The work reflects on the transformations, continuities, and ruptures that the intervention of the Argentinean State has undergone in infrastructure sectors. The provision and operation of railway, ...water and sanitation services, and the production of hydrocarbons through state-owned enterprises were justified based on various aspects. These aspects include public health concerns, the need for critical infrastructure construction, and lack of private investment, the necessity to control the production of strategic goods, control of monopolies, income redistribution, and stimulation of industrialization, among others. Building upon this contextualization, the work reflects on a set of contributions made by state-owned enterprises to the economic and social development of the country. This qualitative study systematizes a broad range of documentary sources, including specialized documents from companies and public organizations, regulations, and statistics.
El trabajo reflexiona en las transformaciones, continuidades y rupturas que ha tenido la intervención del Estado argentino en sectores de infraestructura. La provisión y explotación del servicio de ferrocarril, agua y saneamiento y la producción de hidrocarburos mediante empresas públicas se justificó en aspectos variados. Entre los que se incluyen aspectos de salud pública, necesidades de construcción de infraestructuras críticas, falta de inversión privada, necesidad de control de la producción de bienes estratégicos, el control de los monopolios; la redistribución del ingreso y la estimulación de la industrialización, etc. A partir de dicha contextualización se reflexiona en torno a un conjunto de aportes que han realizado las empresas públicas al desarrollo económico y social del país. Se trata de un trabajo cualitativo que sistematiza un conjunto amplio de fuentes documentales que incluyen documentos especializados de las empresas y organismos públicos, normativas, y estadísticas.
The Sarbanes-Oxley Act significantly expanded the responsibilities of auditors, management, and corporate governance actors such as the audit committee and the board. This interview-based research ...extends an earlier study conducted in 1999-2000 by examining auditors' experiences in working with corporate governance actors in the post-Sarbanes-Oxley era. Thirty audit managers and partners from three of the Big 4 firms participated in the study. In line with regulatory reforms and a monitoring perspective, auditors indicate that the corporate governance environment has significantly improved in recent years with audit committees that are substantially more active and diligent and possessing greater expertise and power to fulfill their responsibilities. The results indicate that in many instances audit committees play a passive role in helping to resolve contentious financial reporting issues with management, with respondents indicating that the auditor and management often try to resolve issues before they come to the attention of the audit committee.
SUMMARY
Increased audit regulation, coupled with reports of frequent mergers among smaller audit firms, creates a dynamic environment in which to assess changes in the U.S. audit market. We examine ...the audit quality consequences of audit firm mergers between small audit firms that audit public clients, a topic about which little is known. Using a sample of small audit firms each involved in a single merger during 2004–2016, we find consistent evidence that post-merger audit quality decreases when PCAOB-identified audit deficiencies and audit fees are used as proxies for audit quality. In addition, we find weak evidence of lower post-merger audit quality when examining discretionary accruals, and no conclusive post-merger audit quality effect for the probability of misstatements. Overall, our findings provide evidence regarding the audit quality consequences of some small audit firm mergers in the United States.
Data Availability: Data are available from the public sources cited in the text.
JEL Classifications: M42.
SUMMARY This paper examines the effect of the quality of a firm's internal control over financial reporting (ICFR) on the quality of corporate M&A decisions. We use material weaknesses in internal ...control (ICMWs) from SOX 404 audits as a proxy for the quality of a firm's ICFR and use future goodwill impairment to proxy for the quality of managers' M&A decisions. We find that goodwill recognized from acquisitions in years concurrent with ICMWs has a greater rate of impairment in subsequent years than goodwill recognized from acquisitions in years without ICMWs, thereby establishing a link between ICMW and goodwill impairment. We further show that disclosure and remediation of ICMWs appear to improve valuations of subsequent acquisitions. Our study contributes to the literature on internal controls by documenting unanticipated benefits of SOX 404 audits on managerial performance, and to the goodwill literature by identifying ICMWs as a determinant of goodwill impairment.
SYNOPSIS
COSO has developed frameworks for firms to improve their internal controls with the objective of reducing fraud and managing enterprise risk. The frameworks are widely used by firms and ...their auditors to comply with the internal control requirements of the Sarbanes-Oxley Act (SOX). We investigate two issues involving the most recent COSO internal control framework (COSO 2013): the determinants of a firm's decision to adopt it in a timely manner; and the consequences of adoption on internal controls. In our sample, firms that report internal control problems under SOX 404, especially firms with information technology (IT) problems, are likely to be late adopters. Regarding the consequences of adoption, for late adopters, we find that firms using the revised COSO framework have a lower probability of reporting weaknesses in IT-related controls. We also find evidence that COSO 2013 adoption is helpful in remediating internal control weaknesses.
Data Availability: Data are available from the public sources cited in the text.
