Shareholder ratification of the auditor and audit market competition

In my dissertation, I examine factors associated with firms’ submission of auditor selection for shareholder ratification and test if shareholder ratification of auditor selection is associated with the extent of price competition in the audit market (as measured by audit fees) and audit quality (as measured by clients’ earnings management). The dissertation is motivated from the recent recommendation of the U.S. Treasury’s Advisory Committee on Auditing Profession (ACAP) regarding the submission of auditor selection for shareholder ratification votes. The ACAP suggests that this practice may improve the competition in the audit market; yet, there is no empirical evidence supporting the ACAP’s recommendation. My dissertation attempts to fill the gap in the literature on an issue of current interest to the auditing profession. I find that firm size, CEO-Chair duality, insider ownership and institutional ownership are associated with the submission of auditor selection for shareholder ratification vote. However, I do not find an association between audit committee variables and the submission of auditor selection for shareholder ratification vote. The second essay investigates the association between auditor ratification and audit fees. Audit fees are higher in firms that submit auditor selection for shareholder ratification. The finding is not consistent with the increased price competition predicted by the ACAP. The third essay of my dissertation examine whether the submission of auditor selection for shareholder ratification is associated with earnings management. I find that firms that submit auditor selection for shareholder ratification are more likely to have lower level of earnings management. Overall, the results suggest that the same factors that are associated with higher quality monitoring also may be associated with the submission of auditor selection for shareholder ratification vote. The results call into question the one-size-fits-all approach recommended by the ACAP.

Audit pricing, reporting quality, and auditor switches in the post -SOX period

The Sarbanes-Oxley Act represents an important watershed event in the history and regulation of the accounting profession. In this dissertation, I develop arguments as to why we can expect differences in auditor behavior before and after SOX and empirically test if indeed there were differences in auditor behavior before and after SOX. My dissertation consists of three essays. For the three essays, I investigate issues related to auditor independence, audit pricing, the impact of auditor changes in the post-SOX period. The motivation for the first part of my research comes from the SEC's assertions that there are differences between types of non-audit services in terms of their potential to adversely impact auditor independence. The first part of my dissertation empirically validates the SEC's assertions that auditors would be more conservative in those instances where the tax and other non-audit services fee ratios are high but not when the audit-related fee ratio is high. The second part of my study examines if auditors are less likely to "low ball" their audit fees in the period after SOX than in the period preceding SOX. Legislators, regulators, and the media have expressed concerns that auditors "low ball" the fees for initial year audits and that such low-balling can lead to reduced audit quality. I find that there is significant initial year audit fee discount in pre-SOX period and but the fee discount does not hold in post-SOX periods. The third part of my dissertation examines the association between auditor switches and auditor conservatism. I find that a large portion of Big 4 clients switch to non-Big 4 auditors and there is no significant evidence indicating that successor auditors are more conservative in the post-SOX period.

An empirical analysis of the global audit market: International Financial Reporting Standards-related changes and differences within the Big 4 global networks

Ongoing debates within the professional and academic communities have raised a number of questions specific to the international audit market. This dissertation consists of three related essays that address such issues. First, I examine whether the propensity to switch between auditors of different sizes (i.e., Big 4 versus non-Big 4) changes as adoption of International Financial Reporting Standards (IFRS) becomes a more common phenomenon, arguing that smaller auditors have an opportunity to invest in necessary skills and training needed to enter this market. Findings suggest that clients are relatively less (more) likely to switch to (away from) a Big 4 auditor if the client's adoption of IFRS occurs in more recent years. ^ In the second essay, I draw on these inferences and test whether the change in audit fees in the year of IFRS adoption changes over time. As the market becomes less concentrated, larger auditors becomes less able to demand a premium for their services. Consistent with my arguments, results suggest that the change in audit service fees declines over time, although this effect seems concentrated among the Big 4. I also find that this effect is partially attributable to a differential effect of the auditors' experience in pricing audit services related to IFRS based on the period in which adoption occurs. The results of these two essays offer important implications to policy debates on the costs and benefits of IFRS adoption. ^ In the third essay, I differentiate Big 4 auditors into three classifications—Parent firms, Brand Name affiliates, and Local affiliates—and test for differences in audit fee premiums (relative to non-Big 4 auditors) and audit quality. Results suggest that there is significant heterogeneity between the three classifications based on both of these characteristics, which is an important consideration for future research. Overall, this dissertation provides additional insights into a variety of aspects of the global audit market.^

