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THE PUBLIC POLICY IMPLICATIONS OF AUDIT REGULATION: THREE STUDIES RELATED TO THE PASSAGE OF THE SARBANES-OXLEY ACT OF 2002
Title
THE PUBLIC POLICY IMPLICATIONS OF AUDIT REGULATION: THREE STUDIES RELATED TO THE PASSAGE OF THE SARBANES-OXLEY ACT OF 2002.
Creator
Thornburg, Steven, Roberts, Robin, University of Central Florida
Abstract / Description
This dissertation documents and evaluates certain financial and non-financial strategies used by the public accounting profession to influence audit regulation during the policy formation period of the Sarbanes-Oxley Act of 2002 (SOX). The dissertation is comprised of three separate, but related studies. Each study uses prior research in accounting and related disciplines to investigate significant aspects the profession's strategies. The first study evaluates the rationality and...
Show moreThis dissertation documents and evaluates certain financial and non-financial strategies used by the public accounting profession to influence audit regulation during the policy formation period of the Sarbanes-Oxley Act of 2002 (SOX). The dissertation is comprised of three separate, but related studies. Each study uses prior research in accounting and related disciplines to investigate significant aspects the profession's strategies. The first study evaluates the rationality and effectiveness of political action committee (PAC) contributions paid by the accounting profession to members of Congress. The study finds that the accounting profession rationally allocated more PAC contributions to top congressional leaders and to members of committees having jurisdiction over SOX. The study also finds that the accounting profession allocated more PAC contributions to legislators with a history of pro-business roll call voting behavior and to candidates in close electoral races. This evidence suggests that the profession is motivated to contribute cash to legislators in order to gain access to lobby and to influence the ideological composition of the legislature. A voting model also finds a positive relationship in two instances between PAC contributions and roll call voting favorable to the economic interests of the profession in the House of Representatives. The second study evaluates the effect of these PAC contributions on Committee members' frequency and mode of speech during public hearings related to SOX. Using computerized computational linguistics, the study finds a significant positive association between PAC contributions and speech performance. The study also finds differential uses of modals and certain verbs between legislators depending upon party affiliation. The third paper explores the rhetoric of the accounting profession's public interest ideal and the profession's motivation to invoke public interest arguments in various contexts. I approach my analysis from three different perspectives. The first perspective analyzes the public interest language of the profession as well-intentioned rhetoric. The second approach eschews any well-intentioned motivations on behalf of the profession and casts public interest arguments as propaganda cloaking self-interested action. The third approach deconstructs the public interest ideal as myth, embodying a constellation of elements including cultural values, political doctrine and contingent interests.
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Date Issued
2005
Identifier
CFE0000540, ucf:46425
Format
Document (PDF)
PURL
http://purl.flvc.org/ucf/fd/CFE0000540
Conditions Associated with Increased Risk of Fraud: A Model for Publicly Traded Restaurant Companies
Title
Conditions Associated with Increased Risk of Fraud: A Model for Publicly Traded Restaurant Companies.
Creator
Yost, Elizabeth, Croes, Robertico, Severt, Denver, Robinson, Edward, Murphy, Kevin, Semrad, Kelly, Jackson, Leonard, University of Central Florida
Abstract / Description
The central focus of this dissertation study is to understand the impact of the Sarbanes-Oxley Act and the factors that contribute to increased risk of fraud in order to determine why fraud may occur despite the imposed regulation of the Sarbanes-Oxley Act. The main premise of the study tests the application of the fraud triangle framework constructs to publicly traded restaurant companies during the time period of 2002-2014, using proxy variables defined through literature. Essentially, the...
