Accounting - Theses
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ItemEssays on the intermediation of investors( 2020)Institutions that intermediate between investors and companies are crucial to the proper functioning of capital markets. These institutions provide marketplaces for and facilitate the transaction activity of investors, gather and disseminate information, and record the property rights of securities holders. The effectiveness of these institutions should be valuable to economies as they allow investors to effectively exercise and maximize the rights of ownership (La Porta et al., 2002; Claessens and Laeven, 2003; Hail and Leuz, 2006; Dixit, 2009). This thesis contains two essays that examine the value of different institutions involved in such intermediation. In the first essay, I examine the effect of securities transfer agents. Transfer agents are used to intermediate between the company and company-registered shareholders. Their primary responsibility is the proper maintenance of shareholder records, and the administration of shareholder transactions. Recent compliance failures by transfer agents, including reported acts of malfeasance by transfer agent staff, have increased regulatory scrutiny of the industry. Follow these events, the Securities and Exchange Commission (“SEC”) has released draft updates to the existing transfer agent regulatory requirements designed to improve the quality of transfer agent services and prevent further failures. Given concerns regarding the effect of this regulation on the costs of operating securities transfer agencies and competition, I examine two questions relevant to the regulatory discussion: Do transfer agents differ in quality? And, do these quality differences matter to investors? In the second essay, I examine the effect of the minimum price requirements (“MPRs”) of the NASDAQ and New York Stock Exchange (“NYSE”). MPRs permit exchanges to delist firms with stock prices persistently below $1.00. Proponents of MPRs argue they allow exchanges to maintain the quality of listed companies. Critics of the requirements argue they lack fundamental basis, limit access to capital, and harm investors. The merits of MPRs are likely rooted in the quality of firms subject to MPRs, the response of firm managers to (potential) breaches of MPRs, and the steps taken in the event of forced delisting. In this essay, I focus on the actions of firms in response to noncompliance with MPRs and examine whether these noncompliant firms respond by increasing news flow to the market.
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ItemThe demand determinants of non-audit services: an empirical analysis with implications for auditor independence( 2001)Auditor independence is being increasingly questioned in a public debate about the joint provision of audit and non-audit services (NAS) by auditors to their corporate clients. Regulators are concerned that auditor firms which provide material consultancy services to their audit clients are likely to have their independence impaired either through conflicts of interest or fee dependence or both. Public accounting firms (the auditors) deny these risks. Positive accounting theories, such as agency theory and costly contracting theory, have supported the regulators' concerns by arguing that economic bonding between auditor and client is likely to be increased by the provision of NAS by the incumbent auditor, and hence lead to an impairment (real or perceived) of auditor independence. However, academic research into the nature of the association between auditor independence and the provision of non-audit services has been inconclusive and has failed to provide a definitive resolution to the debate. A reliable, comprehensive NAS fee model is a necessary prequel to greater insights into this debate. Guided by Firth (1997) and Craswell, Guz and Francis (2000), this study hypothesises a model reflecting three demand determinants for NAS: (i) the company's ex ante need for NAS, (ii) the auditor's NAS industry expertise and (iii) the company's willingness to appoint the auditor (given a portfolio of endogenous corporate governance practices and given a set of exogenous agency cost and political cost circumstances). The data set of 432 companies is selected from the "Top 500" Australian companies listed on the ASX in 1997. OLS regression analysis strongly confirms the model's first two demand determinants. First, a company's complexity, the extent of its restructuring activities, its appointment of a new CEO and its poor performance are all shown to be significant dimensions of its "need for NAS". Secondly, the important role of a NAS industry expert is a significant new finding in the NAS fee literature. The third determinant, the "willingness to appoint" is not comprehensively tested. Nevertheless some auditor independence issues associated with the "willingness to appoint" are explored. Auditor independence appears to be of concern to companies exposed to high political costs while it does not seem to be of concern to companies facing high agency costs. However, this study argues that auditor independence needs to be considered as part of a portfolio of other corporate governance practices/positions, which taken together, influence a company's willingness to appoint an incumbent auditor to the NAS consultancy. The demand determinants for NAS are also found to be robust across various partitionings of the data and in a novel re-specification of the model focussing on periodic increases in the level of NAS fees. Some limitations are acknowledged but exciting prospects for further fruitful research are recommended.