Shareholder Ratification of The Auditor and Audit Market Competition

In my dissertation, I examine factors associated with firms’ submission of auditor selection for shareholder ratification and test if shareholder ratification of auditor selection is associated with the extent of price competition in the audit market (as measured by audit fees) and audit quality (as measured by clients’ earnings management). The dissertation is motivated from the recent recommendation of the U.S. Treasury’s Advisory Committee on Auditing Profession (ACAP) regarding the submission of auditor selection for shareholder ratification votes. The ACAP suggests that this practice may improve the competition in the audit market; yet, there is no empirical evidence supporting the ACAP’s recommendation. My dissertation attempts to fill the gap in the literature on an issue of current interest to the auditing profession. I find that firm size, CEO-Chair duality, insider ownership and institutional ownership are associated with the submission of auditor selection for shareholder ratification vote. However, I do not find an association between audit committee variables and the submission of auditor selection for shareholder ratification vote. The second essay investigates the association between auditor ratification and audit fees. Audit fees are higher in firms that submit auditor selection for shareholder ratification. The finding is not consistent with the increased price competition predicted by the ACAP. The third essay of my dissertation examine whether the submission of auditor selection for shareholder ratification is associated with earnings management. I find that firms that submit auditor selection for shareholder ratification are more likely to have lower level of earnings management. Overall, the results suggest that the same factors that are associated with higher quality monitoring also may be associated with the submission of auditor selection for shareholder ratification vote. The results call into question the one-size-fits-all approach recommended by the ACAP.

Gender differences in audit committees

Issues related to the composition of audit committees have attracted significant interest from legislators and regulators in recent years. In my dissertation, I examine one overlooked component of audit committee composition – namely, the presence of female directors on the audit committee. I empirically test to see if there are any differences in the functioning of audit committee when there is at least one female director on the audit committee. My dissertation examines three issues: audit committee diligence, audit pricing and earnings management. ^ The absence of females on corporate boards has become the focus of legislators in some countries. Prior research, in a variety of contexts, suggests that women are in general more conservative in their judgments and decisions. The first part of my dissertation empirically shows that the presence of at least one female director on the audit committee makes the audit committee have more meetings. The second essay empirically examines if there is a positive association between audit fees and the presence of female directors in the audit committee. I posit that having a female director on the audit committee will result in higher audit fees. I find no significant evidence to show that audit fees are higher when there is a female director on the audit committee. The third part of my dissertation empirically examines if there an association between the presence of a female director on the audit committee and earnings management. I find no significant evidence to show that the presence of female directors on the audit committee constrains earnings management. Overall, the results suggest that having a female on the audit committee changes the form – if not the substance – of audit committee functioning. ^

Three essays on corporate governance and meeting-beating or missing analyst forecasts

The beginning of the 21st century was plagued with unprecedented instances of corporate fraud. In an attempt to address apparent non-existent or “broken” corporate governance policies, sweeping measures of financial reporting reform ensued, having specific requirements relating to the composition of audit committees, the interaction between audit committees and external auditors, and procedures concerning auditors’ assessment of client risk. The purpose of my dissertation is to advance knowledge about “good” corporate governance by examining the association between meeting-or-beating analyst forecasts and audit fees, audit committee compensation, and audit committee tenure and “busyness”. Using regression analysis, I found the following: (1) the frequency of meeting-or-just beating (just missing) analyst forecasts is negatively (positively) associated with audit fees, (2) the extent by which a firm exceeds analysts’ forecasts is positively (negatively) associated with audit committee compensation that is predominately equity-based (cash-based), and (3) the likelihood of repeatedly meeting-or-just beating analyst forecasts is positively associated with audit committee tenure and “busyness”. These results suggest that auditors consider clients who frequently meet-or-just beat forecasts as being less “risky”, and clients that frequently just miss as being more “risky”. The results also imply that cash-based director compensation is more successful in preserving the effectiveness of the audit committee’s financial reporting oversight role, that equity-based compensation motivates independent audit committee directors to focus on short-term performance thereby aligning their interests with management, and that audit committee director tenure and the degree of director “busyness” can affect an audit committee member’s effectiveness in providing financial reporting oversight. Collectively, my dissertation provides additional insights regarding corporate governance practices and informs policy-makers for future relevant decisions.^

Chlorine contribution to quantitative structure and activity relationship models of disinfection by -products' quantum chemical descriptors and toxicities

