Thesis (Ph. D.)--University of Wisconsin--Madison, 1981. / Typescript. Vita. eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references (leaves 140-147).

Thesis (Ph. D.)--University of Washington, 2005. / Vita. Includes bibliographical references (leaves 92-97).

Research report--Massey University, 1998. / Includes bibliographical references (leaves 101-115)

M.Comm. / At the time of a fresh issue of shares or debentures to the public, the principle document that provides potential investors with information on which to base their investment decisions, is a prospectus. In terms of the Companies Act, an offer of shares may not be made to the public unless it is accompanied by a prospectus. The information to be disclosed in a prospectus must conform to the requirements of Schedule 3 of the Companies Act. A prospectus also has to comply with the JSE Listing Requirements. Schedule 3 was promulgated in 1975 and has not been amended since. The question arises whether the requirements of Schedule 3 are comparable with similar international regulations and meet the needs of a changing business environment in South Africa. In an attempt to overcome this problem, ED 105 - Report offinancial information to be included in a prospectus created the first accounting statement dealing with the financial information that should be included in a prospectus, as well as proposing a revised Schedule 3 to the Standing Advisory Committee on Company Law relating to non-financial information that should be disclosed in a prospectus. Firstly this thesis aimed to establish whether the prospectus is a protection instrument for potential investors. The prospectus must, therefore, provide potential investors with sufficient and reliable information to enable them to make sound investment decisions. The contents of Schedule 3 were analysed in comparison with the JSE Listing Requirements and ED 105 to determine whether progress has been made in the provision of quality information to potential investors through the prospectus. The current South African requirements for disclosure in the prospectus were also compared with the requirements of leading overseas bourses and the prospectuses of recently listed companies. ED 105 improved the accuracy, completeness and relevancy of the requirements contained in Schedule 3 and the JSE Listing Requirements. The comparison, however, highlighted additional items of disclosure that can further contribute to the prospectus being a protection instrument for potential investors. In view of the financial literacy levels of the South African population, it was also necessary to investigate the ability of potential investors, especially private investors, to understand, interpret and use the information provided in a prospectus. The second objective was, therefore, to determine whether the prospectus empowers potential investors. The prospectus will be an empowerment instrument if the information provided therein is of - such a nature that potential investors can understand and interpret the information for decision-making purposes. An investigation into the literacy profile of potential investors, into relevant education provided to potential investors and an assessment ofthe understandability of the contents of the prospectus was, therefore, performed. Financial information required in ED 105 is strongly linked to the latest Statements of GAAP. A number of the items are only lectured on CT A level and with the Harmonisation and Improvements Project it can be expected that only individuals with a recent CTA will be able to understand these requirements. ED 105 impaired the understandability of the prospectus by the average potential investor.

M.Comm.

This thesis investigates whether firms use real activities manipulation for income-decreasing earnings management purposes. Managers can use different tools to manage earnings. Given that managers have the authority to apply their own judgment in the preparation of financial reports and to make decision about business activities of their incumbent companies, the opportunity to manipulate earnings is twofold: the first is to manipulate financial reports using accounting techniques and the second is to manipulate underlying transactions. After the introduction of new regulations that were meant to restrict accounting choice as a response to high-profile accounting scandals at the turn of the century, there has been growing literature on the use of real activities manipulation for earnings management. While more control over financial reporting can potentially reduce earnings management through accounting choice, as real activities manipulation concerns non-accounting decisions of management, tighter accounting standards are not able to restrict manipulation of activities. This shift toward real activities manipulation is supported by empirical evidence. Whilst prior studies indicate that managers have incentives for both income-increasing and income-decreasing earnings management, the overwhelming majority of authors have concentrated on income-increasing attempts. However, one would expect that real activities manipulation would also be used for income-decreasing purposes. This study links two lines of research in the area of earnings management; downward earnings management and earnings management through real activities manipulation. Using a large sample of US firms for the period 2002-2011, the present thesis examines whether and how real activities manipulation is used for income-decreasing earnings management. To this end, firms that substantially outperformed their last year performance, or suspect firms, which are considered as more likely to exhibit income-decreasing earnings management are compared with the rest of the sample in terms of various measures of real activities manipulation. The results indicate that firms with extra earnings by the end of third quarter of fiscal year manage earnings downward by means of real activities including sales, production and discretionary expenses. The results are generally robust to a number of sensitivity tests.

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The objective of this research report was to determine which internal controls are perceived, by internal auditors, to be contributing to the effectiveness of an internal control structure. The Committee for Sponsoring Organisations (COSO) integrated internal control framework was used as a basis for the questionnaire construction and respondents were asked to rate the perceived control effectiveness of each of the components of internal control. Descriptive statistics were used to analyse the basic meaning of the data. The questionnaire was completed by following a Uniform Resource Locator (URL) which was sent to two internal auditors in audit firms. Thirty one responses were obtained; all the respondents have experience in the evaluation and assessment of internal control systems. This research showed that control elements as outlined in COSOs integrated internal control framework, if implemented, could contribute to the effectiveness of the internal control system.

At the end of the 20th century and beginning of the 21st century, China implemented several new asset write-down regulations. This study addresses the claim that these regulations significantly enhanced the usefulness of financial statements for investors in China. The effect of the regulations on usefulness of financial statements has implications for financial accountants, standard-setters, educators, and auditors. This study derives and tests some of the empirical implications of the claim. I operationalize usefulness of accounting information in terms of the valuerelevance framework, in which information usefulness is construed as a tradeoff between relevance and reliability. These two dimensions are the primary criteria underlying the FASB’s Conceptual Framework for choosing alternative accounting rules. Asset write-down, if correctly applied to over-stated assets, should increase the decision relevance to investors; however, measurement errors due to either unintentional mistakes involving professional judgment or intentional misrepresentations involving earnings management may decrease the reliability of reported amounts. While there is substantial value-relevance research, the role of reliability is generally absent. Reliability of regression estimates, also known as measurement error, is often implicitly assumed and not measured. Following nonnested model selection techniques and relative measurement error research, I explicitly measure the relative reliability of asset write-down accounting in various valuation models. Therefore, this study contributes to value-relevance research. First, I examine the incremental value relevance of asset write-down estimates through their associations with market values: the ability of asset write-down provisions to explain market value of equity; the ability of asset write-down gains and losses to explain annual market-adjusted return; and the ability of both the above provisions and earnings to explain market value of equity. All the models provide evidence for value relevance of asset write-down estimates, indicating an acceptable level of information usefulness with mixed effects of relevance and reliability. I apply my tests to a balanced panel sample of exchange-listed firms in China over the period 1998-2001. The sample is limited to A shares—the shares subject to the new rules. Next, the above three valuation models are applied again in a reliability analysis. Model appropriateness tests, i.e. non-nested model tests, are used to answer the question: did asset write-down practices improve reliability in the valuation models? I find that the asset write-down practices are approximately comparable in reliability to historical cost methods in the balance sheet valuation model but somewhat less reliable in the income statement valuation model. The results are ambiguous when both assets and earnings are included in a third valuation model. My relative measurement error tests yield similar results. I conclude that the asset write-down regulations in China have not improved the usefulness of financial statements to investors in terms of reliability. Because the asset write-down rules are subject to interpretation and judgment, I consider the motivation for write-downs in the final part of the study. The results support a relation between discretionary motivations and the amount of current or cumulative write down. A sub-sample analysis shows that asset write-down rules improve usefulness of financial information in the absence of discretionary motivations.

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