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.

Do parents and children know each other? A study about agreement on personality within families

Se estudiaron las relaciones entre autoevaluaciones y heteroevaluaciones de cuestionarios de personalidad en contextos familiares españoles. 336 matrimonios evaluaron la personalidad de uno de sus hijos. Al mismo tiempo, cada hijo se autoevaluaba. Se aplicaron los marcadores de Goldberg. En una segunda muestra, 120 estudiantes universitarios evaluaron la personalidad de ambos padres. Al mismo tiempo, ambos padres se autoevaluaron. Se aplicaron los marcadores de Goldberg y el NEO-PI-R. Se replica el grado de acuerdo encontrado en otras culturas, siendo las correlaciones entre autoevaluaciones y heteroevaluaciones de alrededor de 0.40, y con tamaños del efecto de las diferencias de medias no grandes. Se observa que: 1) los hijos son más acertados que los padres; 2) el grado de acuerdo es más alto para el NEO-PI-R que para los marcadores de Goldberg, especialmente en el factor de Apertura a la Experiencia; y 3) la variable sexo no afectó a los resultados. Se discuten las implicaciones y las limitaciones del presente estudio.

Study on Accuracy of Judgments by Chinese Fingerprint Examiners

The interpretation of fingerprint evidence depends on the judgments of fingerprint examiners. This study assessed the accuracy of different judgments made by fingerprint examiners following the Analysis, Comparison, and Evaluation (ACE) process. Each examiner was given five marks for analysis, comparison, and evaluation. We compared the experts' judgments against the ground truth and used an annotation platform to evaluate how Chinese fingerprint examiners document their comparisons during the identification process. The results showed that different examiners demonstrated different accuracy of judgments and different mechanisms to reach them.

Cigarette électronique : le point en 2015 [Electronic cigarette: what do we know in 2015?].

La cigarette électronique produit de la vapeur à inhaler contenant du propylène-glycol, des arômes et de la nicotine libérée rapidement. 6,7% de la population suisse, surtout des fumeurs, ont essayé la cigarette électronique et 0,1% l'utilise quotidiennement. Malgré l'incertitude due au bas niveau de preuves, la cigarette électronique pourrait être efficace pour cesser ou réduire le tabagisme. La sécurité de la cigarette électronique est démontrée à court terme mais pas à long terme ; sa toxicité semble très inférieure à celle du tabac. Les non-fumeurs et les jeunes utilisent peu la cigarette électronique qui ne semble pas les amener au tabagisme. Les mesures de santé publique recommandées sont la régulation du produit avec contrôle de la qualité ainsi que l'interdiction d'usage dans les lieux publics, de publicité et de vente aux mineurs. Electronic cigarettes are devices producing vapour containing propylene-glycol, flavourings and quickly delivered nicotine. 6.7% of the Swiss population, mainly smokers, experimented the electronic cigarette while 0.1% use it daily. Despite uncertainty due to the low level of evidence, electronic cigarettes might be effective for smoking cessation and reduction. The safety of electronic cigarettes is demonstrated at short-term but not at long-term; however its eventual toxicity is likely to be much lower than tobacco. Use of electronic cigarettes by non-smokers and youth who do not smoke is low and seems unlikely to lead them to tobacco use. Recommended public health measures include product regulation with quality control, ban in public places, prohibition of advertising and sales to minors.

Dépistage : faire ce que l'on sait [Screening: what do we know]

Identifier tôt une maladie pour intervenir précocement et améliorer son pronostic est un concept immédiatement compréhensible. Appliqué aux individus asymptomatiques, ce concept s'appelle un dépistage, et devient en fait un geste complexe. Ceci contraste avec le test de dépistage qui est en général simple. Le programme de dépistage est une intervention complexe dans les populations humaines, qui va du recrutement des personnes à dépister jusqu'à la prise en charge des malades. C'est le médecin, praticien hospitalier ou ambulatoire, praticien de premier recours ou spécialiste, qui est souvent en première ligne pour affronter cette complexité.

What young people with spina bifida want to know about sex and are not being told.

OBJECTIVE: The aim of this paper was to examine sexual knowledge, concerns and needs of youth with spina bifida (SB) to inform the medical community on ways to better support their sexual health. METHODS: As part of the Video Intervention/Prevention Assessment (VIA) - transitions, a prospective cohort study, 309 h of video data were collected from 14 participants (13-28 years old) with SB. Participants were loaned a video camcorder for 8-12 weeks to shoot visual narratives about any aspects of their lives. V/A visual narratives were analysed with grounded theory using NVivo. RESULTS: Out of 14 participants, 11 (six women) addressed issues surrounding romantic relationships and sexuality in their video clips. Analysis revealed shared concerns, questions and challenges regarding sexuality gathered under four main themes: romantic relationships, sexuality, fertility and parenthood, and need for more talk on sexuality. CONCLUSIONS: Youth with SB reported difficulties in finding answers to questions regarding their sexuality, romantic relationships and fertility. This study revealed a need for help from the medical community to inform and empower youth with SB in the area of sexual health. Through sexual and reproductive health education with patients and parents starting at an early age, medical providers can further encourage healthy emotional and physical development in adolescents transitioning into adulthood.

