Years In Section Research Articles

Mandatory Disclosure for Ethical Supply Chains: A Conflict Mineral Case Study

Mandatory disclosure requirements for corporate supply chains have the potential to leverage consumer and investor sensibilities to incentivize corporations to source more ethically. Despite their growing prevalence, there are few empirical studies of their effects: whether they actually put pressure on companies remains untested. This Article supplies such evidence by examining the consumer and investor responses to corporate supply chain disclosures made pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act requires publicly traded companies to disclose to the Securities and Exchange Commission whether their supply chain contains “conflict minerals” (minerals important in global supply chains whose sourcing supports the conflict in the Democratic Republic of Congo and surrounding areas). The law aims to give customers and investors information about corporate supply chains, with the hope that they will support companies that source responsibly and punish those that do not. But whether this is actually accomplished is an open question. This Article provides an empirical study of the market responses to three years of Section 1502 disclosures, whose contents were coded to create a novel dataset. Disclosures implying that a company has a higher risk of contributing to the conflict are associated with higher revenues and stock performances than those implying a lower risk. This implies there is no market discipline of bad actors in response to the disclosures; instead, bad actors are rewarded. This is consistent with the finding that the number of companies reporting a higher risk of contributing to the conflict through their supply chains did not decrease over the three years. One potential explanation is that consumers and investors may read disclosures more for signals of a corporation’s honesty or profit-maximization skills than for information about conflict-minerals exposure, and firms disclosing a higher risk of this exposure are more likely to be honest and profit seeking. Because disclosures about supply chains will generally send these signals as well, expecting investors or consumers to discipline the supply chains in response to securities disclosures is unrealistic. But scores for the due diligence procedures and forward-looking commitments in the disclosures generated by an NGO for a subset of the companies are positively correlated with revenues, suggesting how mandatory disclosure regimes might be improved. The NGO’s success in disseminating and analyzing the information suggests that the SEC may not be the best actor for implementing supply chain disclosure requirements and the criteria for the scoring suggest that disclosure requirements should focus more on the reporting of processes so that they are less likely to send a signal about honesty.

Solitary confinement, Section 350, Evin prison in Tehran

I was born in 1985 in Tehran, Iran. I started my political and human rights activism at university by founding a secular student association and publishing student magazines. Because of this, the university disciplinary committee did not allow me to study for two semesters. I was arrested by intelligence officials in 2008 and spent 38 days in solitary confinement in Evin prison (Tehran). That was the first time I was faced with psychological torture. During the repression after the presidential election in 2009, I was arrested for a second time. It was by the Revolutionary Guards (‘Sepah-e- Pasdaran’) and this time I spent about nine months in solitary confinement. This time marked me in many senses. Finally, because of those two incidents, I was convicted by the Revolutionary Court and sentenced to prison. After about six years in Section 350, Evin Prison, I was freed in 2014.

Diamond Grinding or Grooving a Concrete Pavement? Achieving the 4S’s in the 21st Century. A Contractor’s Experience in Australia

Diamond grinding / grooving (DGAG) of concrete pavement is undertaken for a number of different purposes include improve ride (smoothness), increase skid resistance, quieter pavements (silent) and for concrete road revival (sustainability). This technique was first used in 1965 on a 19 year of section of I-10 in Southern California to eliminate excessive faulting. Since then, diamond grinding has become a major element of concrete pavement restoration project in the USA. DGAG was introduced in Australia in the early 21st century. The Company has undertaken diamond grinding / grooving assignments in Australia for the past four years. These assignments were undertaken on new concrete pavements, existing concrete pavements and existing concrete pavement with asphalt overlay removed in New South Wales, Australia. The outcomes of these years of experience shows that the DGAG process is a cost effective process in achieving 4S’s. This paper presents a brief description of some of the DGAG assignment conducted and a summary of the findings.

Early Warnings of Internal Control Problems: Additional Evidence

SUMMARY:Hermanson and Ye (2009; hereafter, HY) find that in the initial year of SOX Section 404 implementation, only 27 percent of accelerated filer firms with an adverse Section 404(b) report had disclosed such material weaknesses (MWs) in internal control in Section 302 certifications in previous quarters of the same fiscal year. We extend HY by examining (1) a more recent time period (using data from fiscal years 2007 and 2008), and (2) both accelerated and non-accelerated filers. We find that the proportion of accelerated filers (with adverse Section 404 reports) that have early warnings (in Section 302 certifications in previous quarters of the same fiscal year) is less than 50 percent even in the fourth and fifth years of Section 404 reporting. We also find that, after controlling for other factors, non-accelerated filers were more likely to have early warnings than accelerated filers in 2008; however, the difference is not significant in 2007. Early warning is more likely for firms with (1) a higher number of MWs, (2) a new CFO, (3) more audit committee members, and (4) more frequent audit committee meetings.

