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This study examines whether personally performing other audit tasks can bias supervising seniors' going-concern judgments. During an audit, the senior performs some audit tasks him/herself and delegates other tasks to staff members. When personally performing an audit task, the senior would focus on the evidence related to that task. We predict that such evidence will have greater influence on the senior's subsequent going-concern judgment. The results of our experiment are consistent with our predictions. When provided with an identical set of information, seniors who performed another audit task for which the underlying facts of the case reflected positively (negatively) on the company's viability, subsequently made going-concern judgments that were relatively more positive (negative). Our results also demonstrate that the well-documented tendency of auditors to attend more to negative information does not always dominate auditors' information processing. Subjects who performed the task for which the underlying facts reflected positively on the company's viability directed their attention to such positive information and, consequently, both their memory and judgments were more positive than those of subjects in the other conditions. Recent findings indicating that biases in seniors' going-concern judgments may not be fully offset in the review process are discussed along with other potential implications of our results.

PurposeThe aim of this paper is to provide additional insights on the association between real earnings management (REM) and crash risk, particularly from the perspective of an emerging market economy. It also examines the moderation role that internal and external corporate governance may play in this area.Design/methodology/approachRelying on archival data from the RESSET and CSMAR databases over a timeframe from 2010 to 2018 of China listed company, the authors test the hypotheses by regressing common measures of crash risk on the treatment variable (REM) and crash risk control variables identified in the prior crash risk literature. The authors also introduce monitoring proxies (internal controls as an internal governance and institutional ownership as an external governance) and assess how effective internal and external governance moderate the relation between REM and stock price crash risk.FindingsThe results suggest firms with higher REM have a significantly greater stock price crash risk, and that this association is mitigated by external monitoring. That is, greater institutional ownership, particularly pressure insensitive owners, mitigates the impact of REM on stock price crash risk. However, internal control does not mitigate the association between REM and stock price crash risk.Originality/valueFollowing the passage of the Sarbanes–Oxley (SOX) Act, prior research has documented an increase in the use of REM and a positive association between REM and cash risk. The authors demonstrate that they persist in one of the largest emerging markets where institutional regulations, market conditions and corporate behaviors are different from those in developed markets. Also, the assessment of the moderation effect of internal and external governance mechanisms could have meaningful implications for investors and regulators in Chinese and other emerging markets.

Purpose Information security has increasingly been in the headlines as data breaches continue to occur at alarming rates. This paper aims to propose an Information Security Preparedness Model that was developed to examine how SME executives’ perceptions of security importance, implementation challenges and external influences impact their awareness and commitment to security preparedness. Design/methodology/approach Funded by the Department of Justice, a national survey of SME executives’ perceptions of information security preparedness was conducted. Using PLS-SEM, the survey responses were used to test the proposed Information Security Preparedness Model. Findings The results indicate that as perceptions of security importance and external influences increase, SME executives’ awareness and commitment to information security also increases. In addition, as implementation challenges increase, awareness and commitment to information security decreases. Finally, as security importance and awareness and commitment to information security increases, executives’ perception of security preparedness also increases. Research limitations/implications Executive perceptions of information security were measured and not the actual level of security. Further research that examines the agreement between executive perceptions and the true state of information security within the organization is warranted. Originality/value Prior information security studies using Roger’s (1975, 1983) Protection Motivation Theory have produced mixed results. This paper develops and tests the Information Security Preparedness Model to more fully explain SME executive’s perceptions of information security.