Show moreThe central focus of this dissertation study is to understand the impact of the Sarbanes-Oxley Act and the factors that contribute to increased risk of fraud in order to determine why fraud may occur despite the imposed regulation of the Sarbanes-Oxley Act. The main premise of the study tests the application of the fraud triangle framework constructs to publicly traded restaurant companies during the time period of 2002-2014, using proxy variables defined through literature. Essentially, the study seeks to identify the factors that may provide the optimal criteria to engage in fraudulent or opportunistic behavior. The fraud triangle theoretical framework is comprised of the constructs of pressure, opportunity and rationalization, and has mostly been utilized by external auditors to assess the fraud risk of various companies. It has never been applied to the restaurant industry, and the proxy variables selected have never before been tested in a comprehensive model. Thus, a major contribution of this study may enable executive managers to assess the fraud triangle conditions according to the model in order to afford conclusions regarding increased risk of fraud. The study first hypothesized that the Sarbanes-Oxley Act has had a significant impact on detecting increased risk of fraud for publicly traded restaurant companies. Additionally, the study controlled for and tested the proxy variables of the fraud triangle constructs to determine if any of the variables had a significant impact on detecting increased risk of fraud for publicly traded restaurant companies. The variables tested included company size, debt, employee turnover, organizational structure, international sales growth, executive stock compensation, return on assets, the Recession, and macro-economic factors of interest, inflation, and unemployment rates. The research study adopted an exploratory research design using the case of publicly traded United States restaurant companies in order to provide a better understanding of the characteristics that may contribute to increased fraud risk. The study assumed a binary distribution of the dependent variable, increased fraud risk, measured by the incidence of a reported internal control deficiency over the testable time period. Specifically, the study employed a probit model to estimate the probability that an entity or company will be at an increased risk of fraud based on the independent variables that support and are linked to the fraud triangle framework. Additionally, the model assumes equal weight to the variables of the fraud triangle framework. Through use of the probit model, the major findings of the study were as follows: First, the Sarbanes-Oxley Act does have a significant impact on highlighting areas of increased fraud risk for publicly traded restaurant companies. Second, for the total population of restaurant companies, only the Recession, interest rates, inflation rates and unemployment rates are significant indicators of increased fraud risk. None of the internal variables were significant. However, once the data was segmented by type of restaurant, the results revealed significance of both internal and external variables. These results imply a couple of theoretical notions: first, that the Sarbanes-Oxley Act is an effective means for detecting risk of fraud for publicly traded restaurant companies when considering variables that support the fraud triangle; second, that the fraud triangle is contextual when applied to the restaurant industry because only the variables that are outside of managements control were significant. Finally, from a managerial perspective, the study provides evidence that macro-economic conditions that might affect consumer demand may increase the risk of fraud for publicly traded restaurant companies.
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Date Issued
2015
Identifier
CFE0005745, ucf:50101
Format
Document (PDF)
PURL
http://purl.flvc.org/ucf/fd/CFE0005745
THREE STUDIES INVESTIGATING THE LEGAL LIABILITY IMPLICATIONS OF THE SARBANES-OXLEY ACT OF 2002
Title
THREE STUDIES INVESTIGATING THE LEGAL LIABILITY IMPLICATIONS OF THE SARBANES-OXLEY ACT OF 2002.
Creator
Phillips, Jillian, Arnold, Vicky, University of Central Florida
Abstract / Description
This dissertation examines the litigation and legal liability exposure of auditors related to the Sarbanes-Oxley Act of 2002 (SOX). Three separate studies were conducted to examine how auditorÂÂ's litigation exposure is evaluated by potential litigants (lawyers), and how auditor liability is evaluated by jurors, following the bankruptcy of a client. The first study examines whether the auditorÂÂ's SOX Section 404 reporting decisions influence...
Show moreThis dissertation examines the litigation and legal liability exposure of auditors related to the Sarbanes-Oxley Act of 2002 (SOX). Three separate studies were conducted to examine how auditorÂÂ's litigation exposure is evaluated by potential litigants (lawyers), and how auditor liability is evaluated by jurors, following the bankruptcy of a client. The first study examines whether the auditorÂÂ's SOX Section 404 reporting decisions influence lawyersÂÂ' assessments of their litigation exposure. The second study investigates whether voluntary disclosures of significant deficiencies in internal controls within the SOX Section 404 report, and the subjectivity of the internal control judgments made by the auditor, influence jurorsÂÂ' perceptions of auditor liability for negligence. The third study examines how the requirements of SOX Section 302 related to audit committee independence and audit committee expertise influence jurorsÂÂ' perceptions of auditor independence and auditor liability for negligence. Overall, these three studies provide insights on how different provisions of SOX, specifically the Section 404 report and audit committee requirements, influence the likelihood that auditors will be sued and the likelihood that they will be held liable by a jury.
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Date Issued
2010
Identifier
CFE0003340, ucf:48480
Format
Document (PDF)
PURL
http://purl.flvc.org/ucf/fd/CFE0003340
THE ACCOUNTING FRAUD @ WORLDCOM: THE CAUSES, THE CHARACTERISTICS, THE CONSEQUENCES, AND THE LESSONS LEARNED
Title
THE ACCOUNTING FRAUD @ WORLDCOM: THE CAUSES, THE CHARACTERISTICS, THE CONSEQUENCES, AND THE LESSONS LEARNED.