The effects of Section 404 of Sarbanes‐Oxley Act of 2002 on the audit fees of foreign firms listed on US exchanges

Purpose – The purpose of this study is to examine the change in audit fees for US‐listed foreign firms in their first year of providing Section 404 auditor attestation reports for fiscal years ending between July 15, 2006 and July 14, 2007.Design/methodology/approach – During the sampling time period, foreign large accelerated filers had to provide both auditor and management Section 404 reports while the foreign accelerated filers only had to provide management Section 404 reports without the auditor attestation reports. Foreign non‐accelerated filers did not have to provide any Section 404 report. This research design and sample allows the authors to control for the general market‐wide increases in audit fees. The paper examines the annual change in audit fees from the preceding year to the first year of Section 404 compliance.Findings – It is found that foreign large accelerated filers have an average increase of 74 percent in audit fees in this first year of Section 404 compliance, while the foreign a...

Adverse Section 404 Opinions and Shareholder Dissatisfaction toward Auditors

SYNOPSIS: Auditors issuing adverse Section 404 internal control opinions may be viewed as too conservative, or they may be blamed for being partly responsible for the existence of the internal control material weaknesses. Using a sample of 240 companies with adverse internal control opinions and 240 matched “clean” companies in their first year of Section 404 compliance, we examine how shareholder dissatisfaction with the auditors varies depending on material weakness existence/type (company-level versus noncompany-level) and the presence of recent accounting restatements. In the full sample, we find a significant positive interaction between restatement and company-level material weakness—company-level material weaknesses have a greater effect on shareholder dissatisfaction when a restatement has occurred. To provide insight, we partition our sample based on whether test companies have had recent accounting restatements. In the nonrestatement sample, we find that shareholders are less likely to vote for auditor ratification if the company received an adverse Section 404 internal control opinion because of noncompany-level material weaknesses. Shareholders may view the auditor as being too conservative when no company-level material weaknesses are cited and no recent accounting restatements have been issued. In the restatement sample, we find that shareholders are less likely to vote for auditor ratification if the company received an adverse Section 404 opinion with or without company-level material weaknesses cited—but with shareholder dissatisfaction greater for companies with company-level material weaknesses. Hence, in companies with recent accounting restatements, shareholders may blame the auditor for being partly responsible for the existence of material weaknesses (i.e., low audit quality). Overall, the results provide insights into shareholders’ perceptions of auditing and suggest that existing shareholders may sometimes prefer less conservative auditors. We encourage additional research on the role of auditors in protecting current versus prospective shareholders.

Sarbanes Oxley Section 404 Costs of Compliance: a case study

In 2002 US Congress approved the Sarbanes Oxley Act (SOX). Section 404 requires companies to assess their internal controls and acquire an attestation of this assessment from their external auditor. In this paper, we investigate the costs of compliance of this assessment and attestation.The European division of a US listed company is used as a case study. The divisional project approach is described, and costs of compliance for this division are presented in two categories: assessment costs, mainly hours spent by internal staff; and attestation costs, mainly audit fees.The case study shows that the internal hours spent on assessment are approximately 12 times higher than the initial estimate made by the SEC in 2002, and that the realised other expenses are approximately 1.4 times higher than this estimate. Furthermore, a year on year increase of 50 per cent of the company’s audit fee in the first year of Section 404 compliance is found.Companies can reduce the costs of compliance by implementing programmed controls, using auditors from countries with lower rates, remediating material weaknesses only, focusing on the internal control system rather than on individual controls, and by encouraging the auditor to rely on the company’s assessment.

The Third Year of Section 404 Reporting on Internal Control

US public companies recently filed, for the second or third time, management and auditor reports on internal control as required by Section 404 of the Sarbanes-Oxley Act of 2002 (404 reports). This Special Comment summarizes our experience and findings on the credit implications of these reports.

The Second Year of Section 404 Reporting on Internal Control

The Second Year of Section 404 Reporting on Internal Control

42. Close Binary Stars (Etoiles Binaires Serrees)

During the XlXth General Assembly of the IAU in Delhi the number of members of Cotrmission 42 increased to 260. This simply reflects the growing interest and importance of our field. Growing is not only the number of astronomers involved in research on CBS but also the number of papers resulting from that activity. As an example one can quote the numbers of papers listed during the last few years in Sections 117 (Close Binaries), 119 (Eelipsing Binaries), and 120 (Spectroscopic Binaries) of theAstronomy and Astrophysics Abstracts:705(1982), 775(1983), 836(1984), 1080(1985), and 911(1986); note that many additional references could be added to these numbers from other sections. Naturally, such numbers alone do not reflect the quality and even less so the position and significance of the CBS field. Here one could perhaps mention an impressive record of successful research proposals involving requests for the observing time on large, ground based telescopes and on space instruments. Indeed, in spite of a very strong competition from other fields, programs involving CBS are usually placed very high on the priority lists (cf. Sections 2D and 2E). Obviously, the close binary systems, their evolution, and the physical processes which occur in them (accretion, stellar winds, nuclear burning, etc) appear interesting and important not only to those who are involved in their studies but also to astronomers from other fields.

