Risk management committees (RMCs) are recognised as a key corporate governance mechanism for controlling corporate risk. We examine the performance of RMCs in Australia over the period 2007-2014. We ...identify three performance measures related to the function of the RMC: the probability of financial distress, growth options (market to book) and return on assets. We find that firms with an RMC perform better than other firms. We also find that firms with a separately constituted RMC perform better, relative to firms where the risk management activities are absorbed into an existing committee.
We provide descriptive evidence on enforcement actions (i.e., regulatory enquiries and their outcomes) following the adoption of International Financial Reporting Standards (IFRS) in New Zealand. The ...most common enquiries made by the Securities Commission of New Zealand post‐IFRS adoption period (2007–2010) relate to IFRS transition, financial statement presentation, financial instrument disclosures and related party disclosures. We conclude that the perspective of public enforcement (securities regulators) differs from that of private enforcement (auditors) and focuses on disclosure issues. We discuss the implications of this result for current International Accounting Standards Board (IASB) issues, such as materiality and professional judgment in principles‐based standards.
This paper makes a number of observations on the International Accounting Standards Board's Discussion Paper DP/2020/2 Business Combinations under Common Control. I address issues such as the choice ...of the controlling party or transferred business book, the principles and objectives of the Discussion Paper, and the relationship with related party disclosures.
The use and usefulness of equity accounting Bradbury, Michael E.; Mehnaz, Laura; Scott, Tom
Accounting and finance (Parkville),
April 2022, Letnik:
62, Številka:
S1
Journal Article
Recenzirano
In this study we examine the use and usefulness (value relevance) of equity accounting. Descriptive evidence shows there is a higher frequency of disclosure about the investment in associates than ...the share of profits. There is also more diversity in presentation and disclosure than reported by the International Accounting Standards Board. The characteristics of firms differ for those that report ancillary disclosures such as assets and liabilities of the associate. Firm characteristics also differ on whether associate income is reported before earnings before interest and taxes (EBIT). Last, we document that equity accounting is value relevant, but not when alternative accounting options (e.g., fair value or proportionate accounting) are available.
In this paper I describe how the New Zealand External Reporting Board (XRB) and its sub‐boards, the New Zealand Accounting Standards Board (NZASB) and the New Zealand Auditing and Assurance Standards ...Board (NZAuASB), use research in setting accounting and assurance standards. The XRB came into existence on 1 July 2011. In the early years (2011–2014) the focus was on getting the Accounting Standards Framework in place. Research into (financial statement) user‐needs became a major strategy in 2014 and continues to be a key component of the boards’ due process.
In this paper I describe how the New Zealand External Reporting Board uses research in setting accounting and assurance standards.
This article examines cost behaviour in a municipal (local government) setting and finds evidence of cost stickiness. We also find that costs are super-sticky as they increase even when revenues ...decrease. Municipals in New Zealand are required to produce forecasts, which allow us to investigate whether asymmetric cost behaviour is incorporated into forecasts. Forecast cost behaviour is found to be statistically indistinguishable from actual behaviour. In our tests, we control for asset intensity, employee intensity, expected demand, operating slack and past cost structure. The finding that the asymmetric relation between costs and revenues is incorporated into managerial forecasts suggests that cost stickiness is understood by managers rather than being merely a mechanistic outcome of cost structure.
This study examines the relationship between ‘best practice’ risk management committee and firm performance in an environment where the existence and composition of risk management committees are ...purely voluntary. Based on a sample of 368 Australian listed firms over 2007–2014, we find firms that voluntarily adopted the ‘best practice’ risk management committee perform better than other firms. In addition, our result shows that among the four ‘best practice’ risk management committee characteristics (independence of risk management committee chairman, independence of risk management committee members, risk management committee size and risk management committee human capital), risk management committee human capital plays important role in increasing firm performance.
Auditor's responses to changes in risk Bradbury, Michael E.; Scott, Tom
International journal of auditing,
October 2022, Letnik:
26, Številka:
4
Journal Article
Recenzirano
Odprti dostop
This paper examines whether auditors plan engagements to be the same‐as‐last‐year (SALY) and if they respond to changes in risk both before and during audit engagements by varying engagements from ...planned. These are important questions considering audit standards require the assessment of risk and general concerns about audit quality and fee pressure. We provide new insights using a proprietary database containing both quoted and reported audit hours and fees. We find that the basis quoted audit hours and billing rates (i.e., audit plans) are prepared on is not SALY. However, as there is little difference for audit hours, we conclude that they are based‐on‐last‐year (BOLY). Changes in audit characteristics are associated with the variance between quoted and reported audit hours and billing rates. In addition, auditors with higher reputational risk quote more audit hours and have a higher quoted average billing rate and further increase them from quoted.
Financial statement preparers claim that the ‘excess’ volatility of comprehensive income (CI) confuses financial statement users. We examine the volatility and risk relevance of CI, relative to net ...income, for a sample of 92 New Zealand nonfinancial firms for the period 2003–2010. The results show that CI is more volatile than net income. However, the volatility of CI incremental to net income is not related to market risk. Furthermore, the incremental volatility of CI does not modify the pricing of net income. These results hold when asset revaluations are excluded from other CI.
