Critical Matters Research Articles

Early Evidence on the AS 3101 Critical Audit Matters Disclosure

As the deadline looms for companies to comply with AS 3101, the new critical audit matters (CAM) disclosure in the independent auditor’s report, this study evaluates how June 30th fiscal year-end large accelerated filers have already met the deadline with reported CAMs, and provides some insights to companies still looking ahead toward this part of the audit process. Firms reported between one to four CAMs each with the average disclosure consisting of 1.74 CAMs, with 100% of the firms disclosing at least one CAM. We found that 48% of the CAMs that were reported for these firms were related to (1) revenue recognition and, (2) the assessment & impairment of intangibles. And, 57% of the CAMs categorized as acquisition-related issues was related to assessing intangibles as part of an acquisition. Additionally, 84.5% of the firms fall within the manufacturing (51.7%) and services (32.8%) industries. As we are in the time period when December year-end firms must get this process moving, this study provides both firms and auditors with some insights to understanding some of the key challenges that can complicate the audit process and gives them an opportunity to devise a more focused strategic plan of action to get to the December year-end audit.

Conclusion to the special issue: Responding to the opioid crisis-perspectives, challenges, and directions.

Due to a combination of unique circumstances, opioid use and misuse in the United States have escalated dramatically over the past 15 years, resulting in a national crisis. To bring together work that addresses the role that psychologists can play in responding to this crisis, we assembled this special issue. The papers included in this issue underscore critical matters for continued consideration, and point to directions for further action and investigation. Themes that emerged from this collection of papers suggest numerous opportunities for the field as we seek to respond collectively to the crisis now facing our country. (PsycINFO Database Record (c) 2019 APA, all rights reserved).

Kritické gesto a záležitosti péče v souřadnicích ne/způsobilosti

Critique is one of the social sciences' most respectable tasks, especially when its aim is to emancipate people oppressed for their otherness. However, there is also a critique of critique as a disabling tool, replacing the obvious actors revealed as 'fictitious' with synthetic objects that the critic herself deems more 'factual'. This article understands the critical gesture as a pragmatic resource for re-organising the field of dis/abilities. In the first part of the article, we make three critical gestures together with Jose, a person identified as mentally ill. A paranoid vision of a secret conspiracy, a naturalising concept of disease, and the critique of stigma all seek to radically redraw the dis/ability coordinates, but their emancipatory potential is thwarted by the complex interconnectedness of their objects. Jose's recovery thus ultimately hinges on a delicate balancing act combining critique and composing. In this sense, his effort resembles the careful treading of lay and professional critics in the last part of our text, in which we try to solve problems of living with dementia together with the Hanus family. While the critical gesture has an essential role to play here as well, close ethnographic encounters are rather about jointly articulating the critical matters of care, wherein the problematic agencies of both obvious and not-so-obvious actors are acknowledged.

Does Reporting Risks of Material Misstatement in the Audit Report Impact Audit Adjustments? Experimental Evidence from U.K. Audit Partners and Senior Managers

This experimental study examines whether requiring auditors to report risks of material misstatement (and related auditor findings) affects audit adjustments. Experienced audit partners and senior managers in the United Kingdom proposed audit adjustments under three different reporting regimes: (a) an audit report where no risks are disclosed, (b) a report where risks of material misstatement are disclosed, and (c) a report where risks of misstatement are disclosed, augmented with the auditor’s findings with respect to those risks. Our results indicate that disclosing risks of material misstatement without findings has no effect on audit adjustments, but that lower audit adjustments occur when the disclosure also includes findings, and that this result is driven by auditors requiring particularly low adjustments when they indicate a finding that the post-audit account balance is “mildly optimistic” (as opposed to “reasonable”). Results also suggest that this tendency is unintentional. Overall, these findings indicate that auditors unintentionally trade off audit adjustments for disclosures, consistent with increased detailed disclosure providing an opportunity for “moral licensing” that enables auditors to satisfy client demands while also complying with professional standards. From a practice perspective, these results suggest that disclosure of critical or key audit matters as recently required by U.S. and international standard setters may not affect auditor behavior, but that allowing disclosure of additional findings as done voluntarily in some jurisdictions may have the unintended consequence of reducing the size of audit adjustments that auditors require.

