Prior literature suggests that the effect of adopting the International Financial Reporting Standards (IFRS) could vary by country-specific or firm-specific factors. In particular, we focus on the effect of the strength of corporate governance of a firm, a firm-specific characteristic, prior to the adoption of IFRS. Specifically, we use the Korea Corporate Governance Stock Price Index, a metric for the corporate governance structure in Korea, to examine whether the corporate governance structure influences the effect of IFRS adoption on the analyst's earnings forecasts in Korea. We find that the beneficial effect of IFRS adoption on analyst forecast errors is observed for firms with moderate corporate governance prior to IFRS adoption, but not for firms with superior or inferior corporate governance. We interpret our findings such that firms with strong or weak corporate governance do not benefit from IFRS adoption, because firms with strong corporate governance already had transparent information system prior to IFRS adoption and firms with weak corporate governance failed to implement IFRS properly.
Samsung BioLogics recognized a big valuation gain when it lost control over a biosimilar joint venture. The investment community expressed concerns about the revaluation gain because the loss of control of the joint venture was attributable to potential voting rights held by the joint venture partner and Samsung BioLogics had incentives to present higher profitability prior to IPO. We suggest the following: (1) timely and full disclosure of the potential voting rights; (2) extensive disclosure about the fair value estimate; (3) a conservative recognition of valuation gains; and (4) a periodic assessment of potential impairment of fair value estimates.
[Purpose] The purpose of this study is to investigate auditors response to Coronavirus Disease(COVID-19). The outbreak of COVID-19 paralyses health, social, and economic parts and eventually it had considerable economic and financial impacts worldwide. To prevent the spread of the COVID-19, the government have urged people to stay at home. The COVID-19 led to negative impact on firms’ liquidity, profits and going-concern assumptions. Therefore, auditors might encounter some challenges during COVID-19 such as new audit procedures, a lack of verifying financial information and exceptional situation of manipulating accounting numbers. We investigate whether auditors input more audit hours during COVID-19.
[Methodology] This study uses 3,800 listed firm-years samples during prior year(2019) and the initial year of the COVID-19 outbreak(2020). We use audit hours of managers, registered certified public accountants, staff auditors, and all auditors for auditors response. To control industry effects during COVID-19, we apply fixed effects on our regression model.
[Findings] We find auditors input more working hours on year-end audits during COVID-19. It indicates that all types of auditors might put more efforts to mitigate audit risk. Also, we find that year-end audit hour ratio is increased during COVID- 19.
[Implications] As COVID-19 increases audit risk and also have auditors adopt a new audit procedures, COVID-19 could be a challenge to auditors. This study empirically shows how auditors respond to COVID-19. The auditors spend more audit hours during COVID-19 to mitigate audit risk and apply new procedures.
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