This study examines the impact of comparability on the extent to which financial statement users detect accruals manipulations and managers manipulate earnings. I predict that comparability enables users to better understand and predict economic events and how these events translate into accruals. This improved understanding of accruals decreases information asymmetry between managers and shareholders, improves the ability of users to detect and undo accruals manipulations, and thereby acts as a constraint on accruals earnings management. I find that when prior-period comparability is higher, current period discretionary accruals are less positively correlated with contemporaneous returns and less negatively correlated with future returns, suggesting that greater comparability increases the pricing efficiency of discretionary accruals. I also find that higher prior-period comparability is associated with less current period accruals earnings management. Finally, I document that greater prior-period comparability increases the extent to which managers substitute real activities manipulation for accruals manipulation, consistent with comparability increasing the relative cost of accruals earnings management. Overall, my results support the notion that comparability increases the pricing efficiency of opportunistic accruals and constrains opportunistic accounting. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the Doctor of Philosophy. / Spring Semester 2016. / April 1, 2016. / Comparability, Earnings Management / Includes bibliographical references. / Frank Heflin, Professor Directing Dissertation; Yingmei Cheng, University Representative; Richard Morton, Committee Member; Jeffrey Paterson, Committee Member; Landon Mauler, Committee Member.

I examine whether financial reporting transparency ("transparency") differs between firms whose parent entity is strategically incorporated in a tax haven for purposes of tax avoidance (i.e., tax haven firms) and non-tax haven multinational corporations (MNCs). Knowledge of the non-tax effects of tax haven incorporation is important given attention to tax havens from policy makers, activists, and the media and also due to the paucity of empirical evidence on the non-tax costs of tax haven incorporation. A predominant perception exists within the public sector and also in accounting research that tax haven involvement is unanimously associated with lower transparency due to secrecy laws, reduced informational exchange with regulators and tax authorities of other countries, and potentially lower shareholder protections in tax havens. However, prior economics and legal research also suggests that tax havens have characteristics associated with higher country-level transparency (i.e. government stability, low corruption, high media coverage). Thus, there are arguments for both higher and lower transparency for tax haven firms compared to other MNCs. Using a sample of firms based in 16 countries, I test whether tax haven firms and non-tax haven MNCs differ in three facets of firms' financial information which prior literature has associated with higher transparency (accruals quality, earnings informativeness, and analyst forecast accuracy). Results indicate that the effect of tax havens on transparency depends on the information environment of the country in which the firm is based (i.e. non-tax haven country of headquarters or significant operations). Tax haven firms based in countries with weak information environments exhibit lower transparency relative to non-tax haven firms. In contrast, tax haven firms based in countries with stronger information environments exhibit higher transparency relative to non-tax haven firms. Thus, the predominant perception of an unambiguous negative relation between tax haven involvement and transparency does not apply in all settings. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the Doctor of Philosophy. / Spring Semester 2016. / March 22, 2016. / Tax avoidance, Tax havens, Transparency / Includes bibliographical references. / Bruce Billings, Professor Directing Dissertation; Yingmei Cheng, University Representative; T.J. Atwood, Committee Member; Landon Mauler, Committee Member; Richard Morton, Committee Member.

