ABSTRACT:Many students have not spent much time studying or contemplating the importance of non-G... more ABSTRACT:Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the “Street.” Based on the facts of an actual company and utilizing the financial information drawn from this company's 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards, (2) about the potential role of non-GAAP earnings in this decision—especially as a predictor of future cash flows, and (3) other issues associated with non-GAAP earnings. This topic is important, as auditors are frequently auditing companies that release non-GAAP earnings and/or have going concern issues. This case can be used in Intermediate and Auditing classes, as well as master's-level courses.
ABSTRACT The purpose of this paper is to compare the usefulness of a story versus traditional che... more ABSTRACT The purpose of this paper is to compare the usefulness of a story versus traditional checklist decision aids for enhancing knowledge structure development and for improving the judgments of auditors related to fraud risks. The results from the first experiment indicate that novice participants who read stories develop knowledge structures that more closely resemble the knowledge structures of experts than do participants who read checklists. The second experiment reveals that auditors who read stories make judgments more like experts than do auditors who use checklists. The findings demonstrate that stories may have the capacity to train auditors and improve their judgments. Audit firms constantly seek methods to improve auditors' knowledge and judgments, and our findings suggest opportunities for firms to employ fraud stories to enhance knowledge of fraud and improve professional judgment. This study's results hold important implications for the design of training materials, decision aids, and knowledge management systems.
Most states now require students who sit for the Certified Public Accountant (CPA) examination to... more Most states now require students who sit for the Certified Public Accountant (CPA) examination to have 150 semester hours of college education. The 150-hour requirement is intended to, among other benefits, improve the preparation of students for the profession, increase their chances of success on the CPA exam, ensure a more wellrounded education for new entrants to the profession, and attract better students to the field of accounting. The purpose of this paper is to examine whether accounting majors' perceptions regarding this requirement match the anticipated benefits of the 150-hour rule, and whether they match the realities of what has occurred in localities where the rule has been in effect. Data were collected from 247 accounting majors via a questionnaire. The results indicate that, in most respects, students' perceptions align fairly well with the intentions and the realities of the 150-hour requirement. For example, most students indicate an interest in obtaining a Master of Business Administration (MBA) degree for their fifth year of education. This would be a more balanced education envisioned by the framers of the requirement. Most students feel that they should receive additional compensation for the added education. In contrast to the reality in most locations, they do not expect accounting firms to increase compensation for those with 150 hours of education. Although students generally were not in favor of the 150-hour rule, a majority indicated they would continue to pursue becoming a CPA despite the 150-hour requirement. Still, a substantial number of students indicated they would pursue the Certified Management Accountant (CMA) designation rather than pursuing the CPA.
In most states, students who sit for the certified public accountant (CPA) examination are now re... more In most states, students who sit for the certified public accountant (CPA) examination are now required to have 150 credit hours of college education. In this article, the authors examined the effects of this requirement on the career intentions of women and minorities. The authors collected data from 600 accounting students and the results suggested that the 150-credit-hour requirement might
Cross Cultural Management: An International Journal, Jul 29, 2009
PurposeThe purpose of this paper is to examine differences in managers' and employees' at... more PurposeThe purpose of this paper is to examine differences in managers' and employees' attitudes about fraud across different cultures, provide some theories as to why these differences exist, give some recent examples of cultural differences in ethical perceptions from practice, make recommendations as to how companies can address this issue and make improvements to their anti‐fraud programs based on the country and culture in which they operate, and suggest some opportunities for future research.Design/methodology/approachThe paper takes the form of a literature review.FindingsA great deal of future research is needed to examine the effects of culture on the critical elements of managements' antifraud programs and controls that may be most effective in combating corruption, including the whistleblower hotline, internal audit, surprise audits, management review of internal controls, rewards for whistleblowers, and mandatory job rotation.Originality/valueThis is one of the first papers reviewing the literature on cross‐cultural fraud and identifying opportunities for future research.
