Accounting

The paper analyzes the reporting practices of Unrelated Business Taxable Income (UBTI) in colleges and universities, and examines evidence of cost shifting between related tax-exempt sources of income and unrelated taxable income to minimize or eliminate tax liability. Increasing commercial-type activities and programs in colleges and universities (among other nonprofit tax-exempt organizations) is generating a growing amount of income unrelated to their core mission and, therefore, is taxable based on the tax code. To minimize tax liability on their growing unrelated income, colleges and universities are motivated to shift expenses from the regular tax-exempt operations and assign them as a tax deductible directly expense related to the unrelated income. Using a sample of colleges and universities during years 2013-2015, I report a significant evidence of cost shifting to minimize tax liability in colleges and universities.

The paper examines the corporate governance factors and the independent audit quality as determinants of compliance with IFRS recognition and disclosure requirements of income tax accounting in Egypt. Using the initial IFRS adoption in Egypt, the results show evidence that corporate governance factors that indicate the sophistication level of both company's management and owners (i.e., institutional ownership and foreign representation on the board) and the perceived quality of the engaged auditor improve compliance with IFRS requirements. Companies with higher levels of institutional ownership and foreign representation on the board are more likely to engage an audit firm with international affiliation and comply with IFRS recognition and disclosure requirements. The results underline the significance of professional development and regulations of local audit industries in emerging countries for actual compliance with IFRS requirements when they are officially adopted in these countries.

Crown Oil, Inc. is a family-owned heating oil distributor that offers customers the opportunity to lock-in a fixed price per gallon in advance of the heating season by signing up for a price protection plan. As a result of offering these plans, Crown Oil assumes the risk of price changes, which it then hedges by acquiring exchange-traded future and option contracts. This case provides an introduction to the economic nature of derivative instruments and hedging and to the related accounting and reporting issues. The appropriate timing of revenue recognition for the upfront fees that Crown Oil receives from customers entering into a price protection contract is also explored in the case, as is the opportunity for earnings management. The case provides the opportunity to research the professional accounting literature, apply existing standards, and communicate recommendations to management

This paper examines the association between stock returns and earnings changes of firms that have made different tradeoffs with respect to R&D and advertising spending during an economic downturn. During the 2000-2002 bear market that was associated with a downturn in the U.S. economy, we find the coefficient that relates stock returns and earnings changes to be significantly greater for firms that increased their advertising expenditures and decreased their R&D expenditures than for firms that increased their R&D expenditures and decreased their advertising expenditures. Our results suggest that investors perceive that an increased emphasis on advertising can enable firms to stem earnings erosion that can potentially occur during an economic downturn.

Purpose – This paper aims to study a preemption proposition for the compliance costs associated with stock option expensing under SFAS 123(R) by examining whether early adopters used their discretion over option pricing model inputs to mitigate the adoption effect. Design/methodology/approach – The paper uses a matched sample approach of firms that voluntarily adopted stock option expensing during the 2002-2004 period and similar firms that waited until the mandatory expensing. The paper empirically examines some determinants of voluntary adoption, and the changes in option pricing model inputs during the period leading to mandatory expensing. Findings – The paper reports evidence that voluntary adopters of stock option expensing during the 2002-2004 period have used the period leading to mandatory expensing to preempt its compliance cost effect. The authors exercised their discretion by decreasing estimates for stock price volatility and time-to-maturity to preempt or minimize the ...

This paper examines compliance and enforcement of the International Financial Reporting Standards (IFRS) in developing countries and the effect of independent audit quality as a monitoring mechanism for compliance with IFRS recognition and disclosure requirements. Using a sample of listed companies in the Egyptian Stock Exchange in 2007, we examine their compliance with recognition and disclosure requirements for income tax accounting after Egypt's full adoption of IFRS in 2006. Results show evidence of noncompliance with the IFRS requirements for income tax accounting, and that compliance with recognition and disclosure requirements is significantly related to being audited by an audit firm with international affiliation. These results validate concerns regarding the reliability and comparability of accounting information produced in different jurisdictions that proclaim to adopt IFRS. Enforcement and compliance with IFRS requirements is a function of crosscountry regulatory, economic, and cultural differences.

