Impact of Control Systems on Corporate Innovation

Annotation of Bibliography

1. Commerford, B. P., Hermanson, D. R., Houston, R. W., & Peters, M. F. (2016). Real Earnings Management: A Threat to Auditor Comfort? AUDITING: A Journal of Practice & Theory, 35(4), 39- 56. doi:10.2308/ajpt-51405.
In this article, Commerford et al. review that the real earnings management (REM) is a strategy for controlling financial results. However, there has been little research on how auditors interpret and react to REM. The author uses the auditor’s framework to study how REM affects auditor’ comfort and the way auditors use comfort-building techniques to try to shift to comfort state when REM is present from a discomfort state. This article is helpful in research since Commerford et al., suggest that auditors might terminate a contract because of REM. According to the research analysis, auditors utilize both their reason and their feelings and bodily senses to recognize and attempt to reduce the discomfort that REM causes.
2. Miller, B. P., Sheneman, A. G., & Williams, B. M. (2022). The Impact of Control Systems on Corporate Innovation. Contemporary Accounting Research.
In this article, Miller et al investigate how control structures affect corporate creativity. Innovation is essential to a company’s performance and expansion, enabling businesses to maintain a competitive edge in their sector. By assisting managers in more accurately identifying and patenting their most important intellectual property. Miller et al anticipate that control systems will enhance information flows inside the company. Despite the previous findings that control systems have a favorable innovation impact; this relationship is uncertain because those control systems may produce an overly formalized bureaucracy that would undermine the advantages of innovation effective controls. The study provides necessary information my study since the evidence that increased innovation is connected with successful control systems using a variety of quality measures of control system.
3. Ghafran, C., & O’Sullivan, N. (2017). The impact of audit committee expertise on audit quality: Evidence from UK audit fees. The British Accounting Review, 49(6), 578-593.
Ghafran, C., & O’Sullivan in this article suggest that at the moment, financial knowledge on audit committees is highly valued by governance regulators. This is motivated by the idea that increased knowledge improves the performance of audit committees and, consequently, the standard of the external audit. This research assists my finding in a way that the audit committee knowledge impact on audit fees charged by FTSE350 businesses, one indicator of the quality of audit. According to an investigation by Ghafran, C., and O’Sullivan, audit committees having higher financial experience levels charge more audit fees. When non-accounting and accounting financial experience are separated, researchers discover that the favorable impact is caused by the non-accounting expertise.
4. Pratt, J., & Stice, J. D. (1994). The effects of client characteristics on auditor litigation risk judgments, required audit evidence, and recommended audit fees. Accounting Review, 639-656.
The danger of litigation is a major and growing concern for American public accounting companies. The recent 400 USD million settlement between Young & Ernst the Federal deposit insurance corporation is a sign of how serious the profession’s issues are. In fact, many accounting companies already seem to be evaluating new clients more thoroughly and denying individuals who would have been allowed before the litigation surge. The objective of this research is to analyze the above screening procedure and determine whether some characteristics of clients that have been empirically linked to litigation of audit in the literature of accounting have an impact on auditor litigation risk judgments and their suggestions for the plan of preliminary audit fees of client. This article plays a major role in my study since many accounting companies already seem to be evaluating new clients more thoroughly and denying individuals who would have been allowed before the litigation surge.
5. Ponemon, L. A. (1992). Auditor underreporting of time and moral reasoning: An experimental lab study. Contemporary Accounting Research, 9(1), 171-189.
Ponemon introduces the hypothesis of moral reasoning as a significant factor in the underreporting of time of audit in this article. Actual underreporting in a task of audit was noticed in the experimental lab setup for 88 auditors sample from a national company of public accounting. This article will be helpful in my research because the defining Issues Test results reveal the systematic underreporting correlation with the auditor’s moral reasoning level. The current study adds 3 main new ideas to the fields of psychology and auditing. It first proves the importance of peer pressure like a cause of underreporting. Second, it demonstrates how moral reasoning of auditors might account for actual underreporting conduct when faced with pressure from the job. Thirdly, it exhibits significant underreporting under audits simulation circumstances.
6. Agoglia, C. P., Hatfield, R. C., & Lambert, T. (2010). An Examination of Audit Managers’ Preference for the Underreporting of Time by Their Audit Staff. Unpublished Work, Retrieved from cear. gsu. edu.
According to Agoglia et al., public accounting monitoring organizations have expressed fears that underreporting can have major harmful impacts on quality of audits and may be the first step on a downhill slide to additional unethical activity, all of which will affect an audit risk of firm. Underreporting, sometimes known as “eating time,” happens when certain auditor fail to pay a client for all spent hours on a specific engagement. Due to the unrealistic time limits created by prior underreporting, auditors may neglect to acquire enough information, disclose important findings, and procedures of documents they have not carried out. This article is useful in my research since the compensation system in public accounting is set up so that managers of audits receive bonuses for sticking to staffing budgets and frequently receive sanctions for going over them. As a result, there is a motivation to underreport hours done when real hours worked surpass the engagement’s budget. Agoglia et al examines the extent to which circumstances managers allow those very behavior in their audit team in order to assess the audit manager role in maintaining the underreporting practice.