Important Clients Research Articles

The Effect of Client Importance and Auditor Tenure on Accounting Conservatism: Evidence from Chinese Companies

The concern over accounting regulation has resulted in studies of auditor independence and audit quality, as measured by auditor tenure, accounting conservatism, and the type of audit firm the client employs (Big 4 or non-Big 4).In this study, we continue the line of research on conservatism and auditor tenure by examining whether accounting conservatism is related to auditor tenure for Chinese firms. We extend the studies by Jenkins and Velury (2008) and Li (2010) in order to examine Chinese firms that have non-Big 4 auditors, and we investigate whether the association exists for the most important and least important clients of these audit firms. Our findings indicate that least important clients employ more conservative accounting techniques as auditor tenure increases. For the most important clients, there is less conservatism, compared to the least important clients, in the early years of the auditor’s tenure. Our study provides more information about the regulatory issue of mandatory audit firm rotation because our results suggest that mandatory auditor rotation may have an adverse effect on the least important clients of these Chinese audit firms.

Client Importance and Auditor Independence: The Effect of the Asian Financial Crisis

This paper investigates the effect of the Asian financial crisis on the relationship between client economic importance and auditor independence. Using data from 1994 to 2001 in six Asian markets (Hong Kong, Indonesia, Malaysia, Singapore, Taiwan and Thailand), we find that auditors are less likely to compromise their independence for important clients after a crisis. The result is consistent with Coffee's (2001) crash‐then‐law hypothesis and supports the notion that financial crisis triggers public concern over auditors’ independence. Furthermore, we find the effect of financial crisis on auditor independence is more pronounced in weaker investor protection regimes.

Obesity and Neglect: It's about the Child

All rights reserved. 10.1016/j.jpeds.2012.02.035 R ecently, controversy has arisen when a proposal for (and subsequent report of) state intervention to protect a child from life-threatening consequences of obesity was countered by assertions that removal of a child from his or her home was never justified by obesity alone. The predominantly negative reaction to considering such an intervention reflects a failure to address two issues: (1) persistent misunderstanding of the purpose of, and the criteria needed for, state action related to child neglect of any cause; and (2) doubt that consequences of obesity alone could ever meet this threshold. In this discussion, we apply principles that guide determination of child medical neglect in general to lifethreatening childhood obesity, and specify the required conditions for state intervention that preserve both the possibility for and rarity of its necessity. The key concept is that extreme obesity alone does not constitute imminent harm, but in rare cases its health consequences do. In these rare cases, pediatricians are obligated, as in any situation of child abuse or neglect, to take necessary actions to protect the child. To paraphrase Bela Schick, a pediatrician has 3 important clients: first the child, second the child, and third the child. The primary mission of a pediatrician or other health provider initiating coercive state action is to protect a child from serious irreversible harm; it is not to blame or to punish parents. The terms “abuse” and “neglect” are unfortunate and misleading in our view, because most cases involve loving, caring parents who, for various reasons, are unable to protect their child from serious imminent harm. State action to remove a child from a home as a last resort to save the child’s life has been authorized by US courts for 130 years, and healthcare providers have had a duty to report such cases for 60 years. Reasons for such an action include physical abuse, sexual abuse, and medical or nutritional neglect. Obesity leading to an imminent life-threatening comorbid condition, such as respiratory failure, liver damage with likely liver failure, or severe diabetes, should be viewed as just one of dozens of examples in which state action might be necessary to save a life. Classifying such a situation as neglect might be appropriate when the family of the affected child fails to seek or provide medical care, or fails to control their child’s behavior to a degree that places the child at risk of serious harm, including death. Criteria justifying coercive state intervention should be stringent, so that removal of a child from the home for any reason is justified and indicated only when the following 3 conditions are present.

Knotworking in Academic Libraries: Two Case Studies from the University of Helsinki

Librarians in academic libraries are facing major changes in their work due to, e.g., the internet, digitization, and increasing use of new channels for information retrieval by their most important clients, namely researchers. This creates challenges for librarians: both to deepen their own expertise and to develop innovative service models for their clients. In this paper we present a development project entitled ‘Knotworking in the Library’ from the Helsinki University Library. The project made use of the Change Laboratory method, which is an intensive developmental effort which facilitates improvements in the activities of organizations and changes in the organizational culture. The process started in Viikki Campus Library in 2009–2010 and continued in the City Centre Campus Library in 2010–2011. The aim was to create new kinds of partnership between libraries and research groups in the form of knotworking. By knotworking we mean a boundary-crossing, collective problem-solving way of organizing work. The knotworking model presented in this paper generated practical tools to assist selected research groups in dealing with data management related-issues.

