On April 3, 2020, the Office of the Chief Accountant (OCA) issued a statement[1] regarding the importance of high-quality financial reporting in light of the significant impacts of COVID-19.[2] At that time, in addition to facing a number
financial statements
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Do Investors Care Who Led the Audit?
Following a lengthy and contentious standard setting process, the Public Company Accounting Oversight Board (PCAOB), the U.S. regulator overseeing the auditors of publicly traded companies, implemented Rule 3211 in 2017. This rule requires audit firms to disclose the name of …
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Does Context Matter in Interpreting Financial Information?
The Management Discussion and Analysis (MD&A) section of annual reports is widely credited with providing valuable information about public companies. Yet largely unexplored is the extent to which narrative context influences and complements the numerical data presented in that section. …
Latham & Watkins Discusses the Proposed ESG Auditing Rule You Know Nothing About
On June 6, 2023, the Public Company Accounting Oversight Board (PCAOB), the nonprofit corporation established by Congress to oversee the audit of public companies, proposed new auditing standards designed to further its “investor-protection mandate.”[1]These standards, if adopted, would …
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How Financial Statement Fraud Affects People’s Desire to Become Accountants
Financial statement fraud has many negative effects, including a reduction in people’s willingness to participate in the stock market. It may also cast accountants in a negative light because they prepare and audit financial statements – sometimes even fraudulent ones. …
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Why Passive Investors Care About Audit Quality
In recent decades, the rise of index funds (or passive investors), has caused heated debates over the efficacy of their stewardship role in corporate governance. Passive owners cannot influence the governance of a firm by selling its stock because the …
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How Accounting Comparability Between Bidders and Targets Affects Deal Outcomes
How comparable are the financial statements of M&A bidders and acquirers in the same industry? And does financial statement comparability affect the outcome of a deal? In a recent paper, available here, we investigate these questions, using a sample …
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Revisiting the Audit Expectations Gap
As the regulation of public company audits evolves, questions persist over whether there is still a gap between the public and auditors over expectations for the responsibilities of auditors – what we call the expectations gap. In a recent study, …
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Corporate Culture and Financial Reporting Quality
Corporate culture is an important determinant of companies’ behavior and success and, as a result, has drawn much attention, particularly from the business press. While some companies have received praise for their corporate cultures, others such as Wells Fargo, Valeant …
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Do Public Financial Statements Influence Venture Capital and Private Equity Financing?
Venture capital and private equity funds are important equity investors in private companies (Hand 2005; Stromberg 2008; Kaplan and Stromberg 2009), and their investments are characterized by an extensive search process that imposes significant upfront costs for the funds (Chen …
SEC Chief Accountant on Importance of High-Quality Financial Reporting in Light of Covid-19
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SEC Commissioner Jackson Comments on Proposed Rule on Financial Disclosures for Mergers and Acquisitions
Let me begin by thanking the staff in the Division of Corporation Finance, including Division Director Bill Hinman, for their hard work in developing the May 3 release and for helpful briefings throughout this process.
The May 3 proposal governs …
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SEC Chief Accountant Talks Financial Reporting and Innovation
Thank you, Robert [Hodgkinson] for the kind introduction. Thank you, also, to the Institute of Chartered Accountants in England and Wales (“ICAEW”) for sponsoring this event. I am delighted to be in London and with you this afternoon. London continues …
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Takeover Threats, Job Security Concerns, and Earnings Management
The market for corporate control is widely regarded, at least theoretically, as an important corporate governance mechanism for aligning the interests of managers and shareholders of a firm. A healthy takeover market can also help countries attract domestic and foreign …