The mounting attention given to audit committees following a series of corporate financial reporting failures has resulted in numerous provisions within Sarbanes Oxley Act (SOX hereafter) of 2002. The SOX addresses aspects of the audit committee, including its authority and composition characteristics, but the requirement for minimum meeting frequency for the audit committee member was absent from the final SOX provision despite the recommendations of regulators. Since audit committee activity, or degree of audit committee diligence, is determined by the audit committee itself, we investigate various firm-level and governance attributes that likely influence audit committees choice to meet more often than anticipated. After analyzing a sample of 2,715 firm-year observations spanning fiscal years 1998-2003, we find that audit committee diligence is positively associated with audit committee attributes such as financial expertise, but negatively association with audit committee tenure, suggesting that efficiency gains are enjoyed by audit committees as they become more familiar with firm-specific reporting issues. We also document positive associations between audit committee diligence and both governance and agency cost variables. Finally, we document a significant increase in audit committee diligence in the years following the implementation of the SOX 2002 provisions.

Although sustainability reporting has shown significant advances in the past decade, research has not kept pace with these developments. Very few studies looked how stakeholders perceive the importance of sustainability reporting and disclosure. This paper explored how users and preparers rated the importance of performance indicators suggested by the Global Reporting Initiative (GRI) Guidelines regarding the environmental, economic and social impacts of a company. It provides evidence on which GRI performance indicators are perceived as relevant and important by both preparers and users. We found that users and preparers generally agree with the relevance and importance of all the performance indicators included in the GRI G3 guidelines. Despite a few areas of statistical disagreement, the overall perceptions were similar between users versus preparers regarding the importance of the GRI indicators. The convergence of the usefulness of GRI guidelines as viewed by the two conflicting stakeholders of users and preparers suggests that the stage may be ready for rule-making bodies and governmental agencies to further promote sustainability reporting by mandating uniform standards in reporting and disclosure.

<p>The current financial crisis has created serious repercussions for accounting education. Public universities have lost funding and initiated huge budget cuts. These drastic cutbacks have resulted in the losses of courses, enrollment, and faculty. These losses will translate into inaccessibility of education will reduce the future accounting work force. To recover from the recession, well trained accountants are critical to provide the financial fundamentals for businesses. While most of us understand that an investment in accounting education is an investment in successful business, effective practices for recruitment are needed in a time of scarce resources. In this paper, we would like to focus on the difficulties occurring in accounting education, which will negatively affect business. Furthermore, we would strongly encourage companies to continuously reach out to potential employees and support accounting education. Some suggestions are provided for cost saving avenues to reduce recruiting costs and develop high quality accounting professionals.</p>

PurposeManagers of defined-benefit (DB) firms have considerable discretion in deriving pension costs and flexibility in cash contributions to pension plans. Pension accruals occur when cash contributions differ from pension costs. The manipulable nature of pension costs and cash contributions allows managers of DB firms to manipulate pension accruals to achieve their desired earnings. We study whether DB firms with earnings management attributes (referred to as suspect DB firms) used more discretionary pension accruals (DPA) than non-suspect DB firms, especially after the passage of Sarbanes-Oxley (SOX).Design/methodology/approachThe authors develop an aggregate measure of DPA to capture overall earnings management in pension accounting. They then employ a multivariate regression model to study whether the suspect DB firms engage in more DPA than non-suspect firms and to assess the impact of SOX on DPA for all DB firms and for suspect DB firms.FindingsThe authors find evidence that suspect firms inflate DPA to achieve their earnings goals and also that all DB firms and the suspect firms use more DPA in the post-SOX era compared to the pre-SOX period. In contrast, they observe no significant difference in real activities earnings management (REM) between suspect and non-suspect firms. In addition, neither the entire sample of DB firms nor the suspect firms display a significant change in REM after SOX.Research limitations/implicationsThe samples in the study are limited to firms with defined pension plans; thus, the findings cannot be generalized to all firms. In addition, as in other empirical studies relying on models to estimate earnings management proxies, this study inherits estimation errors from Jones and Roychowdhury's models. Consequently, the impact of these estimation errors cannot be ruled out.Practical implicationsThe empirical findings of the study appear that instead of deterring DB firms from engaging in pension accruals earnings management, enacting the stringent anti-fraud SOX prompts these firms to rely more on accrual-based discretionary pension rather than switch to real activities manipulation to manage earnings.Originality/valueWhile many prior studies focus on the impact of managing individual pension assumptions on earnings, the authors study overall earnings management in pension accounting by developing a model to derive an aggregate measure of pension earnings management.

Purpose This study aims to examine the association between corporate diversification and accrual quality and test whether the diversification effect hypothesis, which predicts that measurement errors in accruals ultimately decline as firms become more diversified, or the measurement error hypothesis, which predicts that these errors increase, prevails. Design/methodology/approach This study modifies an existing empirical framework that uses the downward bias inherent in earnings persistence to measure accrual reliability and applies it to a sample of firms listed on the New York Stock Exchange, American Stock Exchange and NASDAQ from 1998 to 2016. Findings The results indicate a significantly positive association between firms’ diversification level and accrual reliability, which suggests that the diversification effect dominates the measurement errors effect, leading to an increase in firms’ accrual quality. The authors also found additional evidence suggesting that this positive association is more pronounced when a firm’s underlying operating activities among segments are less correlated, which is consistent with the fact that the diversification effect becomes more evident if a firm participates in diverse lines of business. Originality/value This study proposes that applying fewer sets of estimation methods or assumptions to a cluster of segments could yield more measurement errors in accruals. It fills a research gap by showing that the portfolio diversification effect mitigates the detrimental effect of measurement errors in consolidated financial reporting.