Quantitative Structure-Activity Relationship (QSAR) has been applied extensively in predicting toxicity of Disinfection By-Products (DBPs) in drinking water. Among many toxicological properties, acute and chronic toxicities of DBPs have been widely used in health risk assessment of DBPs. These toxicities are correlated with molecular properties, which are usually correlated with molecular descriptors. The primary goals of this thesis are: (1) to investigate the effects of molecular descriptors (e.g., chlorine number) on molecular properties such as energy of the lowest unoccupied molecular orbital (E LUMO) via QSAR modelling and analysis; (2) to validate the models by using internal and external cross-validation techniques; (3) to quantify the model uncertainties through Taylor and Monte Carlo Simulation. One of the very important ways to predict molecular properties such as ELUMO is using QSAR analysis. In this study, number of chlorine (NCl ) and number of carbon (NC) as well as energy of the highest occupied molecular orbital (EHOMO) are used as molecular descriptors. There are typically three approaches used in QSAR model development: (1) Linear or Multi-linear Regression (MLR); (2) Partial Least Squares (PLS); and (3) Principle Component Regression (PCR). In QSAR analysis, a very critical step is model validation after QSAR models are established and before applying them to toxicity prediction. The DBPs to be studied include five chemical classes: chlorinated alkanes, alkenes, and aromatics. In addition, validated QSARs are developed to describe the toxicity of selected groups (i.e., chloro-alkane and aromatic compounds with a nitro- or cyano group) of DBP chemicals to three types of organisms (e.g., Fish, T. pyriformis, and P.pyosphoreum) based on experimental toxicity data from the literature. The results show that: (1) QSAR models to predict molecular property built by MLR, PLS or PCR can be used either to select valid data points or to eliminate outliers; (2) The Leave-One-Out Cross-Validation procedure by itself is not enough to give a reliable representation of the predictive ability of the QSAR models, however, Leave-Many-Out/K-fold cross-validation and external validation can be applied together to achieve more reliable results; (3) E LUMO are shown to correlate highly with the NCl for several classes of DBPs; and (4) According to uncertainty analysis using Taylor method, the uncertainty of QSAR models is contributed mostly from NCl for all DBP classes.

Gender Differences in Audit Committees

Issues related to the composition of audit committees have attracted significant interest from legislators and regulators in recent years. In my dissertation, I examine one overlooked component of audit committee composition – namely, the presence of female directors on the audit committee. I empirically test to see if there are any differences in the functioning of audit committee when there is at least one female director on the audit committee. My dissertation examines three issues: audit committee diligence, audit pricing and earnings management. The absence of females on corporate boards has become the focus of legislators in some countries. Prior research, in a variety of contexts, suggests that women are in general more conservative in their judgments and decisions. The first part of my dissertation empirically shows that the presence of at least one female director on the audit committee makes the audit committee have more meetings. The second essay empirically examines if there is a positive association between audit fees and the presence of female directors in the audit committee. I posit that having a female director on the audit committee will result in higher audit fees. I find no significant evidence to show that audit fees are higher when there is a female director on the audit committee. The third part of my dissertation empirically examines if there an association between the presence of a female director on the audit committee and earnings management. I find no significant evidence to show that the presence of female directors on the audit committee constrains earnings management. Overall, the results suggest that having a female on the audit committee changes the form – if not the substance – of audit committee functioning.

Chlorine Contribution to Quantitative Structure and Activity Relationship Models of Disinfection By-Products' Quantum Chemical Descriptors and Toxicities

Quantitative Structure-Activity Relationship (QSAR) has been applied extensively in predicting toxicity of Disinfection By-Products (DBPs) in drinking water. Among many toxicological properties, acute and chronic toxicities of DBPs have been widely used in health risk assessment of DBPs. These toxicities are correlated with molecular properties, which are usually correlated with molecular descriptors. The primary goals of this thesis are: 1) to investigate the effects of molecular descriptors (e.g., chlorine number) on molecular properties such as energy of the lowest unoccupied molecular orbital (ELUMO) via QSAR modelling and analysis; 2) to validate the models by using internal and external cross-validation techniques; 3) to quantify the model uncertainties through Taylor and Monte Carlo Simulation. One of the very important ways to predict molecular properties such as ELUMO is using QSAR analysis. In this study, number of chlorine (NCl) and number of carbon (NC) as well as energy of the highest occupied molecular orbital (EHOMO) are used as molecular descriptors. There are typically three approaches used in QSAR model development: 1) Linear or Multi-linear Regression (MLR); 2) Partial Least Squares (PLS); and 3) Principle Component Regression (PCR). In QSAR analysis, a very critical step is model validation after QSAR models are established and before applying them to toxicity prediction. The DBPs to be studied include five chemical classes: chlorinated alkanes, alkenes, and aromatics. In addition, validated QSARs are developed to describe the toxicity of selected groups (i.e., chloro-alkane and aromatic compounds with a nitro- or cyano group) of DBP chemicals to three types of organisms (e.g., Fish, T. pyriformis, and P.pyosphoreum) based on experimental toxicity data from the literature. The results show that: 1) QSAR models to predict molecular property built by MLR, PLS or PCR can be used either to select valid data points or to eliminate outliers; 2) The Leave-One-Out Cross-Validation procedure by itself is not enough to give a reliable representation of the predictive ability of the QSAR models, however, Leave-Many-Out/K-fold cross-validation and external validation can be applied together to achieve more reliable results; 3) ELUMO are shown to correlate highly with the NCl for several classes of DBPs; and 4) According to uncertainty analysis using Taylor method, the uncertainty of QSAR models is contributed mostly from NCl for all DBP classes.