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ItemA philosophy of accounting( 1938)This thesis is an exposition of the fundamental principles of Accounting and their relation to the technical form in which financial transactions are expressed. The need for a clear statement of the scope and method of Accounting is painfully expressed in the difficulties which students experience in grasping its basic principles and in translating financial transactions into accounting form through their application. The fundamental relations in Accounting are not adequately dealt with in any text book suitable for Australian conditions; this handicap is severely felt in this country, as examination results constantly bear witness. Accounting, even under the best conditions, is not an easy study; it demands a clear and logical mind and a keen appreciation of relationships. With an understanding of the basic principles, however, it is a study which undoubtedly yields great results for patient and earnest effort. The purpose of this thesis is to help towards this understanding of essentials and to promote the appreciation of the underlying unity of Accounting procedure. To achieve this purpose, the first requirement is an examination of the concept - Accounting - itself. Accordingly, Part 1 deals with the scope and nature of Accounting, and tests its claim to be regarded as a science. Part 2 sets out the basic principles upon which the whole of accounting procedure is founded, while Part 3 deals with the method by which these principles are applied to the practical exigencies of everyday financial transactions.
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ItemAccounting conservatism: evidence from the oil and gas industry( 2004)Prior evidence in the oil and gas industry suggests that investors, when assessing firm value, seem to distinguish between different degrees of accounting conservatism that result from the application of the successful efforts (SE) method versus the full cost (FC) method. However, research addressing the valuation implications of accounting choice in the oil and gas industry primarily investigated periods prior to the issuance of SFAS 121. The effect of SFAS 121 on accounting conservatism in the oil and gas industry and hence on the usefulness of the SE method, relative to the FC method, remains untested. This study extends the existing literature by re-examining the effect of accounting conservatism on the usefulness of accounting numbers produced by SE and FC methods during the period 1995-2001, a period in which both SFAS 121 and the ceiling test rules were applied. Empirical results show that in an environment of both SFAS 121 and the ceiling test, there is no difference between SE and FC firms with respect to conservatism associated with the application of accounting rules. Moreover, the results show that the usefulness of accounting numbers to investors does not differ across SE and FC methods. That is, investors attach no valuation premium of one method over the other in the oil and gas industry. This examination provides updated evidence that should be of interest to regulators and standards setters.
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ItemAn architecture for computer-based accounting information systems( 1991)The question addressed in this thesis is whether cost-effective, computer-based accounting systems can be used to generate "better" accounting information than existing transaction processing accounting systems. The first half of the thesis is devoted to gathering and summarizing information about how computer-based accounting systems work today, and what might constitute "better" accounting information. Data about present-day computer-based accounting systems was collected by mail questionnaires and personal reviews of widely-used packaged accounting software. Information about what constitutes "better" accounting information was collected, first, by reviewing the normative accounting literature, second, by reviewing the empirical literature on the inflation accounting experiments in the US (SFAS 33) and UK (SSAP 16), and third, by reviewing the academic literature on computer-based accounting, particularly the work of Ijiri, McCarthy, and Weber. To reconcile the apparent conflict between the empirical evidence that (a) inflation accounting is essential in times of very high inflation and (b) the empirical studies had found very little evidence of additional information content in SFAS 33 and SSAP 16 reports, it is suggested that the benefits of inflation accounting must only become apparent when general price-level changes exceed, say, 15% - 20% p.a.. Thus the ideas of the normative theorists are not rejected, and it is decided that a computer-based general ledger system that (a) is inflation-tolerant, (b) draws its data from the firm's transaction processing system database, and (c) can provide accounting reports based on different sets of accounting rules (called Multiview Accounting), would be likely to meet the objectives for the thesis. The second half of the thesis focuses on the design of such a system. To build inflation-tolerance into the profit measurement system, it is proposed that the constant-value journal entries and constant-value ledger account balances of conventional ledger systems should be replaced by formulae like those in spreadsheets. It is shown that a coherent system of double-entry bookkeeping, called Formula Accounting, can be developed, where ledger account balances may be functions of any variable that is likely to change in value over time, e.g., time itself, stock market prices, and price-index series. For automatic generation of Formula Accounting (FA) journal entries it is proposed that either the firm's many special-purpose transaction processing systems should be modified, or that a combination of (a) a specially-defined accounting data model (called the REE model), and (b) a computer program that encodes the rules used by accountants when they prepare journal entries (called an Interpreter), should be developed. To demonstrate the feasibility of all these proposals, a prototype REE-Interpreter-FA system was developed in roughly 4,000 lines of Prolog. Multiview Accounting is illustrated by using the prototype system to generate Historical Cost and Current Cost/Constant Purchasing Power interpretations of representative Exchange Events for both a trading firm and a manufacturing firm.