival auditing research by replicating the data and research questions from prior bank audit fee studies. PLS path modelling allows for inter-correlations among audit fee determinants by establishing latent constructs and multiple relationship paths in one simultaneous PLS path model. Endogeneity concerns about auditor choice can also be addressed with PLS path modelling. With a sample of US bank holding companies for the period 2003-2009, we examine the associations among on-balance sheet financial risks, off-balance sheet risks and audit fees, and also address the pervasive client size effect, and the effect of the self-selection of auditors. The results endorse the dominating effect of size on audit fees, both directly and indirectly via its impacts on other audit fee determinants. By simultaneously considering the self-selection of auditors, we still find audit fee premiums on Big N auditors, which is the second important factor on audit fee determination. On-balance-sheet financial risk measures in terms of capital adequacy, loan composition, earnings and asset quality performance have positive impacts on audit fees. After allowing for the positive influence of on-balance sheet financial risks and entity size on off-balance sheet risk, the off-balance sheet risk measure, SECRISK, is still positively associated with bank audit fees, both before and after the onset of the financial crisis. The consistent results from this study compared with prior literature provide supporting evidence and enhance confidence on the application of this new research technique in archival accounting studies.

Audit reports in Australia 2005-2013 : preliminary analysis

This paper provides a preliminary summary of audit reports for Australian listed public companies for the period 2005 to 2013. This summary focuses on auditor reporting in the most recent period 2011 to 2013.

Audit reports in Australia : 2005-2013: Preliminary Findings

This paper provides a preliminary summary of audit reports for Australian listed public companies for the period 2005 to 2013, focusing on auditor reporting in the most recent period 2011 to 2013. Prior research has shown that audit reports modified for uncertainty relating to the going concern assumption increased following the shock of the Global Financial Crisis (GFC) in late 2007. This occurred in Australia from 2008 where Xu et al. (2011) find that reports modified for going concern uncertainty increase from 12% in 2005 to 2007 to 18% in 2008 and 22% in 2009. Similar trends are observable for the United States as shown by an increase from 14% in 2003 to 21% in 2008 (Cheffers et al. 2010, Geiger et al. 2014). The aim of this report is to examine the frequency of the various types of audit reports issued in Australia during the period 2011 to 2013, with a focus on reports emphasizing significant uncertainty in regard to the going concern assumption.

Corporate governance quality, audit fees and non-audit services fees

This paper extends prior research on the relationship between governance quality and auditor remuneration.We examine the influence of audit committee effectiveness (ACE), a proxy for governance quality, on audit fees (AF) and non-audit services fees (NASF) using a new composite measure comprising audit committee independence, expertise, diligence and size. We find that after controlling for board of director characteristics, there is a significant positive association between ACE and AF only for larger clients. Our results indicate that effective audit committees undertake more monitoring which results in wider audit scope and higher audit fees. Contrary to our expectations, we find the association between ACE and NASF to be positive and significant, especially for larger clients. This suggests that larger clients are more likely to purchase non-audit services (NAS) even in the presence of effective audit committees probably due to the complexity of their activities. Overall, our findings support regulatory initiatives aimed at improving corporate governance quality.

Hierarchical deterministic Bitcoin wallets that tolerate key leakage (short paper)

A Bitcoin wallet is a set of private keys known to a user and which allow that user to spend any Bitcoin associated with those keys. In a hierarchical deterministic (HD) wallet, child private keys are generated pseudorandomly from a master private key, and the corresponding child public keys can be generated by anyone with knowledge of the master public key. These wallets have several interesting applications including Internet retail, trustless audit, and a treasurer allocating funds among departments. A specification of HD wallets has even been accepted as Bitcoin standard BIP32. Unfortunately, in all existing HD wallets---including BIP32 wallets---an attacker can easily recover the master private key given the master public key and any child private key. This vulnerability precludes use cases such as a combined treasurer-auditor, and some in the Bitcoin community have suspected that this vulnerability cannot be avoided. We propose a new HD wallet that is not subject to this vulnerability. Our HD wallet can tolerate the leakage of up to m private keys with a master public key size of O(m). We prove that breaking our HD wallet is at least as hard as the so-called "one more" discrete logarithm problem.

