Effective corporate governance : experimental evidence on international auditors'judgments and the contribution of financial accounting education

1 Summary This dissertation deals with two major aspects of corporate governance that grew in importance during the last years: the internal audit function and financial accounting education. In three essays, I contribute to research on these topics which are embedded in the broader corporate governance literature. The first two essays consist of experimental investigations of internal auditors' judgments. They deal with two research issues for which accounting research lacks evidence: The effectiveness of internal controls and the potentially conflicting role of the internal audit function between management and the audit committee. The findings of the first two essays contribute to the literature on internal auditors' judgment and the role of the internal audit function as a major cornerstone of corporate governance. The third essay theoretically examines a broader issue but also relates to the overall research question of this dissertation: What contributes to effective corporate governance? This last essay takes the perspective that the root for quality corporate governance is appropriate financial accounting education. r develop a public interest approach to accounting education that contributes to the literature on adequate accounting education with respect to corporate governance and accounting harmonization. The increasing importance of both the internal audit function and accounting education for corporate governance can be explained by the same recent fundamental changes that still affect accounting research and practice. First, the Sarbanes-Oxley Act of 2002 (SOX, 2002) and the 8th EU Directive (EU, 2006) have led to a bigger role for the internal audit function in corporate governance. Their implications regarding the implementation of audit committees and their oversight over internal controls are extensive. As a consequence, the internal audit function has become increasingly important for corporate governance and serves a new master (i.e. the audit committee) within the company in addition to management. Second, the SOX (2002) and the 8th EU Directive introduced additional internal control mechanisms that are expected to contribute to the reliability of financial information. As a consequence, the internal audit function is expected to contribute to a greater extent to the reliability of financial statements. Therefore, effective internal control mechanisms that strengthen objective judgments and independence become important. This is especially true when external- auditors rely on the work of internal auditors in the context of the International Standard on Auditing (ISA) 610 and the equivalent US Statement on Auditing Standards (SAS) 65 (see IFAC, 2009 and AICPA, 1990). Third, the harmonization of international reporting standards is increasingly promoted by means of a principles-based approach. It is the leading approach since a study of the SEC (2003) that was required by the SOX (2002) in section 108(d) was in favor of this approach. As a result, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) commit themselves to the development of compatible accounting standards based on a principles-based approach. Moreover, since the Norwalk Agreement of 2002, the two standard setters have developed exposure drafts for a common conceptual framework that will be the basis for accounting harmonization. The new .framework will be in favor of fair value measurement and accounting for real-world economic phenomena. These changes in terms of standard setting lead to a trend towards more professional judgment in the accounting process. They affect internal and external auditors, accountants, and managers in general. As a consequence, a new competency set for preparers and users of financial statements is required. The basil for this new competency set is adequate accounting education (Schipper, 2003). These three issues which affect corporate governance are the initial point of this dissertation and constitute its motivation. Two broad questions motivated a scientific examination in three essays: 1) What are major aspects to be examined regarding the new role of the internal audit function? 2) How should major changes in standard setting affect financial accounting education? The first question became apparent due to two published literature reviews by Gramling et al. (2004) and Cohen, Krishnamoorthy & Wright (2004). These studies raise various questions for future research that are still relevant and which motivate the first two essays of my dissertation. In the first essay, I focus on the role of the internal audit function as one cornerstone of corporate governance and its potentially conflicting role of serving both management and the audit committee (IIA, 2003). In an experimental study, I provide evidence on the challenges for internal auditors in their role as servant for two masters -the audit committee and management -and how this influences internal auditors' judgment (Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004). I ask if there is an expectation gap between what internal auditors should provide for corporate governance in theory compared to what internal auditors are able to provide in practice. In particular, I focus on the effect of serving two masters on the internal auditor's independence. I argue that independence is hardly achievable