Cochlear implant: what the radiologist should know

Cochlear implant is the method of choice in the treatment of deep sensorineural hypoacusis, particularly in patients where conventional amplification devices do not imply noticeable clinical improvement. Imaging findings are crucial in the indication or contraindication for such surgical procedure. In the assessment of the temporal bone, radiologists should be familiar with relative or absolute contraindication factors, as well as with factors that might significantly complicate the implantation. Some criteria such as cochlear nerve aplasia, labyrinthine and/or cochlear aplasia are still considered as absolute contraindications, in spite of studies bringing such criteria into question. Cochlear dysplasias constitute relative contraindications, among them labyrinthitis ossificans is highlighted. Other alterations may be mentioned as complicating agents in the temporal bone assessment, namely, hypoplasia of the mastoid process, aberrant facial nerve, otomastoiditis, otosclerosis, dehiscent jugular bulb, enlarged endolymphatic duct and sac. The experienced radiologist assumes an important role in the evaluation of this condition.

Rendu-Osler-Weber syndrome: what radiologists should know. Literature review and three cases report

Rendu-Osler-Weber syndrome or hereditary hemorrhagic telangiectasia is an autosomal dominant vascular disease involving multiple systems whose main pathological change is the presence of abnormal arteriovenous communications. Most common symptoms include skin and mucosal telangiectasias, epistaxis, gastrointestinal, pulmonary and intracerebral bleeding. The key imaging finding is the presence of visceral arteriovenous malformations. The diagnosis is based on clinical criteria and can be confirmed by molecular biology techniques. Treatment includes measures for management of epistaxis, as well as surgical excision, radiotherapy and embolization of arteriovenous malformations, with emphasis on endovascular treatment. The present pictorial essay includes a report of three typical cases of this entity and a literature review.

Coronary anomalies: what the radiologist should know

AbstractCoronary anomalies comprise a diverse group of malformations, some of them asymptomatic with a benign course, and the others related to symptoms as chest pain and sudden death. Such anomalies may be classified as follows: 1) anomalies of origination and course; 2) anomalies of intrinsic coronary arterial anatomy; 3) anomalies of coronary termination. The origin and the proximal course of anomalous coronary arteries are the main prognostic factors, and interarterial course or a coronary artery is considered to be malignant due its association with increased risk of sudden death. Coronary computed tomography angiography has become the reference method for such an assessment as it detects not only anomalies in origination of these arteries, but also its course in relation to other mediastinal structures, which plays a relevant role in the definition of the therapeutic management. Finally, it is essential for radiologists to recognize and characterize such anomalies.

Public Management : Ganzheitliches Know-how zur Sicherstellung eines professionellen Verwaltungsmanagements

Dieses hochwertige Praxishandbuch ermöglicht Personen mit Führungs- und Managementfunktionen in den öffentlichen Verwaltungen des Bundes, der Kantone und der Gemeinden einen raschen Zugang zu allen wichtigen Führungsthemen und enthält praktische Anleitungen zur Bewältigung von Managementproblemen. Über 50 ausgewiesene Fachautoren mit professionellem beruflichen Hintergrund haben die vorliegenden Inhalte entsprechend den heutigen Anforderungen in der öffentlichen Verwaltung erstellt

Sustainability of palm oil production and opportunities for Finnish technology and know-how transfer

The global demand for palm oil is growing, thus prompting an increase in the global production particularly in Malaysia and Indonesia. Such increasing demand for palm oil is due to palm oil’s relatively cheap price and versatile advantage both in edible and non-edible applications. Along with the increasing demand for palm oil, particularly for the production of biofuel, is a heated debate on its sustainability. Ecological degradation, climate change and social issues are among the main sustainability issues pressing the whole palm oil industry today. Clean Development Mechanism (CDM) projects fulfilling the imperatives of the Kyoto Protocol are starting to gain momentum in Malaysia as reflected by the increasing registration of CDM projects in the palm oil mills. Most CDM projects in palm oil mills are on waste-to-energy, cocomposting, and methane recovery with the latter being the most common. The study on greenhouse gases (GHG) in the milling process points that biogas collection and energy utilisation has the greatest positive effect on GHG balance. On the other hand, empty fruit bunches (EFB) end-use as energy and high energy efficiency of the mill have the least effect on GHG balance of the mill. The range of direct GHG emissions from the palm oil mill is from 2.5 to 27 gCO2e/MJCPO, while the range of GHG emissions with all indirect and avoided emissions included is from -9 to 29 gCO2e/MJCPO. Comparing this GHG balance result with that of the EU RES-Directive suggests a further check on the values and emissions consideration of the latter.