불안정성의 시대, 유행 신조어의 남용과 열광이 가지는 위험성: 포스트인터넷아트 (Post-Internet Art)와 사변적 실재론 (Speculative Realism)을 중심으로

The art world, as it enters the 21st century, has been constantly striving to adopt neologism derived from other disciplines in a somewhat precarious undertaking. This study looks at how trendy neologism-such as Post-Internet Art and Speculative Realism in Particular-have been introduced during the past twenty years. Post-Internet Art has found a reputable place in contemporary art even though it suffered from abusing and incoherent usage at adoption and still lacks a clear meaning. Speculative Realism, one of the many forms of elusive non-anthropocentric philosophy, has also been subjected to abuse and misunderstanding; even worse, it is often paired with Post-Internet Art without in-depth theoretical examinations. While Post-Internet Art and Speculative Realism are important and critical subject matters of contemporary art, the indulgence of superficial hypes of trendy neologism can exacerbate the current age of instability and their risks should be clearly recognized.

Bright lines vs. blurred lines: When do critical audit matters influence investors' perceptions of management's reporting credibility?

The Public Company Accounting Oversight Board will soon require auditors to disclose critical audit matters (CAMs) to highlight areas of financial statements which are subject to a higher risk of material misstatement. Concurrently, the Financial Accounting Standards Board and the International Accounting Standards Board continue their efforts to converge both sets of accounting standards, and the newly converged revenue recognition standard contains a relatively limited amount of implementation guidance. I hypothesize and find that CAMs lower investors' perceptions of management's reporting credibility when the financial statement area discussed by CAMs is governed by precise, but not an imprecise, accounting standards. The emphasis of risks via CAMs is incongruent with investors' expectations about the ability of precise standards to reduce financial reporting risks. The results from this experiment with nonprofessional investors provide insights about the interaction between CAMs and accounting standards.

Do critical audit matters signal higher quality of audited financial information? Evidence from asset impairment

ABSTRACTChinese auditing standards mandate the disclosure of critical audit matters (CAMs) in audit reports for all listed companies since 2017. Risk-oriented auditing requires auditors to assess material misstatement risks and provide reasonable assurance on financial statements that should reflect the firm’s underlying economics, regardless whether a CAM is disclosed. However, given a material misstatement risk, if some auditors effectively identify it as a CAM while others do not, the financial information with a CAM would exhibit higher quality than that without a CAM, leading to a positive association between CAM disclosure and the audited information quality. Using asset impairment-related CAMs, we show the relation between asset impairment and worsened economics is notably stronger for companies with an impairment-related CAM than those without any. Further, this association is more pronounced in smaller audit firms. Our findings reveal inadequate implementation of risk-oriented auditing, particularly in audit firms with greater resource constraints.

Gender Mainstreaming in Waste Education Programs: A Conceptual Framework

Gender issues are present in waste management, from daily handling activities through to decision-making processes. In waste education programs, the disregard for views of and contribution by women has resulted in strategies that do not comprehensively address the waste issue, preventing long-standing and sustainable outcomes, while increasing existing gender inequities. Three critical waste matters on education and gender were identified: (1) lack of meaningful involvement and participation of women (and other vulnerable groups) throughout the decision-making processes; (2) lack of inclusion of gender-specific designs and gender-sensitive approaches in the information and education materials; and (3) tendency to devise strategies directed to women only, while exempting the other stakeholders from their responsibilities. This paper presents a closer look into the relationship between waste education and gender, with a proposal of a participatory framework for gender mainstreaming in waste education programs. It includes components to assess the promoting entity of the waste education program and all stages of the program. The framework represents a novel theory and practice contribution for waste education development, to support academics, practitioners, and policymakers, in the quest of achieving equitable and sustainable waste management systems for all.

Consequences of Expanded Audit Reports: Evidence from the Justifications of Assessments in France

SUMMARY Since 2003, French auditors must disclose justifications of assessments (JOAs) in expanded audit reports. Like critical audit matters recently introduced in the U.S., and key audit matters introduced by international standard setters, the purpose of JOAs is to enhance the informative value of audit reports. Based on French audit reports from 2002 to 2011, we analyze the impact of first-time implementation of JOAs, and the impact of new JOAs in subsequent years, on investors (measured by abnormal returns and abnormal trading volume) and on the audit (measured by audit report lag, abnormal accruals, and audit fees). For both first-time implementation of JOAs and new JOAs in subsequent years, we find no significant market reaction to their disclosure and no significant effect on audit report lag, audit quality, and audit fees. Our results suggest that the French expanded audit report did not have the expected consequences on investors and the audit.

Italian foreign policy under the Gentiloni government: do the ‘three circles’ hold in 2017?