ABSTRACT The current study examines the effect of fraud training on auditors' ability to ... more ABSTRACT The current study examines the effect of fraud training on auditors' ability to identify fraud risk factors. This is important because most auditors have little or no direct experience with fraud; thus, research that investigates the potential effect of indirect experience through training is vitally important to fraud detection and audit quality. A total of 369 experienced auditors completed a complex audit simulation task that involved 15 seeded fraud risk red flags. A total of 143 auditors participated in a 30-minute training session focused specifically on fraud risk, while the remaining 226 auditors learned about general internal control risk during this time block. The results indicate that auditors with fraud training identified significantly more red flags and obtained greater knowledge about fraud risk than auditors who did not receive the training. Considering that the fraud training consumed only 30 minutes out of a 64-hour training session, the findings suggest that even modest exposure to fraud training is quite effective.
Auditing-a Journal of Practice & Theory, Mar 1, 1999
In audit analytical procedures, research has shown that auditors have difficulty proposing possib... more In audit analytical procedures, research has shown that auditors have difficulty proposing possible explanations for financial statement discrepancies (Bedard and Biggs 1991a). One source of this difficulty is that auditors may represent analytical procedures problems incorrectly; that is, their mental image of the problem does not contain the underlying cause of the discrepancies. Because shifting initial representations of problems is difficult, auditor decision processes are affected. The purpose of this study is to investigate how problem representation shifts can lead auditors to better insight into possible explanations of discrepancies, and thus improve auditor decision processes in analytical procedures. To accomplish this purpose, verbal protocol data from Bedard and Biggs (1991a) were used to develop a series of problem representations and prompts for the analytical procedures task used in that study. The prompts were given to activate relevant knowledge structures in memory and encourage successive shifts toward the correct representation. Think-aloud verbal protocols were collected from 12 senior auditors with three to five years' experience to provide evidence of problem representation shifts and decision processes. The results indicate that: (1) all subjects initially formulated an unproductive problem representation; (2) only one subject shifted to a productive problem representation and solved the case without prompts; and (3) even with prompts two subjects were unable to solve the case. These findings suggest that shifting to a productive problem representation was critical in achieving effective decision processes and identifying the seeded error in this analytical procedures task. Auditors who developed a thorough understanding of the financial relationships in the case prior to proposing potential solutions were better able to shift problem representations and solve the case. In addition, two processes related to an explanation inherited from client management, “wheel spinning” and truncated hypothesis generation, inhibited problem representation shifts.
ABSTRACT:Many students have not spent much time studying or contemplating the importance of non-G... more ABSTRACT:Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the “Street.” Based on the facts of an actual company and utilizing the financial information drawn from this company's 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards, (2) about the potential role of non-GAAP earnings in this decision—especially as a predictor of future cash flows, and (3) other issues associated with non-GAAP earnings. This topic is important, as auditors are frequently auditing companies that release non-GAAP earnings and/or have going concern issues. This case can be used in Intermediate and Auditing classes, as well as master's-level courses.
ABSTRACT The purpose of this paper is to compare the usefulness of a story versus traditional che... more ABSTRACT The purpose of this paper is to compare the usefulness of a story versus traditional checklist decision aids for enhancing knowledge structure development and for improving the judgments of auditors related to fraud risks. The results from the first experiment indicate that novice participants who read stories develop knowledge structures that more closely resemble the knowledge structures of experts than do participants who read checklists. The second experiment reveals that auditors who read stories make judgments more like experts than do auditors who use checklists. The findings demonstrate that stories may have the capacity to train auditors and improve their judgments. Audit firms constantly seek methods to improve auditors' knowledge and judgments, and our findings suggest opportunities for firms to employ fraud stories to enhance knowledge of fraud and improve professional judgment. This study's results hold important implications for the design of training materials, decision aids, and knowledge management systems.
Most states now require students who sit for the Certified Public Accountant (CPA) examination to... more Most states now require students who sit for the Certified Public Accountant (CPA) examination to have 150 semester hours of college education. The 150-hour requirement is intended to, among other benefits, improve the preparation of students for the profession, increase their chances of success on the CPA exam, ensure a more wellrounded education for new entrants to the profession, and attract better students to the field of accounting. The purpose of this paper is to examine whether accounting majors' perceptions regarding this requirement match the anticipated benefits of the 150-hour rule, and whether they match the realities of what has occurred in localities where the rule has been in effect. Data were collected from 247 accounting majors via a questionnaire. The results indicate that, in most respects, students' perceptions align fairly well with the intentions and the realities of the 150-hour requirement. For example, most students indicate an interest in obtaining a Master of Business Administration (MBA) degree for their fifth year of education. This would be a more balanced education envisioned by the framers of the requirement. Most students feel that they should receive additional compensation for the added education. In contrast to the reality in most locations, they do not expect accounting firms to increase compensation for those with 150 hours of education. Although students generally were not in favor of the 150-hour rule, a majority indicated they would continue to pursue becoming a CPA despite the 150-hour requirement. Still, a substantial number of students indicated they would pursue the Certified Management Accountant (CMA) designation rather than pursuing the CPA.