Your Former Employees Matter: Private Equity Firms and Their Financial Advisors

This paper shows that former investment bankers become important clients for their previous employers and also provide access to profitable business opportunities to their new private equity employers through their previous employment networks. I observe 1,326 individuals directly involved in 1,285 transactions, of whom a large majority have changed their occupation from financial advisor to private equity professional. The social networks arising from these labor market movements affect private equity firms’ choices of financial advisors, as well as the sourcing, pricing, and performance of deals.

Client importance and audit partner independence

We use data from Taiwan where audit partners are required to sign audit reports to examine whether audit partners compromise their independence for economically important clients. Uniquely, we include both listed and unlisted clients in audit partners’ client portfolios and separately study these clients for Big N and non-Big N auditors. We employ multiple proxies for auditor independence, including various abnormal accruals measures, the propensity of audit partners to issue modified audit opinions, and the probability that clients meet or just beat earnings targets. We fail to find evidence that Big N audit partners compromise their independence for economically important clients; however, we find such evidence for non-Big N auditors. Our results are robust to a battery of sensitivity analyses. While our inferences are limited to the Taiwanese capital market, our study may be of interest to market participants and regulators in other well developed capital markets.

Hedge Funds and Analyst Optimism

This study explores the relationship between hedge fund equity holdings and sell-side analyst recommendations. In line with anecdotal evidence which suggests that sell-side analysts are now under tremendous pressure to generate brokerage commissions from their lucrative hedge fund clients, we show that sell-side analysts tend to issue buy and strong buy recommendations on stocks predominantly held by hedge funds. These stocks do not deserve the flattering reports lavished by analysts. Relative to other buy and strong buy recommendations, these favorable recommendations parlay into poorer three-month and six-month stock returns going forward. Hedge funds take advantage of the flattering reports by concurrently offloading their stock holdings. We obtain similar conclusions with analyst upgrades and downgrades, relative recommendations, and 12-month price targets. The findings are robust to adjustments for analyst stock coverage, and are stronger for seasoned analysts, indicating that analysts are not simply incorporating information embedded in hedge fund holdings. Consistent with the notion that analysts are driven by brokerage commissions, analysts are more likely to craft optimistic reports for stocks held by high dollar turnover hedge funds than for stocks held by other less important hedge fund clients. Finally, hedge funds ameliorate the reputation cost of a buoyant recommendation by voting biased analysts as all-stars. Our results suggest that in a post Spitzer-era, Wall Street research departments, having been forcibly weaned off investment banking revenues, now contend with new hedge fund-induced conflicts of interests.

NEW PRODUCT DEVELOPMENT (NPD) SERVICE SUPPLIERS IN OPEN INNOVATION PRACTICES: PROCESSES AND ORGANIZATION FOR KNOWLEDGE EXCHANGE AND INTEGRATION

New Product Development (NPD) service providers have assumed a prominent role in enabling a more widespread use of Open Innovation strategies, thanks to their ability to acquire, recombine and sell specialized knowledge and technologies. This paper adopts the point of view of the NPD service provider to investigate the approaches it can employ in order to favor knowledge exchange with its clients, throughout the service delivery process. The research relies on a multiple case study, which focuses on three collaborative projects undertaken by a worldwide leading provider of NPD services with some of its most important clients. The analysis reveals some important findings. First, the NPD service provider uses standard approaches, both as regards process and organizational variables, to address two critical barriers toward a successful completion of the inter-organizational relationship: the tacit nature of the knowledge to be exchanged and the difficulties in predicting the content of collaboration activities. Second, in implementing these approaches, the NPD service provider takes into account the distinctive characteristics of each client and the peculiarities of the specific collaborative project. Besides providing several managerial insights that will be useful for managers working in NPD service providers, the paper contributes to the academic debate, e.g., investigating the importance of trust in successful inter-organizational knowledge exchange processes.

Has SOX Affected the Association between Fee Dependence and Auditors’ Going-Concern Opinions?

Recently, Li (2009) reports that an auditor’s going-concern decision is unaffected by pressure from her economically important clients in 2001, but is positively affected in 2003. Li attributes these findings to enhanced auditor independence under the Sarbanes-Oxley Act (SOX) of 2002. However, this interpretation seems premature, as failures to issue going-concern reservation are generally regarded as a serious violation of independence which auditors will try and avoid even before the passage of SOX. Moreover, several audit-related SOX provisions did not become effective until 2003. Our study sheds light on Li’s (2009) surprising findings by extending her post-SOX period to 2007 and conducting parallel analyses using a more comprehensive logistic regression model developed by DeFond, Raghunandan and Subramanyam (2002). Unlike Li (2009), we fail to find any association between the incidence of going-concern opinions and economic bonding using either model in 2004–2007. Her findings for 2003 are also very sensitive to model specification and sample choice. We then add to the models an interaction term between economic bonding and an indicator variable, denoting firms with high non-audit service fees in 2001 and hence most affected by SOX. This term is insignificant in 2003–2007, implying that SOX has not improved independence even for targeted firms. Expanding Li’s model to include five additional control variables in DeFond et al. (2002) yields qualitatively similar results as DeFond et al. Thus, the phenomena identified by Li (2009) appear to reflect auditors’ response to the aftermath of accounting scandals and/or the publicity surrounding SOX.