The value of the current pass/fail version of the standardized audit report has been criticized as not providing stakeholders with much information beyond the qualified vs. unqualified opinion (Cohen Commission 1978; Church et al. 2008; Gray et al. 2011; Mock et al. 2013). In 2013, the Public Company Accounting Oversight Board (PCAOB) proposed addition of Critical Audit Matters (CAMs) to the standardized audit report in the hopes that the auditor further highlighting key areas of risk information will reduce the information asymmetry between financial statement users and management (PCAOB 2013). Current CAM research demonstrates investors (Christensen et al. 2014) and jurors (Kachelmeier et al. 2015; Brasel et al. 2016) incorporate CAM information into their decisions to invest or hold auditors responsible for future misstatements. However, it is unclear if this is because users incorporate the underlying risk information or have misconceptions about auditor ability to substantiate management's assertions related to that risk even in the presence of an unqualified opinion. In this study, I apply the Mental Models Approach to risk communication outlined by Morgan et al. (2002) to investigate this issue. Qualitatively, I use a combination of interviews and surveys with investors and auditors to specifically identify areas where auditor and investor views of CAMs and overall audit reporting diverge. I find auditors are skeptical of the potential effectiveness of CAMs and of investor ability to interpret CAM information. I also find that while many investors in this study have a working knowledge of some audit terms such as reasonable assurance and materiality, they do not understand that even in the presence of CAMs an unqualified opinion means sufficient audit evidence has been obtained related to the statements as a whole, including CAM items. This misconception results in the investor belief CAMs serve as a tool to highlight areas for which the auditor is not comfortable. In light of these findings, I suggest language making this relationship clear be included with the presented CAM to improve its effectiveness. Next experimentally, I attempt to evaluate the effectiveness of various versions of the CAM risk disclosure, including versions with such clarifying language and the language recommended by the PCAOB. As one of the goals of the disclosure is to highlight risk disclosure, I measure the effectiveness of CAMs by evaluating how well each disclosure assists investors in aligning their investment choices and personal preferences for or aversion to risk. I find that although not better than having no CAM at all, CAM disclosure is most effective in creating alignment of investment decisions and risk preferences when there is language that makes clear the sufficiency of the auditor's efforts to substantiate management's assertions related to the CAM area. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the Doctor of Philosophy. / Spring Semester 2016. / April 12, 2016. / Assurance, Auditor Reporting, Critical Audit Matter, Investor decision making, Non-professional investor / Includes bibliographical references. / Allen D. Blay, Professor Directing Dissertation; Richard K. Wagner, University Representative; John "Kenny" Reynolds, Committee Member; Martin "Bud" Fennema, Committee Member.

Prior research suggests auditor resources are quasi-fixed at the office-level: local audit offices operate as semi-autonomous units, and resources are costly to transfer across offices. The objective of this study is to document a relation created by office-level resource constraints; the allocation of additional resources to one engagement is accompanied by a decrease in the resources allocated to concurrent engagements. To accomplish this, I examine the effect a restatement has on auditor effort for both firms issuing restatements and non-restating clients of the same audit office. I document increased audit fees and an improvement in audit quality for restating clients, indicative of additional resources being allocated to high-risk engagements. For non-restating clients of offices issuing a restatement, I document lower audit fees and an increased likelihood of misstatement. The effects for non-restating clients are strongest in offices issuing multiple restatements and in small offices, where incrementally more resources are drawn from concurrent engagements. This study contributes to a better understanding of auditor behavior by providing evidence changes in a single client's risk profile can alter the distribution of office resources and affect audit quality, underscoring the importance of properly assessing and addressing resource limitations. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Spring Semester 2016. / March 29, 2016. / Audit Fee, Audit Production, Discretionary Accruals, Restatement / Includes bibliographical references. / J. Kenneth Reynolds, Professor Directing Dissertation; Yingmei Cheng, University Representative; Allen Blay, Committee Member; Landon Mauler, Committee Member.

One of the outcomes of fraud brainstorming as outlined in PCAOB AS 2110 Identifying and Assessing Risks of Material Misstatement is that auditors should continually be on alert for information or conditions which indicate the presence of fraud in the financial statements. However, the extent to which impressions formed during fraud planning affect subsequent judgments and decisions remains rather unexplored in the literature. This study informs our understanding of the extent to which features of the brainstorming session can influence subsequent judgments and decisions during audit fieldwork. In particular, I examine whether auditors who not only develop fraud hypotheses during brainstorming, but also link these hypotheses to subsequent patterns of audit evidence consistent with them respond with improved skeptical judgments and decisions during audit fieldwork. Additionally, I examine the extent to which the mindset auditors adopt during fieldwork influences their ability to identify and respond to patterns of audit evidence indicative of fraud following brainstorming. I find that auditors who consider patterns of audit evidence that would be consistent with identified fraud hypotheses as part of brainstorming perceive the risk of fraud to be higher during a subsequent fieldwork task, but identify significantly fewer issues consistent with a potential fraud and request fewer follow-up procedures. Moreover, I fail to find evidence that the cognitive mindset an auditor adopts during audit fieldwork significantly moderates this relationship. These findings demonstrate the difficulty associated with fraud detection and in designing solutions to improve auditors' ability to detect fraud, and suggest that auditors need more training in evidence evaluation. / A Dissertation submitted to the Department of Accounting in partial fulfillment of the requirements for the degree of Doctor of Philosophy. / Spring Semester 2016. / February 2, 2016. / Brainstorming, Fraud Detection, Professional Skepticism, Risk Assessment / Includes bibliographical references. / Allen Blay, Professor Directing Dissertation; Gerald R. Ferris, University Representative; Bud Fennema, Committee Member; Kenny Reynolds, Committee Member.