if the internal audit function serves two masters with conflicting priorities. The second essay provides evidence on the effectiveness of accountability as an internal control mechanism. In general, internal control mechanisms based on accountability were enforced by the SOX (2002) and the 8th EU Directive. Subsequently, many companies introduced sub-certification processes that should contribute to an objective judgment process. Thus, these mechanisms are important to strengthen the reliability of financial statements. Based on a need for evidence on the effectiveness of internal control mechanisms (Brennan & Solomon, 2008; Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004; Solomon & Trotman, 2003), I designed an experiment to examine the joint effect of accountability and obedience pressure in an internal audit setting. I argue that obedience pressure potentially can lead to a negative influence on accountants' objectivity (e.g. DeZoort & Lord, 1997) whereas accountability can mitigate this negative effect. My second main research question - How should major changes in standard setting affect financial accounting education? - is investigated in the third essay. It is motivated by the observation during my PhD that many conferences deal with the topic of accounting education but very little is published about what needs to be done. Moreover, the Endings in the first two essays of this thesis and their literature review suggest that financial accounting education can contribute significantly to quality corporate governance as argued elsewhere (Schipper, 2003; Boyce, 2004; Ghoshal, 2005). In the third essay of this thesis, I therefore focus on approaches to financial accounting education that account for the changes in standard setting and also contribute to corporate governance and accounting harmonization. I argue that the competency set that is required in practice changes due to major changes in standard setting. As the major contribution of the third article, I develop a public interest approach for financial accounting education. The major findings of this dissertation can be summarized as follows. The first essay provides evidence to an important research question raised by Gramling et al. (2004, p. 240): "If the audit committee and management have different visions for the corporate governance role of the IAF, which vision will dominate?" According to the results of the first essay, internal auditors do follow the priorities of either management or the audit committee based on the guidance provided by the Chief Audit executive. The study's results question whether the independence of the internal audit function is actually achievable. My findings contribute to research on internal auditors' judgment and the internal audit function's independence in the broader frame of corporate governance. The results are also important for practice because independence is a major justification for a positive contribution of the internal audit function to corporate governance. The major findings of the second essay indicate that the duty to sign work results - a means of holding people accountable -mitigates the negative effect of obedience pressure on reliability. Hence, I found evidence that control .mechanisms relying on certifications may enhance the reliability of financial information. These findings contribute to the literature on the effectiveness of internal control mechanisms. They are also important in the light of sub-certification processes that resulted from the Sarbanes-Oxley Act and the 8th EU Directive. The third essay contributes to the literature by developing a measurement framework that accounts for the consequences of major trends in standard setting. Moreovér, it shows how these trends affect the required .competency set of people dealing with accounting issues. Based on this work, my main contribution is the development of a public interest approach for the design of adequate financial accounting curricula. 2 Serving two masters: Experimental evidence on the independence of internal auditors Abstract Twenty nine internal auditors participated in a study that examines the independence of internal auditors in their potentially competing roles of serving two masters: the audit committee and management. Our main hypothesis suggests that internal auditors' independence is not achievable in an institutional setting in which internal auditors are accountable to two different parties with potentially differing priorities. We test our hypothesis in an experiment in which the treatment consisted of two different instructions of the Chief audit executive; one stressing the priority of management (cost reduction) and one stressing the priority of the audit committee (effectiveness). Internal auditors had to evaluate internal controls and their inherent costs of different processes which varied in their degree of task complexity. Our main results indicate that internal auditors' evaluation of the processes is significantly different when task complexity is high. Our findings suggest that internal auditors do follow the priorities of either management or the audit committee depending on the instructions of a superior internal auditor. The study's results question whether the independence of the internal audit function is actually achievable. With our findings, we contribute to research on internal auditors' judgment and the internal audit function's independence in the frame of corporate governance.