ABSTRACTItaly under the Gentiloni government faced significant foreign policy challenges in 2017 against the backdrop of a volatile geopolitical climate. The present chapter employs the ‘three circles’ approach to analyze Italy’s foreign policy, arguing that the three circles approach remains relevant in 2017. In the first Atlanticist foreign policy circle, Italy’s foreign policy influence appears at first blush to have weakened, owing to growing American isolationism and uncertainty surrounding support of NATO and multilateralism more broadly, though the Gentiloni government succeeded to some extent in bridge-building efforts with the United States. In the second European foreign policy circle, Italy’s influence was somewhat enhanced as it took positions of solidarity with its European partners on critical security, economic and environmental matters. In the third Mediterranean foreign policy circle, Italy sought to take on a more active role in addressing the Libyan conflict and the migrant crisis, but its role within this circle was to some degree overshadowed by France following the election of President Emmanuel Macron. On balance, however, Italy continued to focus on its traditional interests within its three foreign policy circles and to seek to leverage multilateral institutions to achieve foreign policy goals within an ever more turbulent global environment.

The Effects of Critical Audit Matter Removal and Duration on Jurors' Assessments of Auditor Negligence

SUMMARY A primary concern facing the PCAOB's requirement of disclosing critical audit matters (CAMs) is increased auditor litigation risk. Evidence with Key Audit Matters from the U.K. indicates auditors may subsequently remove a CAM or continue to report the same CAM for several years. Therefore, we investigate the effects of CAM removal and duration on jurors' assessments of auditor negligence when there is a subsequent material misstatement due to fraud in the account related to the CAM. Using the Culpable Control Model, we predict jurors will assess higher auditor negligence when a CAM is removed than when a CAM is reported and when a CAM is reported for multiple years than for one year. Results from two experiments support our expectations, although results vary depending on complexity of the misstated account. Overall, our findings highlight a quandary for audit firms, where subsequent removal of a CAM increases auditor liability.

The Neighbor Principle, Principal Agent and Stakeholder Theories: Proposed Model to Address Challenges of Digital and Audit Analytics (Presentation Slides)

In view of subjectivity and judgment based elements involved in the determination of critical audit matters, as well as the move to a principles based framework – critical audit matters determined using such a framework, this presentation aims to highlight why a combination of bright line rules and high level principles should be applied to the more innovative phases involving critical decision making – the application of this combination of rules not only reflecting the level of flexibility offered by such a combination, but also the priority accorded to such management decisions which may also embody tactical and strategic elements.

New Auditing Reporting Model: The Final Standard ('AS 3101') (Presentation Slides)

To what extent are critical audit matters, as well as matters relating to subjectivity and judgment likely to impact the future of financial reporting – particularly the need to exercise adequate judgment, reasoning, supervision and other vital mechanisms of corporate governance? This is already impacting the field of Data and Audit analytics. Effective mechanisms of accountability and disclosures procedures – coupled with all important verification and authorization procedures constitute part of essential components which will be required to address challenges presented in this new era.

Critical matters in using Attenuated Total Reflectance Fourier Transform Infrared to characterize the polymer degradation in Styrene–Butadiene–Styrene-modified asphalt binders

Styrene–Butadiene–Styrene (SBS) polymer is widely employed as an outstanding asphalt modifier. However, inevitable field aging will cause degradation of SBS polymer and consequently shortened pavement lifespan. To characterize the SBS degradation of SBS-modified asphalt (SBSMA), infrared spectroscopy is frequently utilized and the infrared intensity of 966 cm−1 peak is usually employed as an SBS content indicator. However, in this study, Attenuated Total Reflection Fourier Transform Infrared (ATR-FTIR), which is a promising alternative to conventional transmission-FTIR, yielded an abnormal 966 cm−1 peak intensity growth after asphalt aging. To investigate this phenomenon, two types of SBSMAs (radial and linear) were laboratorial aged and their infrared spectra obtained by ART-FTIR and transmission-FTIR were compared. It was found that aging significantly reduced the SBS polymer particle size and facilitated SBS dispersion, and a more uniform SBS dispersion combined with the relatively shallow scanning depth of ATR-FTIR (2 μm) caused the different result between ATR-FTIR and transmission-FTIR. A mathematical model was presented to explain this phenomenon. Moreover, a novel infrared index specially developed for ATR-FTIR was proposed to assess the degradation of SBS polymer.

AS 3101: The PCAOB's New Auditor Reporting Requirements

AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (PCAOB, 2017) represents the most significant change to American audit reports in more than 70 years. The new standard form unqualified report, which is required for audits of fiscal years ending on or after December 15, 2017, moves the auditor's opinion to the first paragraph, uses section titles to identify important information, clarifies that the financial statement notes are included within the scope of the audit, and requires auditors to disclose the year they began serving consecutively as the company's auditors. For large accelerated filers in 2019 and smaller PCAOB clients in 2020, auditors must begin identifying and discussing critical audit matters. These are the issues that arose during the audit that involved “especially challenging, subjective or complex auditor judgment.” When AS 3101's reporting requirements are completely implemented, American audit reports will change from three or four paragraphs of standardized boilerplate language to a longer, much more flexible report describing the specific judgments and procedures unique to each client.