CITIZENS AS ANRECEIVEROF MARKETING ACTIVITIES OF TERRITORIAL SELV-GOVERNMENT

Evaluation of marketing activity oriented for citizens, implemented by self-government territorial units is a main task of the work. Citizens are an important segment of marketing activity. The promotional campaign was implemented in the commune Zabierzow. Citizens are treated as a side in the process of benefits exchange and a source for gaining by the community the development factors. research results confirmed, that citizens are the most important private clients of community, and theit participation in implementation of development program are very important.

Part II: Consulting: Helping clients plan, adapt, choose … and much more

Part II: Consulting: Helping clients plan, adapt, choose … and much more

Using whitelisting to mitigate DDoS attacks on critical Internet sites

As DDoS attackers pursue monetary profit, critical Internet sites (CISs) become a good target. These attacks will be more difficult to defend because the botnet size continuously increases, and the attackers spare no pains in preparing the attacks. Under this new paradigm, current anti-DDoS systems may be fooled; we need a new survival strategy. We propose a novel DDoS mitigation scheme for CISs. We observe that CISs can continue their main businesses if most important clients can access the services. This motivates us to build a whitelist, called a VIP list in this article, and the source addresses in the list are given higher priority when the CIS is under attack. The VIP list is built from the previous login logs of authentication processes at the application layer. The experimental results show that the proposed scheme effectively mitigates DDoS attacks.

Client Importance, Institutional Improvements, and Audit Quality in China: An Office and Individual Auditor Level Analysis

ABSTRACT: This study examines how the legal and regulatory changes in China affect the relationship between client economic importance and audit quality. At the individual auditor level, we find that the propensity to issue modified audit opinions (MAOs) is negatively correlated with client importance from 1995 to 2000. However, from 2001 to 2004, when the institutional environment became more investor-friendly, the propensity to issue MAOs is positively associated with client importance. These findings are corroborated by an analysis of regulatory sanctions. Although client importance measured at the office level is also negatively related to the propensity for MAOs from 1995 to 2000 without controlling for the auditor-level client importance, this result is sensitive to model specification and sample composition. Our results suggest that (1) institutional improvements prompt auditors to prioritize the costs of compromising quality over the economic benefits gained from important clients; and (2) the impact of client importance on audit decisions appears to be different at the individual auditor and office levels.

Does Client Importance Affect Auditor Independence at the Office Level? Empirical Evidence from Going‐Concern Opinions*

This paper investigates whether client importance affects auditor independence within the local offices of audit firms. Client importance is measured as the proportion of audit fees, non-audit service fees, or total fees that a distressed, public client contributes to the total public-client revenue earned by the individual audit offices. Auditor independence is measured as the auditor's propensity to issue a going-concern opinion. The paper focuses on changes in the relation between fee ratios and auditor reporting decisions from the pre-SOX (2001) to post-SOX (2003) period. In the pre-SOX period, I do not find statistically significant association between any of the fee ratios and the auditor's propensity to issue a going concern opinion. However, in the post-SOX period, I find evidence that higher audit fee and total fee ratios are positively associated with the auditor's propensity to issue a going concern opinion. That is, post-SOX, relatively more important clients are more likely to receive a going concern opinion. These results allay concerns that auditor independence is compromised for significant clients.

Cooperative Banks & Local Government Units - Areas of Collaboration (Poland Case Study - Research Results)

In 1990 Poland reactivated local governments and several years later the territorial reform introduced two new (apart from communes) local government levels: counties and provinces. This led to the increase in the number of entities running specific activities and therefore needing various banking services. Local governments are attractive clients for banks, because they have at their disposal significant and absolutely credible financial resources. Moreover, local governments have a big developing potential and numerous needs. Apart form that, the number of local government units makes them important clients of banking industry now and in future. The value of the cooperation becomes even more important in the context of Poland's presence in the EU. The aim of the article is to present the scope and character of cooperative banks' collaboration with local government units in Poland, as well as to identify the basic obstacles in this collaboration indicated by various cooperative banks. The author of the article presents the results of the questionnaire survey conducted as for 31/12/2007 among 140 cooperative banks, associated in one of Polish associate banks and serving nearly 600 local government units in Poland. The research results presented in the article concern cooperative banks' policy towards local government units concerning bank account and term deposit services. Moreover, the article describes the level and character of the units' indebtedness in the selected cooperative banks. The conclusion presents the main obstacles of collaboration between cooperative banks and local government units, as well as the banks' relevant expectations from the associate bank. Apart from that, the author attempts to evaluate the collaboration and indicates changes that ought to be introduced in order to make the collaboration more efficient.