Phylogeography and dispersal in the velvet gecko (Oedura lesueurii), and potential implications for conservation of an endangered snake (Hoplocephalus bungaroides).

ABSTRACT: BACKGROUND: To conserve critically endangered predators, we also need to conserve the prey species upon which they depend. Velvet geckos (Oedura lesueurii) are a primary prey for the endangered broad-headed snake (Hoplocephalus bungaroides), which is restricted to sandstone habitats in southeastern Australia. We sequenced the ND2 gene from 179 velvet geckos, to clarify the lizards' phylogeographic history and landscape genetics. We also analysed 260 records from a longterm (3-year) capture-mark-recapture program at three sites, to evaluate dispersal rates of geckos as a function of locality, sex and body size. RESULTS: The genetic analyses revealed three ancient lineages in the north, south and centre of the species' current range. Estimates of gene flow suggest low dispersal rates, constrained by the availability of contiguous rocky habitat. Mark-recapture records confirm that these lizards are highly sedentary, with most animals moving < 30 m from their original capture site even over multi-year periods. CONCLUSION: The low vagility of these lizards suggests that they will be slow to colonise vacant habitat patches; and hence, efforts to restore degraded habitats for broad-headed snakes may need to include translocation of lizards.

Occurence of thrips on Niagara table grape and its control with the insecticides thiacloprid and methiocarb associated with Metarhizium anisopliae

Thrips are reported as important pests on table grapes in United States and several countries of Europe. Damage caused by thrips, particulary Frankliniella occidentalis, was observed on niagara table grape crop in Limeira-SP, Brazil. During the blooming period, high thrips densities were observed feeding on pollen and small berries. The symptoms left were more visible after the development of the berries and were characterized by dark scars and suberized surface on berries, sometimes causing the berry to crack, and the seed to prolapse. The effect of insecticides thiacloprid or methiocarb, associated or not with the entomopathogenic fungus Metarhizium anisopliae were evaluated during the blooming period. For evaluation of thrips damage on fruits, the treatments were applied three additional times, 7, 14 and 21 days after the first application. The treatments were: a) M. anisopliae (strain 1037) 1x10(7) conidia/mL; b) thiacloprid 20mL/100L; c-d) methiocarb 100 and 150mL/100L; e) methiocarb 100mL/100L + M. anisopliae 1x10(7) conidia/mL. Only methiocarb, associated or not with the fungus, was effective in reducing thrips infestation, and no phytotoxic damage was observed. The efficiency of methiocarb 150mL/100L and the insecticide associated with the fungus for the control of the thrips population was 84.2 and 95.5%, respectively. In both cases, there was a reduction of approximately 70% in the number of berries with scars symptoms. For control of thrips on table grapes, chemical insecticides associated or not with M. anisopliae should be applied during the blooming period of the crop.

Dispersal ability modulates the strength of the latitudinal richness gradient in European beetles.

Aim A debate exists as to whether present-day diversity gradients are governed by current environmental conditions or by changes in environmental conditions through time. Recent studies have shown that latitudinal richness gradients might be partially caused by incomplete post-glacial recolonization of high-latitude regions; this leads to the prediction that less mobile taxa should have steeper gradients than more mobile taxa. The aim of this study is to test this prediction. Location Europe. Methods We first assessed whether spatial turnover in species composition is a good surrogate for dispersal ability by measuring the proportion of wingless species in 19 European beetle clades and relating this value to spatial turnover (beta sim) of the clade. We then linearly regressed beta sim values of 21 taxa against the slope of their respective diversity gradients. Results A strong relationship exists between the proportion of wingless species and beta sim, and beta sim was found to be a good predictor of latitudinal richness gradients. Main conclusions Results are consistent with the prediction that poor dispersers have steeper richness gradients than good dispersers, supporting the view that current beetle diversity gradients in Europe are affected by post-glacial dispersal lags.

Project Success through Effective Decisions: Case Studies on Project Goal Setting, Success Evaluation and Managerial Decision Making