For more than a decade, leaders in the accounting profession have been calling for changes to both the content and delivery of accounting courses. Three key concerns identified by these leaders are failure to incorporate in our courses: active learning activities, cooperative learning activities, and real-world examples. We address these concerns by designing a team-based audit simulation for use in the introductory auditing course. This paper describes not only the simulation, but also the evaluation of it using three measures: student response, practitioner response, and faculty response. All respondents judge the simulation as realistic. Further, students rated their learning and team experiences in working on the Proli simulation more favorably than they had anticipated ex ante, suggesting the active and cooperative learning features of the simulation are well-received by students. Practicing auditors assessed the simulation as a useful learning tool and confirmed the importance of the team experiences inherent in Proli. Given these results coupled with the adaptability of the simulation, we believe Proli makes an important and noteworthy contribution to accounting education in the new millennium.

This study investigates whether task information feedback (TIF) promotes 84 auditors' and accounting students' use of higher ethical reasoning, thereby increasing their tendency to consider the public interest in the resolution of ethical dilemmas. TIF is a type of feedback in which subjects are provided with guidance about the cognitive decision-making process they should use. In our experiment, subjects used higher ethical reasoning to resolve audit dilemmas after receiving TIF than they did before receiving TIF. Accordingly, our findings suggest that TIF is effective in promoting higher ethical reasoning and thus increasing the tendency of practicing and aspiring auditors to consider the public interest when resolving ethical dilemmas.

This study introduces Moscovici's (1976, 1985) model of social influence to the accounting research domain, and uses an experiment to assess whether his theory explains how different types of discussion affects consensus in auditors' ethical reasoning. Moscovici's theory proposes three modalities of influence to describe how consensus is achieved following discussion: conformity, innovation and normalization. Conformity describes the situation where individuals in the minority (e.g., auditors that do not accept the dominant view) accede to the majority (e.g., auditors that hold the dominant view) as a result of group discussion. Innovation describes the situation where individuals in the majority accede to the minority. Normalization describes the situation where there is reciprocal influence. We find that conformity occurs when auditors are asked to prescriptively discuss what ideally "should" be the resolution to an ethical dilemma. Normalization occurs when auditors are asked to deliberatively discuss what realistically would be the resolution to an ethical dilemma. The results of this study suggest that prescriptive discussion of an ethical dilemma encourages auditor groups to strive to find the best response to a moral dilemma if it is represented by the majority view. In contrast, deliberative discussion of an ethical dilemma may encourage the elimination of multiple viewpoints. The results of this study have important implications for understanding the social influence process that affects auditors' ethical reasoning.

This paper explains how and why the Ignatian Pedagogical Paradigm (IPP), a 450-year old approach to education, can serve as a framework for a modern principlesbased ethics course in accounting. The IPP takes a holistic view of the world, combining five elements: context, experience, reflection, action and evaluation. We describe the components of the IPP and discuss how they align with suggestions from prior research for providing principles-based ethics instruction in accounting. We conclude by describing how we used the IPP as a framework to create a graduate-level accounting ethics course.

This paper compares the moral reasoning of 363 auditors from Canada and the United States. We investigate whether national institutional context is associated with differences in auditors'' moral reasoning by examining three components of auditors'' moral decision process: (1) moral development, which describes cognitive moral capability, (2) prescriptive reasoning of how a realistic accounting dilemma ought to be resolved and, (3) deliberative reasoning of how a realistic accounting dilemma will be resolved. Not surprisingly, it appears that institutional factors are more likely to be associated with auditors'' deliberative reasoning than their prescriptive reasoning in both countries. Additionally, our findings suggest that the national institutional context found in the United States, which has a tougher regulatory and more litigious environment, appears to better encourage auditors to deliberate according to what they perceive is "the ideal&quo...