The largest admitted IT project failure in the Southern Hemisphere: A teaching case

The Queensland Health implementation project failure is the largest IS failure in the southern hemisphere to date, costing $1.25 billion AUD. This case highlights the importance of systematically analysing project failure. It examines the case organization details, royal commission report, auditor general report and 118 witness statements pertaining to the Queensland Health implementation project. The objective of this teaching case is (1) to illustrate the factors that contributed to Queensland Health's disastrous implementation project and (2) to understand the broader applications of this project failure on state and national legislations as well as industry sectors. The case narrative and teaching notes are appropriate for both undergraduate and postgraduate students studying IS and project management subjects.

The right to a voice and the fight to be heard: The experience of being an ESL user in Australia

This paper focuses on the fundamental right to be heard, that is, the right to have one’s voice heard and listened to – to impose reception (Bourdieu, 1977). It focuses on the ways that non-mainstream English is heard and received in Australia, where despite public policy initiatives around equal opportunity, language continues to socially disadvantage people (Burridge & Mulder, 1998). English is the language of the mainstream and most people are monolingually English (Ozolins, 1993). English has no official status yet it remains dominant and its centrality is rarely challenged (Smolicz, 1995). This paper takes the position that the lack of language engagement in mainstream Australia leads to linguistic desensitisation. Writing in the US context where English is also the unofficial norm, Lippi-Green (1997) maintains that discrimination based on speech features or accent is commonly accepted and widely perceived as appropriate. In Australia, non-standard forms of English are often disparaged or devalued because they do not conform to the ‘standard’ (Burridge & Mulder, 1998). This paper argues that talk cannot be taken for granted: ‘spoken voices’ are critical tools for representing the self and negotiating and manifesting legitimacy within social groups (Miller, 2003). In multicultural, multilingual countries like Australia, the impact of the spoken voice, its message and how it is heard are critical tools for people seeking settlement, inclusion and access to facilities and services. Too often these rights are denied because of the way a person sounds. This paper reports a study conducted with a group that has been particularly vulnerable to ongoing ‘panics’ about language – international students. International education is the third largest revenue source for Australia (AEI, 2010) but has been beset by concerns from academics (Auditor-General, 2002) and the media about student language levels and falling work standards (e.g. Livingstone, 2004). Much of the focus has been high-stakes writing but with the ascendancy of project work in university assessment and the increasing emphasis on oracy, there is a call to recognise the salience of talk, especially among students using English as a second language (ESL) (Kettle & May, 2012). The study investigated the experiences of six international students in a Master of Education course at a large metropolitan university. It utilised data from student interviews, classroom observations, course materials, university policy documents and media reports to examine the ways that speaking and being heard impacted on the students’ learning and legitimacy in the course. The analysis drew on Fairclough’s (2003) model of the dialectical-relational Critical Discourse Analysis (CDA) to analyse the linguistic, discursive and social relations between the data texts and their conditions of production and interpretation, including the wider socio-political discourses on English, language difference, and second language use. The interests of the study were if and how discourses of marginalisation and discrimination manifested and if and how students recognised and responded to them pragmatically. Also how they juxtaposed with and/or contradicted the official rhetoric about diversity and inclusion. The underpinning rationale was that international students’ experiences can provide insights into the hidden politics and practices of being heard and afforded speaking rights as a second language speaker in Australia.

Social audit failure: Legal liability of external auditors

In this chapter, we look at the step beyond reporting, to the external audit or assurance function. The role of any audit engagement is to provide a professional opinion on a set of financial or non-financial assertions reported by an organization's management, based on an agreed evaluative framework. Any such opinion is not a guarantee that the underlying report is free from fraud or misstatement. Where an audit opinion on financial statements is incorrect, this is referred to as an audit failure. Specifically, the textbook definition of audit failure has two components: that the financial statements contain a serious error and that the auditor has failed to detect the error due to the auditor's failure during the audit process.