The objective of the thesis is to structure and model the factors that contribute to and can be used in evaluating project success. The purpose of this thesis is to enhance the understanding of three research topics. The goal setting process, success evaluation and decision-making process are studied in the context of a project, business unitand its business environment. To achieve the objective three research questionsare posed. These are 1) how to set measurable project goals, 2) how to evaluateproject success and 3) how to affect project success with managerial decisions.The main theoretical contribution comes from deriving a synthesis of these research topics which have mostly been discussed apart from each other in prior research. The research strategy of the study has features from at least the constructive, nomothetical, and decision-oriented research approaches. This strategy guides the theoretical and empirical part of the study. Relevant concepts and a framework are composed on the basis of the prior research contributions within the problem area. A literature review is used to derive constructs of factors withinthe framework. They are related to project goal setting, success evaluation, and decision making. On the basis of this, the case study method is applied to complement the framework. The empirical data includes one product development program, three construction projects, as well as one organization development, hardware/software, and marketing project in their contexts. In two of the case studiesthe analytic hierarchy process is used to formulate a hierarchical model that returns a numerical evaluation of the degree of project success. It has its origin in the solution idea which in turn has its foundation in the notion of projectsuccess. The achieved results are condensed in the form of a process model thatintegrates project goal setting, success evaluation and decision making. The process of project goal setting is analysed as a part of an open system that includes a project, the business unit and its competitive environment. Four main constructs of factors are suggested. First, the project characteristics and requirements are clarified. The second and the third construct comprise the components of client/market segment attractiveness and sources of competitive advantage. Together they determine the competitive position of a business unit. Fourth, the relevant goals and the situation of a business unit are clarified to stress their contribution to the project goals. Empirical evidence is gained on the exploitation of increased knowledge and on the reaction to changes in the business environment during a project to ensure project success. The relevance of a successful project to a company or a business unit tends to increase the higher the reference level of project goals is set. However, normal performance or sometimes performance below this normal level is intentionally accepted. Success measures make project success quantifiable. There are result-oriented, process-oriented and resource-oriented success measures. The study also links result measurements to enablers that portray the key processes. The success measures can be classified into success domains determining the areas on which success is assessed. Empiricalevidence is gained on six success domains: strategy, project implementation, product, stakeholder relationships, learning situation and company functions. However, some project goals, like safety, can be assessed using success measures that belong to two success domains. For example a safety index is used for assessing occupational safety during a project, which is related to project implementation. Product safety requirements, in turn, are connected to the product characteristics and thus to the product-related success domain. Strategic success measures can be used to weave the project phases together. Empirical evidence on their static nature is gained. In order-oriented projects the project phases are oftencontractually divided into different suppliers or contractors. A project from the supplier's perspective can represent only a part of the ¿whole project¿ viewed from the client's perspective. Therefore static success measures are mostly used within the contractually agreed project scope and duration. Proof is also acquired on the dynamic use of operational success measures. They help to focus on the key issues during each project phase. Furthermore, it is shown that the original success domains and success measures, their weights and target values can change dynamically. New success measures can replace the old ones to correspond better with the emphasis of the particular project phase. This adjustment concentrates on the key decision milestones. As a conclusion, the study suggests a combination of static and dynamic success measures. Their linkage to an incentive system can make the project management proactive, enable fast feedback and enhancethe motivation of the personnel. It is argued that the sequence of effective decisions is closely linked to the dynamic control of project success. According to the used definition, effective decisions aim at adequate decision quality and decision implementation. The findings support that project managers construct and use a chain of key decision milestones to evaluate and affect success during aproject. These milestones can be seen as a part of the business processes. Different managers prioritise the key decision milestones to a varying degree. Divergent managerial perspectives, power, responsibilities and involvement during a project offer some explanation for this. Finally, the study introduces the use ofHard Gate and Soft Gate decision milestones. The managers may use the former milestones to provide decision support on result measurements and ad hoc critical conditions. In the latter milestones they may make intermediate success evaluation also on the basis of other types of success measures, like process and resource measures.

Evolution of the mating system in colonizing plants.

Colonization is likely to be more successful for species with an ability to self-fertilize and thus to establish new populations as single individuals. As a result, self-compatibility should be common among colonizing species. This idea, labelled 'Baker's law', has been influential in discussions of sexual-system and mating-system evolution. However, its generality has been questioned, because models of the evolution of dispersal and the mating system predict an association between high dispersal rates and outcrossing rather than selfing, and because of many apparent counter examples to the law. The contrasting predictions made by models invoking Baker's law versus those for the evolution of the mating system and dispersal urges a reassessment of how we should view both these traits. Here, I review the literature on the evolution of mating and dispersal in colonizing species, with a focus on conceptual issues. I argue for the importance of distinguishing between the selfing or outcrossing rate and a simple ability to self-fertilize, as well as for the need for a more nuanced consideration of dispersal. Colonizing species will be characterized by different phases in their life pattern: dispersal to new habitat, implying an ecological sieve on dispersal traits; establishment and a phase of growth following colonization, implying a sieve on reproductive traits; and a phase of demographic stasis at high density, during which new trait associations can evolve through local adaptation. This dynamic means that the sorting of mating-system and dispersal traits should change over time, making simple predictions difficult.

