تاثیر پیچیدگی اطلاعات در شکست حسابرسی ناشی از تقلب شرکت
Abstract
1. Introduction
2. Literature review and hypotheses development
3. Methodology
4. Empirical results
5. Sensitivity analyses
6. Conclusion
Acknowledgements
References
Abstract
This study examines the association between related-party transactions, level of diversification and auditor sanctions arising from corporate fraud. Sample firms are manually collected from the list of auditor partners sanctioned due to corporate fraud published according to the Securities and Exchange Act and the Certified Public Accountants Act in Taiwan between 1992 and 2010. Empirical results indicate that the increasing complexity of corporate information with increasing aggregate monetary values of related-party transactions, especially revenue-based related-party transactions (RPTs), increases the probability of auditor sanctions. Moreover, more complex product diversification raises the likelihood of auditor sanctions. These results support the information asymmetry hypothesis, namely that increasing complexity of corporate information reduces the transparency of information, and thus raises information asymmetry between managers and auditors, resulting in higher audit risk. This investigation suggests that auditors should pay proper attention to providing professional audit work when a company has complex related-party transactions and product diversification. Analytical results could provide research-based evidence for the PCAOB to consider when formulating policy on the auditing of related party transactions (PCAOB, 2014) and the disclosure of engagement partners (PCAOB, 2011).
Introduction
The use of related-party transactions (hereafter, RPTs) to conceal large debts exploded after Enron in 2001, generating further scandals involving false accounting from companies such WorldCom and Merck. Investors around the world began to question the financial information publicized by corporations and to think that it may contain many implicit problems, such related-party transactions, corporate management practices and poor accounting standards. Taiwan had the high-profile Rebar Group scandal, as well as a scandal involving a dozen photoelectric material manufacturers. These problems become more conspicuous as Taiwanese enterprises internationalize and become more diversified in businesses. As the global economy grows, reinvestments and business diversity have led to over-investment, which causes complications with information sources. In particular, the intertwined connections of parent-subsidiary companies can become complicated for auditing. Consequently, engagement in investments, financing and other economic activities relies on the authenticity of corporate financial reports. Meanwhile, CPAs play a major role in these new practices, and they assume legal responsibility for financial statement certifications. Blazenko and Scott (1986) argued that a CPA acts as an overseer who can reduce information asymmetry between competent authorities and investors, and helps to promote the accountability of corporate financial reports for stakeholders. In these circumstances, CPAs are responsible for auditing reviews that must be appropriately expressed and with full disclosure, or they face lawsuits or penalties.