An examination of accounting and auditing issues related to strategic environmental initiatives

Although corporate environmental accountability is receiving unprecedented attention in the United States from policy makers, the capital market, and the public at large, extant research is limited in its examination of the implications of strategic corporate environmental initiatives on accounting and auditing. The purpose of my dissertation is to address these implications by examining the association between firm environmental initiatives and audit fees, capital expenditures, and earnings quality using multivariate regression analysis. I find that firms engaged in more strategic environmental initiatives tend to have significantly higher audit fees and capital expenditures, and significantly lower levels of earnings manipulation measured using discretionary accruals. These results support the notion that auditors do recognize the importance of environmental initiatives when conducting the year-end financial statement audit, an idea that positively reflects upon the auditor’s monitoring role. The results also demonstrate the increased amount of capital resources required to participate in strategic environmental initiatives, an anecdotal notion that had yet to be empirically supported. This empirical support provides valuable insights on how environmental initiatives materially impact corporate financial statements. Finally, my results extend the extant literature by demonstrating that the superior financial performance reported by environmentally active firms is less likely driven by earnings manipulation by management, and by implication, more likely a result of real economic gains. Taken together, my dissertation establishes a strong and timely foundation for current and future research to explore corporate environmental initiatives in the United States and globally, a topic increasingly gaining momentum in today’s more eco-conscious world.^

Climate, Land Use and Hydrologic Sensitivities of Stormwater Quantity and Quality in Complex Coastal Urban Watersheds

The study analyzed hydro-climatic and land use sensitivities of stormwater runoff and quality in the complex coastal urban watershed of Miami River Basin, Florida by developing a Storm Water Management Model (EPA SWMM 5). Regression-based empirical models were also developed to explain stream water quality in relation to internal (land uses and hydrology) and external (upstream contribution, seawater) sources and drivers in six highly urbanized canal basins of Southeast Florida. Stormwater runoff and quality were most sensitive to rainfall, imperviousness, and conversion of open lands/parks to residential, commercial and industrial areas. In-stream dissolved oxygen and total phosphorus in the watersheds were dictated by internal stressors while external stressors were dominant for total nitrogen and specific conductance. The research findings and tools will be useful for proactive monitoring and management of storm runoff and urban stream water quality under the changing climate and environment in South Florida and around the world.

Structural adjustment and labor in Jamaica and the Dominican Republic

Statement of the problem. It seeks to examine whether structural adjustment in Jamaica produced the desired developmental effects for labor--both organized and non-unionized--and if there is any significant difference in the Dominican Republic, which did not undergo that economic transformation. The research hypothesis is; "Structural Adjustment leads to Marginalization of labor."^ Methodology used. The methodology is mostly a straight cross-sectional analysis using data sets and publications from the UN, ILO, World Bank and IDB, as well as local statistical sources. The dissertation is primarily an historical to contemporary analysis of the Jamaican experience under structural adjustment, as it related to labor. To a greater extent it involves a straight cross-national comparison on the historical experiences of each country and a discussion of the relative similarities and differences between them, and the impact these features had on labor.^ Summary of findings. In the end, the question is asked as to whether internal factors are important in the relative success or failure of development strategies. From the data there is some indication that under structural adjustment there has been limited economic benefits for labor in Jamaica while labor standards have not improved. In the Dominican Republic the economic performance has been similar but the labor standards have improved significantly. This thus leads to the conclusion that structural adjustment may have been a factor in the resistance to labor's empowerment.^ Nevertheless, the study also shows that there may have been a causal role which local power relations had. The suggestion from the study is that in analyzing the phenomenon, attention must be paid to internal as well as external dynamics and variables. ^

The role of attitudes, subjective norms, attributions, and individualism-collectivism in managers' responses to bribery in organizations: The case of Ecuador