Two stories: the emergence of the Vietnamese social media

Should social media be constructed as a Trojan horse (as its detractors fear) or the Flame of Prometheus (as its proponents argue)? Social media take-up in Vietnam arouses both hope and scepticism, and becomes an innovative tool for critical matters. This article examines the blogosphere in Vietnam through a comparative study of the Vietnamese blogosphere and state media. The research found that while state media operate as a voice of the agents of the state, social media provide a means to capture the voice of the community and to participate in public discussion through commentary to posts, as well as a platform for those who want to speak out. As a result, there is a tension between the reporting of general information and the voice of state agencies in state media. The ‘two stories’ that emerge in some political and social issues are told through different approaches and perspectives.

Port and Berth: Safe or Unsafe?

Nowadays, ensuring safety in ports and berths is one of the most important issues in the maritime law. But, in what extent should we understand the notion of safety in ports/berths and which obligatory measures should be taken for providing this safety? This article will try to concisely answer those questions and show through the case law that how the measures can work out. In addition, the article will comprise of some specific legal implications from Azerbaijani law, as well as will introduce some critical technical matters to be done in ports and berths for the sake of safety.

Consequences of Justifications of Assessments in French Expanded Audit Reports

Since 2003, French auditors must disclose justifications of assessments (JOAs) in expanded audit reports. Like critical audit matters recently introduced in the US and key audit matters introduced by international standard setters, the purpose of JOAs is to enhance the informative value of audit reports. Based on French audit reports issued from 2002 to 2011, we analyze the impact of first-time implementation of JOAs, and the impact of new JOAs in subsequent years, on investors (measured by abnormal returns and abnormal trading volume) and on the audit (measured by audit report lag, abnormal accruals, and audit fees). For both first-time implementation of JOAs and new JOAs in subsequent years we find no significant market reaction to their disclosure and no significant effect on audit report lag, audit quality and audit fees. Overall, our results suggest that the French expanded audit report did not have the expected consequences on investors and the audit.

The Effects of Critical Audit Matter Removal and Duration on Jurorss Assessments of Auditor Negligence

A primary concern facing the PCAOB's requirement of disclosing critical audit matters (CAMs) is increased auditor litigation risk. Evidence with Key Audit Matters from the U.K. indicates auditors may subsequently remove a CAM or continue to report the same CAM for several years. Therefore, we investigate the effects of CAM removal and duration on jurors' assessments of auditor negligence when there is a subsequent material misstatement due to fraud in the account related to the CAM. Using the Culpable Control Model, we predict jurors will assess higher auditor negligence when a CAM is removed than when a CAM is reported and when a CAM is reported for multiple years than for one year. Results of our first experiment, in which the CAM relates to a more complex account, highlight a quandary auditors could face in the years subsequent to reporting a CAM such that removal of a CAM that had been reported for multiple years increases auditor liability. Results of our second experiment, in which the CAM relates to a less complex account, provides limited support that CAM removal increases liability. Our results should be of interest to academics, practitioners, and regulators regarding legal implications of the new CAM standard.

Inter-frame forgery detection in H.264 videos using motion and brightness gradients

In the midst of low cost and easy-to-use multimedia editing software, which make it exceedingly simple to tamper with digital content, the domain of digital multimedia forensics has attained considerable significance. This research domain deals with production of tools and techniques that enable authentication of digital evidence prior to its use in various critical and consequential matters, such as politics, criminal investigations, defense planning. This paper presents a forensic scheme for detection of frame-based tampering in digital videos, especially those captured by surveillance cameras. Frame-based tampering, which involves insertion, removal or duplication of frames into or from video sequences, is usually very difficult to detect via simple visual inspection. Such forgeries, however, disturb the temporal correlation among successive frames of the tampered video. These disturbances, when analyzed in an appropriate manner, help reveal the evidence of forgery. The forensic technique presented in this paper relies on objective analysis of prediction residual and optical flow gradients for the detection of frame-based tampering in MPEG-2 and H.264 encoded videos. The proposed technique is also capable of determining the exact location of the forgery in the given video sequence. Results of extensive experimentation in diverse and realistic forensic set-ups show that the proposed technique can detect and locate tampering with an average accuracy of 83% and 80% respectively, regardless of the number of frames inserted, removed or duplicated.