Political Economy, Client Economic Importance and Auditor Independence: Some Evidence from Chinese Non-Big 4 Auditors

This paper shows that politically connected non-Big 4/5 auditors are associated with lower levels of audit quality (proxied by the level of abnormal non-core earnings and the proportion of modified audit opinions) than firms with no political connections. We also show that more economically important clients are associated with lower levels of audit quality. This result is in contrast to US evidence that client economic importance is not significantly associated with Big 4 auditor independence because of the need to protect auditor reputation. Further analysis shows that the negative association between political connections and audit quality is stronger for more economically important clients. Using a smaller data set, we show that the relationships we document initially become weaker after the introduction of the Auditor Disaffiliation Program which suggests an overall improvement in auditor independence after the program, ceteris paribus.

Helping Informal Caregivers with Responsive Communication in the Adult Day Care Center

Informal caregivers of older users of adult day care centers are important clients for promoting the quality of services related to them. From the perspective of quality management, responsive communication and training provided to informal caregivers would enhance the caregivers' knowledge about the services of the center and thereby their perception about the helpfulness of the center. These effects are the focus of examination in the present study, which surveyed 508 caregivers affiliated with 22 adult day care centers in Hong Kong. The study measured the responsive communication of the center by aggregating care-givers' perceptions. Results support the hypothesis by revealing the contributions of the responsive communication of the center and the caregiver's knowledge to the caregiver's perception of helpfulness of the center. Moreover, responsive communication appears to foster the caregiver's service knowledge.

Do Analysts Revise Their Recommendations to Facilitate Trading?

Analysts should play an important role in making stock prices properly reflect changes in the value of listed firms’ operations. Yet research shows that there are systematic biases in analysts’ research induced by personal conflicts of interest faced by the analyst. This paper reports research concerning brokerage firm’s clients’ response to analysts’ recommendation changes on the Helsinki Stock Exchange from 1995 to 2004. The issue that we focus on is whether there is evidence that recommendation changes are used to facilitate execution of trades for important clients rather than as pointers to existing misevaluations in the stock market. Our results reveal that some recommendation changes seem more likely to have been generated by an attempt to execute a sizeable order rather than by genuine revision of expectations concerning the future profitability of the analyzed firm. JEL classification: G14; G24

The Power of Law Firm Partnership: Why Dominant Rainmakers will Impede the Immediate, Widespread Implementation of an Autocratic Management Structure

Consultants and commentators have suggested that law firms would benefit from the implementation of effective business management practices. Specifically, a number of observers maintain that the partnership model by which virtually all law firms operate is outdated and inefficient. To alleviate this inefficiency, commentators claim that law firms could experience tremendous gains through the adoption of a corporate management model. Although the proposals advanced by observers differ slightly, the basic premise of the suggested solutions requires law firms to replace (or at least modify) their partnerships with a rational management structure in favor of a centralized leader who can best maximize efficient client service and lawyer satisfaction. Although sound in theory, this paper argues that such a transformation is likely to be extremely difficult, given the current distribution of power within the large law firm. More specifically, a structural conflict exists between the best interests of the firm and the firm's most powerful rainmaking partners because the dominant rainmakers are both mobile and the most powerful actors within law firms. Law firms rely heavily on their most productive star lawyers because these individuals generate a significant amount of revenue and service the firm's most important clients. Consequently, these partners wield a considerable amount of power within the firm. But because the new model requires that power shift from the rainmaking partners to a centralized leader, it is unlikely that the powerful partners will easily relinquish the authority and influence they currently enjoy. Consequently, those attempting to modify the firm's management structure, and therefore alter the distribution of power within the firm, have the arduous task of garnering the approval of the firm's rainmakers since these are the lawyers who are in a position to thwart any proposed transformation.

Prostitution and fellatio

Questionnaires gathered from men arrested while trying to hire female prostitutes in three Western cities indicate that the desire for fellatio is an important reason clients seek female prostitutes. Respondents were more likely to select fellatio than any other practice when asked which sexual practices they (a) had ever experienced with a prostitute (81% in comparison to 55% for vaginal sex; N = 995), (b) usually experienced with a prostitute (51% in comparison to 12% for vaginal sex, the second most common practice; N = 926), and (c) experienced during their most recent sexual encounter with a prostitute (68% in comparison to 43% for vaginal sex; N = 424). Though a majority of respondents (65%) found the practice of fellatio very appealing, an even greater proportion expressed that opinion about vaginal intercourse (76%; N = 55). These findings, when analyzed in the context of other research on sexual practices, suggest that the desire for fellatio may be one reason some men seek prostitutes.