Concern about the validity of the DIT and Fisher and Sweeney's measurement of conservative, moderate and liberal political orientation using a seven-point Likert scale motivates our study. We perform two experiments to investigate these interrelated issues. First, we assess the degree to which 569 undergraduate students' political orientation as measured by a seven-point Likert scale associates with their corresponding political orientation as measured by a ninepoint Likert scale. We find differences in categorization of subjects depending upon scale used, suggesting problems with the sampling distribution arise when a seven-point Likert scale is used for categorizing subjects.

In response to accounting failures of unprecedented proportions (e.g., Enron, WorldCom, etc.), in 2002 Congress passed and President Bush signed into law one of the most sweeping accounting reform bills since the Great Depression of the 1930s: the Sarbanes-Oxley Act (SOX). SOX was intended to restore the public's confidence in corporate reporting (Leone, 2003a). To achieve this end, the bill contained numerous provisions aimed at improving corporate governance, financial disclosure and audits of published financial statements. While the provisions of the law affect multiple constituencies, perhaps no parties are more directly affected than managers of public companies, boards of directors of those public companies, and their external auditors. As implementation of SOX has gone forward, each of these three groups has encountered ethical dilemmas associated not only with certain provisions of the legislation, but also with the SEC rules designed to put into action those provisions. The purpose of this paper is to highlight some of the unintended ethical consequences associated with SOX. One potential unintended ethical consequence of SOX is the possibility that it is contributing to an exodus of qualified CFOs and/or discouraging potential CFOs. As a result, SOX may be creating a shortage of qualified CFOs and, unwittingly encouraging less qualified individuals to seek out positions as CFOs, coupled with contributing to management inappropriately spending shareholders' money (e.g., for insurance coverage for board of directors members, for consultants to advise the "experts" on the board, etc.). Additionally, the new act may be creating a shortage of qualified directors and, unwittingly encouraging less qualified individuals to seek out director positions.

The cost-benefit approach (CBA) generally evaluates whether expenditures (costs) are worthwhile relative to their returns (benefits) (Harlow and Windsor 1988; Watkins 2008). Equal alternatives have the same relative benefit/cost ratio; thus, a higher cost alternative will have the same benefit/cost ratio as a lower cost alternative if its benefit is correspondingly higher than the benefit of the lower cost alternative (c.f., Hold and Elliott 2002). The purpose of this study is to demonstrate how CBA can be used to assess the most cost-effective business school major. We present a case study in which we apply CBA to evaluate textbook costs across the typical business majors (i.e., Accounting, Finance, Information Systems, International Business, Management and Marketing). We discuss how the CBA findings can inform public policy and individual decisions.

The present study was motivated by concern about the validity of the DIT and methodological issues in Fisher and Sweeney (2001, 1998) studies. Our study of 98 accounting students from three private institutions in the eastern U.S. generates results that directly contradict those of Fisher and Sweeney’s (1998). Using the nine-point scale, we could reject our three hypotheses relating to DIT scores associating with political orientation. First, we find that there was not a significant difference between the pre-test DIT scores of liberal and conservative politically orientated students. Second, the follow on DIT test scores for those students who were not politically conservative did not decrease when responding from a conservative perspective. Third, the follow on DIT test scores for those students who were not politically liberal did not increase when responding from a liberal perspective.

In response to accounting failures of unprecedented proportions (e.g., Enron, WorldCom, etc.), in 2002 Congress passed and President Bush signed into law one of the most sweeping accounting reform bills since the Great Depression of the 1930s: the SarbanesOxley Act (SOX). SOX was intended to restore the public’s confidence in corporate reporting (Leone, 2003a). To achieve this end, the bill contained numerous provisions aimed at improving corporate governance, financial disclosure and audits of published financial statements. While the provisions of the law affect multiple constituencies, perhaps no parties are more directly affected than managers of public companies, boards of directors of those public companies, and their external auditors. As implementation of SOX has gone forward, each of these three groups has encountered ethical dilemmas associated not only with certain provisions of the legislation, but also with the SEC rules designed to put into action those provisions. The...