Magnetostratigraphy of the Koobi Fora Formation, Lake Turkana, Kenya

The Koobi Fora Formation, a Pliocene and Pleistocene sequence of sedimentary deposits northeast of Lake Turkana, has yielded numerous fossils and stone artifacts of early hominids. Stratigraphic correlation of the hominid‐bearing deposits throughout the Turkana region was established primarily by the chemistry and isotopic ages of volcanic tuffs and complemented by magnetostratigraphic studies. We have reinterpreted previously published magnetostratigraphy from the upper part of the Koobi Fora Formation because the original stratigraphy and dating of tuffs have been revised. In our reinterpretation we include previously unpublished data from the uppermost part of the formation. The upper magnetozones correlate with parts of the Brunhes Normal‐Polarity Chron and Matuyama Reversed‐Polarity Chron (about 0.6–0.85 Ma) and are separated from the magnetozones of the upper part of the Matuyama (2.0–1.25 Ma) by a disconformity. The Olduvai Normal‐Polarity Subchron is represented within the Matuyama, but the lower part of the Matuyama (2.4–2.0 Ma) is missing due to an erosional disconformity. We have also determined magnetozones in the lower part of the Koobi Fora Formation, which had not been sampled for paleomagnetism during the earlier studies. Our time calibration of the magnetozones is made possible by isotopic dating of several tuffs and by chemical correlation of Koobi Fora tuffs with dated tuffs in the Shungura Formation of southern Ethiopia. The tephra correlations are corroborated by the excellent concordance between the magnetostratigraphies of the Koobi Fora and Shungura formations. The lower part of the Koobi Fora spans the interval from about 4 Ma to 2.4 Ma, within the Gilbert Reversed‐Polarity and Gauss Normal‐Polarity chrons. Rock magnetic studies indicate that detrital magnetite carries most of the stable remanence, although hematite contributes to the remanence as indicated by thermal demagnetization. The hematite, which presumably formed by postdepositional oxidation of original iron oxide grains, carries chemical remanent magnetization (CRM) that diminishes the sharpness of polarity zone boundaries. The CRM accumulated continuously within the uppermost 10 m of sediment below the land surface, so that the CRM reinforces the depositional remanent magnetization within thick magnetozones but obscures magnetozones having durations of roughly less than 70,000 years in sections where the sedimentation rate was approximately 15 cm/1000 years.

Results from Plantings of Marked Trout of Legal Size in Streams and Lakes of Michigan

Intensive creel censuses served as the chief basis for estimates of the effectiveness of plantings of marked legal-sized brook trout, brown trout and rainbow trout at various seasons over a period of from 1 to 3 years in sections of five public streams and in two private streams. Similar data are presented for plantings of rainbow trout in five lakes. Returns from fall planting in streams never exceeded 5.3 per cent; spring and open-season plantings resulted in the recovery by anglers of from 4.9 to 61.9 per cent of the fish released. Fall plantings of rainbow trout in lakes yielded returns up to 66 per cent. Plantings of from 100 to 160 trout per mile of stream averaging 50 feet in width yielded higher percentage returns than did plantings of larger numbers of fish, benefited relatively more anglers, and did not stimulate the catch of native fish. The increase in the catch per hour and the percentage of hatchery fish in the total catch appeared to be inversely proportional to the density of the native population of the species stocked and directly proportional to the number of fish planted. The percentage of the total catch contributed by plantings of moderate numbers of trout in the spring or during the season varied from 1.8 to 30.4. It is concluded that in northern Michigan streams, major dependence for good fishing must be placed on the native or “wild” stock. Rainbow trout and brown trout were caught for at least 8 weeks following planting, although the majority was removed by the end of 4 weeks; few if any brook trout were taken after 4 weeks. Very few planted trout survived one or more winters even in private streams not subject to intensive angling. Most of the trout were taken within 5 miles of the point of release and usually downstream; of the three species, rainbow trout migrated most extensively. From 5.7 to 20.6 per cent of the fisherman-day records showed the capture of marked trout. Apparently as many anglers benefited frown “spot” plantings as from wider distribution by boat. Control experiments proved that jaw-tagging and fin-clipping provided effective methods of tracing fish during the period of investigation and that mortality and the effect on growth of either method were negligible.