Blueberry pollination in southern Brazil and their influence on fruit quality

Blueberry (Vaccinium ashei) is a relatively new crop in cultivation under Southern Brazil conditions. The first collection introduced in the area was formed by rabbiteye cultivars which need insect pollinators and also pollinizers. The aim of this work was to observe if there were differences between pollinizers on fruit quality of the commercial cultivar and also to observe the most effective and frequent insect pollinators, under natural conditions. It was concluded that pollen source has an effect on quality of blueberry fruits. Bumblebees are the most efficient pollinators; however the species found in southern Brazil are different from the ones mentioned in the U.S. literature.

Data collection and criticality analysis for cost effective maintenance during the life cycle of a flue gas line

Työn tarkoituksena oli kerätä käyttövarmuustietoa savukaasulinjasta kahdelta suomalaiselta sellutehtaalta niiden käyttöönotosta aina tähän päivään asti. Käyttövarmuustieto koostuu luotettavuustiedoista sekä kunnossapitotiedoista. Kerätyn tiedon avulla on mahdollista kuvata tarkasti laitoksen käyttövarmuutta seuraavilla tunnusluvuilla: suunnittelemattomien häiriöiden lukumäärä ja korjausajat, laitteiden seisokkiaika, vikojen todennäköisyys ja korjaavan kunnossapidon kustannukset suhteessa savukaasulinjan korjaavan kunnossapidon kokonaiskustannuksiin. Käyttövarmuustiedon keräysmetodi on esitelty. Savukaasulinjan kriittisten laitteiden määrittelyyn käytetty metodi on yhdistelmä kyselytutkimuksesta ja muunnellusta vian vaikutus- ja kriittisyysanalyysistä. Laitteiden valitsemiskriteerit lopulliseen kriittisyysanalyysiin päätettiin käyttövarmuustietojen sekä kyselytutkimuksen perusteella. Kriittisten laitteiden määrittämisen tarkoitus on löytää savukaasulinjasta ne laitteet, joiden odottamaton vikaantuminen aiheuttaa vakavimmat seuraukset savukaasulinjan luotettavuuteen, tuotantoon, turvallisuuteen, päästöihin ja kustannuksiin. Tiedon avulla rajoitetut kunnossapidon resurssit voidaan suunnata oikein. Kriittisten laitteiden määrittämisen tuloksena todetaan, että kolme kriittisintä laitetta savukaasulinjassa ovat molemmille sellutehtaille yhteisesti: savukaasupuhaltimet, laahakuljettimet sekä ketjukuljettimet. Käyttövarmuustieto osoittaa, että laitteiden luotettavuus on tehdaskohtaista, mutta periaatteessa samat päälinjat voidaan nähdä suunnittelemattomien vikojen todennäköisyyttä esittävissä kuvissa. Kustannukset, jotka esitetään laitteen suunnittelemattomien kunnossapitokustannusten suhteena savukaasulinjan kokonaiskustannuksiin, noudattelevat hyvin pitkälle luotettavuuskäyrää, joka on laskettu laitteen seisokkiajan suhteena käyttötunteihin. Käyttövarmuustiedon keräys yhdistettynä kriittisten laitteiden määrittämiseen mahdollistavat ennakoivan kunnossapidon oikean kohdistamisen ja ajoittamisen laitteiston elinaikana siten, että luotettavuus- ja kustannustehokkuusvaatimukset saavutetaan.

Diversifying selection and color-biased dispersal in the asp viper.

BACKGROUND: The presence of intraspecific color polymorphism can have multiple impacts on the ecology of a species; as a consequence, particular color morphs may be strongly selected for in a given habitat type. For example, the asp viper (Vipera aspis) shows a high level of color polymorphism. A blotched morph (cryptic) is common throughout its range (central and western Europe), while a melanistic morph is frequently found in montane populations, presumably for thermoregulatory reasons. Besides, rare atypical uniformly colored individuals are known here and there. Nevertheless, we found in a restricted treeless area of the French Alps, a population containing a high proportion (>50%) of such specimens. The aim of the study is to bring insight into the presence and function of this color morph by (i) studying the genetic structure of these populations using nine microsatellite markers, and testing for (ii) a potential local diversifying selection and (iii) differences in dispersal capacity between blotched and non-blotched vipers. RESULTS: Our genetic analyses support the occurrence of local diversifying selection for the non-blotched phenotype. In addition, we found significant color-biased dispersal, blotched individuals dispersing more than atypical individuals. CONCLUSION: We hypothesize that, in this population, the non-blotched phenotype possess an advantage over the typical one, a phenomenon possibly due to a better background matching ability in a more open habitat. In addition, color-biased dispersal might be partly associated with the observed local diversifying selection, as it can affect the genetic structure of populations, and hence the distribution of color morphs.

