Research Submission 3 due 9/2
Posted: August 27th, 2021
Research Submission 3 due 9/2
Carnes et al (2019, Accounting Review)
2 pointsmax, 1.7 points for good work
Carnes, R.R., Christensen, D.M., and Lamoreaux, P.T. (2019) Investor Demand for Internal Control Audits of Large U.S. Companies: Evidence from a Regulatory Exemption for M&A Transactions. The Accounting Review: January, Vol. 94, No. 1, pp. 71-99.
- In your own words, what is Carnes et al’s (2019) first hypothesis?
| Investors are likely to respond negatively to the revelation that an internal control audit failed to include acquired operations of a company. |
- Model 1 on page 77 defines a variable “opt-out”. What does that variable indicate?
| Opt-out is an indicator variable which equates to 1 if the consolidated company fails to procure an internal control audit for target (i) during fiscal year (t), whereas the indicator equates to 0 when otherwise. |
- Which industry had the highest “opt-out” percentage? (Table 2, Panel C)
| Manufacturing Industry |
- Did Boeing opt out? Refer to the second auditor’s report of 2018 and quote the excerpt.
| Yes, Boeing opted out. Excerpt: The separation and transfer, by Embraer, of assets, liabilities, properties, rights and obligations (subject to certain exceptions) associated with the profitable aviation business unit to a Brazilian closely-held corporation which operates the commercial aviation business and undertakes services concurrentlyundertaken by Embraer. |
- Provide a 100-200 word summary, in your words, of Carnes et al (2019). Cite the authors at least once.
| With the legislation of the SOX Act in the US for all the companies, Carnes et al have sought to evaluate whether the investors would demand for the internal control audits of large US corporations (73). Clearly, the author has cited how difficult it has been for investors to demand for the internal control audit for the reason that the US market capitalization is huge for large firms, thus a lacking of counterfactual information. As much as many companies have been exempted from the acquisitions of internal control audits, managers have been however required to reveal the excluded operations through internal control reporting. In this regard, Carnes et al (75) has opined that investors have reacted negatively upon the disclosure that a company’s acquired operations were exempted from the internal control audit reports. Likewise, the effects of such negative responses among the investors have been stronger, especially if large acquisitions were involved (Carnes et al 93). The reason for such negative response is that investors feel uncertain regarding the actual value of the acquired company. |
- Choose one of the references at the end of the article. Copy and paste the entire reference and attach the article. For instructions on how to find journal articles through the Brooklyn College Library, please see below.
| Altamura, J., &Beatty, A. (2010). How does internal control regulation affect financial reporting?Journal of Accounting and Economics, 49(1-2), 58-74. |
Brooklyn College Library Instructions:
1. Google Brooklyn College Library
2. E-Journals
3. Name of Journal
Expert paper writers are just a few clicks away
Place an order in 3 easy steps. Takes less than 5 mins.