The goal of this study was twofold: (1) to introduce a model explaining how attitudes, subjective norms, internal and external attributions about bribery affect the way managers' deal with bribery in organizations, and (2) to clarify the role of the individualism-collectivism cultural dimension in managers' attributions of employees' behavior related to bribery. Twenty-six internal and external attributions related to bribery were identified through a series of structural interviews with 65 subject matter experts, and then evaluated by three hundred fifty-four (n = 354) Ecuadorian managers. Hierarchical regression analyses indicated that attitudes and external attributions significantly predicted managers' intentions to discipline employees' who accepted a bribe, and that those with a collectivist orientation were more likely to make external attributions of bribery. Implications for the eradication of bribery in organizations are discussed. ^

Effect of performance feedback on perceived knowledge and likelihood to pursue continuing education

The purpose of this study was to assess the effect of performance feedback on Athletic Trainers’ (ATs) perceived knowledge (PK) and likelihood to pursue continuing education (CE). The investigation was grounded in the theories of “the definition of the situation” (Thomas & Thomas, 1928) and the “illusion of knowing,” (Glenberg, Wilkinson, & Epstein, 1982) suggesting that PK drives behavior. This investigation measured the degree to which knowledge gap predicted CE seeking behavior by providing performance feedback designed to change PK. A pre-test post-test control-group design was used to measure PK and likelihood to pursue CE before and after assessing actual knowledge. ATs (n=103) were randomly sampled and assigned to two groups, with and without performance feedback. Two independent samples t-tests were used to compare groups on the difference scores of the dependent variables. Likelihood to pursue CE was predicted by three variables using multiple linear regression: perceived knowledge, pre-test likelihood to pursue CE, and knowledge gap. There was a 68.4% significant difference (t101=2.72, p=0.01, ES=0.45) between groups in the change scores for likelihood to pursue CE because of the performance feedback (Experimental group=13.7% increase; Control group=4.3% increase). The strongest relationship among the dependent variables was between pre-test and post-test measures of likelihood to pursue CE (F2,102=56.80, p<0.01, r=0.73, R2=0.53). The pre- and post-test predictive relationship was enhanced when group was included in the model. In this model [YCEpost=0.76XCEpre-0.34 Xgroup+2.24+E], group accounted for a significant amount of unique variance in predicting CE while the pre-test likelihood to pursue CE variable was held constant (F3,102=40.28, p<0.01, r=0.74, R2=0.55). Pre-test knowledge gap, regardless of group allocation, was a linear predictor of the likelihood to pursue CE (F1,102=10.90, p=.01, r=.31, R2=.10). In this investigation, performance feedback significantly increased participants’ likelihood to pursue CE. Pre-test knowledge gap was a significant predictor of likelihood to pursue CE, regardless if performance feedback was provided. ATs may have self-assessed and engaged in internal feedback as a result of their test-taking experience. These findings indicate that feedback, both internal and external, may be necessary to trigger CE seeking behavior.

Successful and sustained leadership: A case study of a Jesuit high school president

Fr. Marcelino García, S.J. has been the president of Belen Jesuit Preparatory School for 25 years. The longevity and success of his tenure is an exemplary case of effective leadership and provided significant insight into what constitutes effective school leadership. The target population for this case study consisted of the school’s 7 administrators, 90 faculty members, 10 English-speaking staff members, and 3 key informants. Data were collected using Bolman and Deal’s (1997) Leadership Orientation Survey along with the Jesuit Secondary Education Administration’s (1994) Administrative Leadership Profile Survey (ALPS). Data collected from the surveys were analyzed using the SPSS, version 10. The study also included data collected from focus interviews with Fr. García and six other significant members of the school community. The interviews were approximately 1-hour individual interviews that employed a semi-structured guide. A concurrent triangulation method was used that directly compared the results from these data collection methods. This was done by looking at the data as a whole and in parts. The parts were internal (faculty, administrators, and staff) and external (parents, alumni, and the superior of the Jesuit community) sectors. The comparison of the findings was then examined in terms of each research question. Analysis of the data revealed that while Fr. García’s predominant leadership style reflected the typical Bolman and Deal characteristics associated with the political frame, his leadership demonstrates access to all four frames. Research has found a correlation between multiple frame use and successful leadership. Relatedly, Fr. García’s capacity to approach his administration from various perspectives is indicative of success. In addition, from the perspective of Jesuit education, an analysis of Fr. García’s leadership indicated recurring themes that contributed to the school’s organizational health. The results of this study provide an extensive analysis of the administration of a unique leader. An analysis of Fr. García’s leadership style from two perspectives gives fresh insight into sustained and successful leadership.