ABSTRACT
Firm life‐cycle stage reflects a firm's current strategic direction toward exploration independent of age or size. We provide evidence that young life‐cycle firms are particularly vulnerable ...to negative innovation consequences from financial regulation but do not appear to experience any compensating financial reporting quality (FRQ) benefits. Using a generalized difference‐in‐differences design around Sarbanes Oxley Act of 2002 (SOX), we document a significant reduction in both research and development (R&D) spending and innovation outputs for young life‐cycle stage firms after regulation. Declines in innovation manifest both from the diversion of scarce resources and from the imposition of an organizational culture mismatched to the pursuit of explorative innovation, resulting in a less generalizable and less diversified patent portfolio. However, we find no evidence that improvements to FRQ materialize to offset these costs. Event study analyses suggest that this negative impact was expected by market participants, and postregulation returns confirm this expectation.
SUMMARY
The number of days required to complete financial statement audits (i.e., audit delay) increased significantly with the implementation of Section 404 of the Sarbanes-Oxley Act (SOX, U.S. ...House of Representatives 2002). As firms' in-house experts on internal control, Internal Audit Functions (IAFs) can substantially affect financial reporting processes and, thus, audit delay. Internal auditors can help management maintain strong internal controls and assist external auditors with financial statement audits. Accordingly, we investigate whether IAF quality and the IAF's contribution to financial statement audits affect audit delay in a sample of 292 firm-year observations drawn from the pre-SOX 404 period.
Using survey data from the Institute of Internal Auditors (IIA), we develop a comprehensive proxy for IAF quality; we measure different aspects of IAF quality (e.g., competence, objectivity, fieldwork rigor); and we measure the nature of the IAF's contribution to financial statement audits (independently performed work and direct assistance). Results indicate audit delay is decreasing in IAF quality, and this decrease is driven by IAF competence and fieldwork quality. Delay is four days shorter when IAFs contribute to external audits by independently performing relevant work. High-quality IAFs contribute to financial statement audits by independently performing relevant work, while low-quality IAFs provide direct assistance.
Ethics is important in the Information Systems field as illustrated by the direct effect of the Sarbanes-Oxley Act on the work of IS professionals. There is a substantial literature on ethical issues ...surrounding computing and information technology in the contemporary world, but much of this work is not published nor widely cited in the mainstream IS literature. The purpose of this paper is to offer one contribution to an increased emphasis on ethics in the IS field. The distinctive contribution is a focus on Habermas's discourse ethics. After outlining some traditional theories of ethics and morality, the literature on IS and ethics is reviewed, and then the paper details the development of discourse ethics. Discourse ethics is different from other approaches to ethics as it is grounded in actual debates between those affected by decisions and proposals. Recognizing that the theory could be considered rather abstract, the paper discusses the need to pragmatize discourse ethics for the IS field through, for example, the use of existing techniques such as soft systems methodology. In addition, the practical potential of the theory is illustrated through a discussion of its application to specific IS topic areas including Web 2.0, open source software, the digital divide, and the UK biometric identity card scheme. The final section summarizes ways in which the paper could be used in IS research, teaching, and practice.
In 2001, the US moved to regulate internal control reporting by management and auditors. While some jurisdictions have followed the lead of the US, many others have not. An important question, ...therefore, is the relevance of internal control to stakeholders. The more specific issue of the benefits of US-style regulation of internal control reporting is also topical. We review studies on the determinants of internal control quality and its economic consequences for stakeholders including investors, creditors, managers, auditors and financial analysts. We extend previous reviews by focusing on US studies published since 2013 as well as all non-US studies investigating IC quality including countries regulating IC disclosure as well as unregulated settings and both developed and developing economies. In doing so, we identify research questions where evidence remains mixed and new directions in which there are research opportunities.
Three main insights arise from our analysis. First, evidence on the economic consequences of internal control quality suggests that the quality of internal control can have a significant effect on decision making by users of financial information. Second, the results of research on the empirical association between ownership structure, certain board characteristics and internal control quality is generally mixed. Empirical evidence concerning the association between audit committee characteristics and internal control quality generally supports a positive and significant association. Finally, while studies in non-US jurisdictions are increasing, opportunities remain to explore the determinants and consequences of internal control in other jurisdictions. Our review provides evidence for policy makers of whether there are benefits from requiring management and auditors to report on internal control over financial reporting.
SYNOPSIS
This study examines whether companies' decisions to dismiss or substantially reduce reliance on their audit firms as tax-service providers in the wake of the Sarbanes-Oxley Act affect tax ...avoidance. We hypothesize that decoupling audit and tax-service provision and subsequently obtaining tax services from a new provider can result in decreased tax avoidance because the new provider lacks familiarity with a client's existing tax planning or does not have the expertise to generate new tax-avoidance opportunities. Consistent with our hypothesis, our results reveal that sample companies' book (cash) effective tax rates increased by economically significant 1.36 (1.63) percentage points in the year after terminating or substantially decreasing purchases of tax services from their audit firms, and discretionary permanent book-tax differences declined significantly. We find that decreases in tax avoidance were larger for companies whose outgoing tax-service providers were tax-specific industry experts.