Creator
Ashraf, Javiriyah, Roush, Pamela, University of Central Florida
Abstract / Description
The economic prosperity of the late 1990s was characterized by a perceived expansive growth that increased the expectations of a company's performance. WorldCom, a telecommunications company, was a victim of these expectations that led to the evolution of a fraud designed to deceive the public until the economic outlook improved. Through understanding what led to the fraud, how the fraud grew, and what its effects were, lessons can be derived to gain a better understanding of the reasons...
Show moreThe economic prosperity of the late 1990s was characterized by a perceived expansive growth that increased the expectations of a company's performance. WorldCom, a telecommunications company, was a victim of these expectations that led to the evolution of a fraud designed to deceive the public until the economic outlook improved. Through understanding what led to the fraud, how the fraud grew, and what its effects were, lessons can be derived to gain a better understanding of the reasons behind a fraud and to prevent future frauds from occurring or growing as big as the WorldCom fraud did.
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Date Issued
2011
Identifier
CFH0003811, ucf:44772
Format
Document (PDF)
PURL
http://purl.flvc.org/ucf/fd/CFH0003811
Essays on the Effect of Excess Compensation and Governance Changes on Firm Value
Title
Essays on the Effect of Excess Compensation and Governance Changes on Firm Value.
Creator
Dah, Mustafa, Frye, Melissa, Whyte, Ann, Gatchev, Vladimir, Schnitzlein, Charles, Campbell, Terry, University of Central Florida
Abstract / Description
This dissertation consists of three essays on the effect of excess compensation and corporate governance changes on the firm's performance. The first paper utilizes a cost minimization stochastic frontier approach to investigate the efficiency of director total compensation. Our findings suggest that board members are over compensated. We show that, on average, the director actual compensation level is above the efficient compensation level by around 63%. Our results suggest that an increase...
Show moreThis dissertation consists of three essays on the effect of excess compensation and corporate governance changes on the firm's performance. The first paper utilizes a cost minimization stochastic frontier approach to investigate the efficiency of director total compensation. Our findings suggest that board members are over compensated. We show that, on average, the director actual compensation level is above the efficient compensation level by around 63%. Our results suggest that an increase in director excess compensation decreases the likelihood of CEO turnover, reduces the turnover-performance sensitivity, and increases managerial entrenchment. Thus, the surplus in director compensation is directly associated with managerial job security and entrenchment. Furthermore, although director excess compensation is not significantly inversely related to the firm's future performance, it has an indirect negative effect on future performance through its impact on the entrenchment-performance relationship. Therefore, this essay proposes that the overcompensation of directors is directly associated with a board culture predicated by mutual back-scratching and collusion between the CEO and the board members. The second essay tests the effect of an exogenous shock, the Sarbanes-Oxley Act (SOX) of 2002, on the structure of corporate boards and their efficiency as a monitoring mechanism. The results suggest an increase in the participation of independent directors at the expense of insiders. Consequently, we investigate the implications of board composition changes on CEO turnover and firm value. We document a noticeable reduction in CEO turnover in the post-SOX period. We also demonstrate that, after SOX, a board dominated by independent directors is less likely to remove a CEO due to poor performance. Finally, we highlight a negative association between the change in board composition and firm value. We propose that our findings are predicated on an off equilibrium result whereby firms were forced to modify their endogenously chosen board composition. Therefore, contrary to the legislators' objectives, we suggest that the change in board structure brought about inefficient monitoring and promoted an unfavorable tradeoff between independent directors and insiders. The third essay examines the relationship between the firm's governance structure and its value during different economic conditions. We show that both relative industry turnover and CEO entrenchment increase during economic downturns. We also find that relative industry turnover and managerial entrenchment have opposite impacts on the value of the firm throughout the recessionary period. While industry turnover leads to an appreciation in firm value, managerial entrenchment reduces shareholders' wealth. The negative impact of managerial entrenchment on firm value, however, outweighs the positive impact of industry turnover. Accordingly, we propose that a recession provides managers with a good opportunity to camouflage their behavior and extract more private benefits and, thus, blame the poor performance on bad economic conditions.
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Date Issued
2012
Identifier
CFE0004202, ucf:49029
Format
Document (PDF)
PURL
http://purl.flvc.org/ucf/fd/CFE0004202