In most states, students who sit for the certified public accountant (CPA) examination are now re... more In most states, students who sit for the certified public accountant (CPA) examination are now required to have 150 credit hours of college education. In this article, the authors examined the effects of this requirement on the career intentions of women and minorities. The authors collected data from 600 accounting students and the results suggested that the 150-credit-hour requirement might
Cross Cultural Management: An International Journal, Jul 29, 2009
PurposeThe purpose of this paper is to examine differences in managers' and employees' at... more PurposeThe purpose of this paper is to examine differences in managers' and employees' attitudes about fraud across different cultures, provide some theories as to why these differences exist, give some recent examples of cultural differences in ethical perceptions from practice, make recommendations as to how companies can address this issue and make improvements to their anti‐fraud programs based on the country and culture in which they operate, and suggest some opportunities for future research.Design/methodology/approachThe paper takes the form of a literature review.FindingsA great deal of future research is needed to examine the effects of culture on the critical elements of managements' antifraud programs and controls that may be most effective in combating corruption, including the whistleblower hotline, internal audit, surprise audits, management review of internal controls, rewards for whistleblowers, and mandatory job rotation.Originality/valueThis is one of the first papers reviewing the literature on cross‐cultural fraud and identifying opportunities for future research.
ABSTRACT The current study examines the effect of fraud training on auditors' ability to ... more ABSTRACT The current study examines the effect of fraud training on auditors' ability to identify fraud risk factors. This is important because most auditors have little or no direct experience with fraud; thus, research that investigates the potential effect of indirect experience through training is vitally important to fraud detection and audit quality. A total of 369 experienced auditors completed a complex audit simulation task that involved 15 seeded fraud risk red flags. A total of 143 auditors participated in a 30-minute training session focused specifically on fraud risk, while the remaining 226 auditors learned about general internal control risk during this time block. The results indicate that auditors with fraud training identified significantly more red flags and obtained greater knowledge about fraud risk than auditors who did not receive the training. Considering that the fraud training consumed only 30 minutes out of a 64-hour training session, the findings suggest that even modest exposure to fraud training is quite effective.
Auditing-a Journal of Practice & Theory, Mar 1, 1999
In audit analytical procedures, research has shown that auditors have difficulty proposing possib... more In audit analytical procedures, research has shown that auditors have difficulty proposing possible explanations for financial statement discrepancies (Bedard and Biggs 1991a). One source of this difficulty is that auditors may represent analytical procedures problems incorrectly; that is, their mental image of the problem does not contain the underlying cause of the discrepancies. Because shifting initial representations of problems is difficult, auditor decision processes are affected. The purpose of this study is to investigate how problem representation shifts can lead auditors to better insight into possible explanations of discrepancies, and thus improve auditor decision processes in analytical procedures. To accomplish this purpose, verbal protocol data from Bedard and Biggs (1991a) were used to develop a series of problem representations and prompts for the analytical procedures task used in that study. The prompts were given to activate relevant knowledge structures in memory and encourage successive shifts toward the correct representation. Think-aloud verbal protocols were collected from 12 senior auditors with three to five years' experience to provide evidence of problem representation shifts and decision processes. The results indicate that: (1) all subjects initially formulated an unproductive problem representation; (2) only one subject shifted to a productive problem representation and solved the case without prompts; and (3) even with prompts two subjects were unable to solve the case. These findings suggest that shifting to a productive problem representation was critical in achieving effective decision processes and identifying the seeded error in this analytical procedures task. Auditors who developed a thorough understanding of the financial relationships in the case prior to proposing potential solutions were better able to shift problem representations and solve the case. In addition, two processes related to an explanation inherited from client management, “wheel spinning” and truncated hypothesis generation, inhibited problem representation shifts.
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Papers by James Bierstaker