Is high dose rate brachytherapy reliable and effective treatment for prostate cancer patients? A review of the literature.

The intrinsic physical and radiobiological characteristics of High Dose Rate Brachytherapy (HDR-BT) are well suited to the treatment of prostate cancer. HDR-BT was initially used as a boost to external beam brachytherapy, but has subsequently been employed as the sole treatment, which is termed HDR monotherapy. This review summarizes the clinical outcomes and toxicity results of the principal studies and discusses the radiobiological basis supporting its use.

Nuclear surface properties in relativistic effective field theory

We perform Hartree calculations of symmetric and asymmetric semi-infinite nuclear matter in the framework of relativistic models based on effective hadronic field theories as recently proposed in the literature. In addition to the conventional cubic and quartic scalar self-interactions, the extended models incorporate a quartic vector self-interaction, scalar-vector non-linearities and tensor couplings of the vector mesons. We investigate the implications of these terms on nuclear surface properties such as the surface energy coefficient, surface thickness, surface stiffness coefficient, neutron skin thickness and the spin-orbit force.

In vitro pollen germination and pollen viability in passion fruit (Passiflora spp.)

The use of Passiflora species for ornamental purposes has been recently developed, but little is known about pollen viability and the potential for crossing different species. The objective of this study was to evaluate the pollen viability of six Passiflora species collected from different physiological stages of development through in vitro germination and histochemical analysis using dyes. The pollen was collected in three stages (pre-anthesis, anthesis and post-anthesis). Three compositions of culture medium were used to evaluate the in vitro germination, and two dyes (2,3,5-triphenyltetrazolium chloride, or TTC, and Lugol's solution) were used for the histochemical analysis. The culture medium containing 0.03% Ca(NO3) 4H2O, 0.02% of Mg(SO4 ).7H2O, 0.01% of KNO3, 0,01% of H3BO3, 15% sucrose, and 0.8% agar, pH 7.0, showed a higher percentage of pollen grains germinated. Anthesis is the best time to collect pollen because it promotes high viability and germination. The Lugol's solution and TTC dye overestimated the viability of pollen, as all accessions showed high viability indices when compared with the results obtained in vitro.

Effective Electrodiffusion equation for non uniform nanochannels

We derive a one dimensional formulation of the Planck-Nernst-Poisson equation to describe the dynamics of of a symmetric binary electrolyte in channels whose section is of nanometric section and varies along the axial direction. The approach is in the spirit of the Fick-Jacobs di fusion equation and leads to a system of coupled equations for the partial densities which depends on the charge sitting at the walls in a non trivial fashion. We consider two kinds of non uniformities, those due to the spatial variation of charge distribution and those due to the shape variation of the pore and report one and three-dimensional solutions of the electrokinetic equations.

Disentangling the formation of contrasting tree line physiognomies combining model selection and Bayesian parameterization for simulation models.

Alpine tree-line ecotones are characterized by marked changes at small spatial scales that may result in a variety of physiognomies. A set of alternative individual-based models was tested with data from four contrasting Pinus uncinata ecotones in the central Spanish Pyrenees to reveal the minimal subset of processes required for tree-line formation. A Bayesian approach combined with Markov chain Monte Carlo methods was employed to obtain the posterior distribution of model parameters, allowing the use of model selection procedures. The main features of real tree lines emerged only in models considering nonlinear responses in individual rates of growth or mortality with respect to the altitudinal gradient. Variation in tree-line physiognomy reflected mainly changes in the relative importance of these nonlinear responses, while other processes, such as dispersal limitation and facilitation, played a secondary role. Different nonlinear responses also determined the presence or absence of krummholz, in agreement with recent findings highlighting a different response of diffuse and abrupt or krummholz tree lines to climate change. The method presented here can be widely applied in individual-based simulation models and will turn model selection and evaluation in this type of models into a more transparent, effective, and efficient exercise.