This study examines the association between bank financial reporting opacity, measured by delayed expected loss recognition, and banks’ uninsured deposit financing. In particular, following calls from prior research, I investigate the effects of reporting opacity on this critical source of bank financing, which represents over $5 trillion at 2019. Using quarterly regulatory filings of federally-insured US commercial banks, I confirm a predicted negative association between uninsured deposits and larger delays in expected loss recognition, my proxy for reporting opacity. I also document expected cross-sectional variation, with this negative association accentuated for banks that are not too-big-to-fail (as these lack the implicit government guarantees of too-big-to-fail banks), and some evidence for banks that are not publicly-traded (which have lower overall reporting and disclosure quality relative to publicly-traded banks). My findings contribute to the extant literature on bank opacity, uninsured deposit financing, and the consequences of loan loss provisioning by suggesting that delayed expected loss recognition affects uninsured deposit financing.

Includes bibliographical references. / The globalisation of the South African economy and the recent corporate activity involving South African life insurance companies has renewed interest in financial reporting by these companies. There has been little development in guidance on reporting for long term insurers in South Africa since 1994 when AC121 "Disclosure in the Financial Statements of Long-Term Insurers" was published. South African life insurance companies have also fared poorly in recent Excellence in Financial Reporting surveys. Revisions to the reporting requirements of life insurance companies in the United Kingdom and Australia provide scope for the examination of the usefulness of the financial statements of life insurance companies in South Africa, by investigating the extent and adequacy of disclosure (as proxies for usefulness) by such companies in terms of local and international benchmarks.

Some recent studies have proposed the integration of two prominent learning theories: Cognitive Load Theory (CLT) and self-regulated learning (SRL); whilst other studies have argued against their integration. The purpose of this study is to firstly, explore these arguments regarding the theoretical feasibility of integrating CLT and SRL, and secondly, to assess whether the integration can be empirically validated using the Conceptual Model proposed by Seufert (2018). Regarding the first objective, the findings of this study support the view that the commonalities between the independent learning paradigms outweigh the differences, providing theoretical support for the integration of CLT and SRL. The second objective was achieved by statistically analysing data collected from a postgraduate accounting class. Each participant completed one of three tasks of varying levels of difficulty, followed by a questionnaire that subjectively assessed each participants' cognitive load and self-regulation. The results indicate a statistically significant positive relationship between cognitive load and perceived task difficulty, in line with existing literature. No direct significant relationships were found for the negative relationship theorised between cognitive load and mental resources available, although certain descriptive tests indirectly supported the presence of the negative relationship. Finally, there is partial support for the parabolic relationship proposed by Seufert (2018): there is a significant negative relationship between cognitive load and self-regulation, as theorised in part of the parabola. However, no significant relationship was found for the positive relationship between cognitive load and self-regulation in the parabola. Therefore, this study contributes theoretical support and partial empirical validation, using Seufert's (2018) Conceptual Model, for the integration of CLT and SRL. This study is useful to educators, researchers and professional bodies who are interested in gaining a further understanding, through the integration of CLT and SRL, of the trade-off between the cognitive load experienced during learning, and the learner's ability to self-regulate while learning from various tasks and developing adaptable learners who can self regulate and improve their learning efficiency.

I quantify and explain value-relevant news in textual disclosures using word context. I improve upon traditional methods by: (i) modeling disclosures as sequentially connected and interacting elements (rather than stand-alone narrative attributes), and (ii) directly predicting the magnitude and direction of disclosure news. I apply a new textual analysis approach—a BERT-based neural language model—and find that contextualized news in quarterly earnings announcement text explains five times more variation in short-window stock returns than traditional narrative attributes and offers large incremental explanatory power relative to reported earnings. I also demonstrate that contextualized disclosures strongly predict future earnings, and that large news content arises from (a) word sequencing and connecting words (i.e., context), (b) text describing numbers, and (c) text at the beginning of disclosures. Overall, this study highlights the importance of contextualized disclosures for researchers, regulators, and practitioners.

Bibliography: pages 129-140. / Segmental reporting (breaking down information in financial statements between different business activities and different geographical areas) is mandatory for certain companies in South Africa in terms of the disclosure requirements of AC 115. Such requirements are similar to those contained in other international accounting statements and include the disclosure of turnover, total assets, and operating profit for each industry and geographical segment within which a company operates. The users of financial statements need segmental information to assess the risk, profitability and return of a company, especially when various components of the company differ significantly in rates of growth, profitability and risk. This study investigates users' needs for segmental information and relates these needs to the requirements of AC 115.