Yuchen Liu (@03915253)
AC793 Accounting Research and Policy
Nov 7th, 2017
Individual Research Critique
I used the research critique framework as the basis of my paper to access the quality of the research paper in a referred journal. The paper is exhibited in Appendix A. This paper examines the association of AC member s social and professional ties with management and other board members and the actions ACs take when accessing (1) the risk of FFR, and (2) management integrity (Wilbanks, 2017). The study has the basis in Sarbanes-Oxley Act (U.S. House of Representatives 2002). Using the survey of 134 U.S. public company AC members, the study finds that AC participants with social ties to the CEO are negatively associated with AC actions to assess FFR risk and management integrity. Wilbanks suggested that the social connection with directors will lower the risk. Wilbanks showed the evidence that AC-management friendship ties were associated with greater earnings management, lower audit fees, a lower likelihood of receiving a going concern opinion, and a lower likelihood of reporting internal control de ciencies; outcomes suggesting that AC oversight is less effective in the presence of certain ties" (Wilbanks, 2017). While the research extends to AC processes and the quality of management, external audit, internal audit, the AC, and others.
Type of Research
The quantitative research mode is presented in this paper because it has a well-developed theory with well-specified variables. The study provides a strong theoretical foundation with two formal types of research to predict the relationship between dependent and independent variables. Also, the study develops and employs mathematical models, theories, and hypotheses pertaining to phenomena.
The author, Wilbanks, is well-trained in the quantitative research and provides a statistical analysis, which starts with the collection of data, based on the hypothesis or theory.
Details of the Research Design
Identify the specific theory, if any, used in the study. This paper briefly basically reviews two literature on Beasley et al. s (2009) and Bruynseels and Cardinael s (2014). The paper summarizes the results of the papers in the literature, which previously examine the AC member s professional and social ties with management and other board members and the actions ACs take when accessing the risk of fraudulent financial reporting risk and management integrity. The paper specifically identifies the different theories built by the literature and points out how to extend the hypothesis for further researches.
Identify research hypotheses. There are three identifiable hypotheses presented in the paper. Wilbanks suggested that the social connection with directors will lower the risk. While the research extends to AC processes and the quality of management, external audit, internal audit, the AC, and others. There are three hypothesis listed after studying the previous researches (Wilbanks et al. 2017): (H1) there is a negative association between AC participants social ties to the CEO or CFO and the AC s efforts to assess FFR risk and management integrity; (H2) there is a negative association between AC participants professional ties to the CEO or CFO and the AC s efforts to assess FFR risk and management integrity; and (H3) there is no association between AC participants social or professional ties to other directors and the AC s efforts to assess FFR risk and management integrity.
The paper specifically identifies two dependent variables: (1) AC actions to assess FFR risk (SumFFRActions), which used 100-point numerical interval sales to measure the six specific AC actions (FFR Analyze, FFR Character, FFR Inter, FFR Whistle, FFR Search, and FFR Expense) to assess FFR risk from Beasley et al. (2009), and (2) AC actions to assess management integrity (SumMIActions), which used 0-100 scale to measure five specific AC actions (MI Body, MI Open, MI Pressure, MI Defensive, and MI Whistle) to assess management integrity from Beasley et al. (2009). The 100-point numerical interval sales allow the researcher to capture a continuous measurement of the intensity of audit committee members' judgments.
Meanwhile, the independent variables in the paper are: (1) social ties to the CEO (STCEO), (2) professional ties to the CEO (PTCEO) and CFO (PTCFO), (3) social ties to other AC members (STOAC) and other independent directors (STOID), and (4) professional ties to other AC members (PTOAC) and other independent directors (PTOID).
Describe the research method used in the study. The study has used empirical data from surveys with one hundred thirty-four AC members from U.S. public companies participated. After eliminating the AC members with principal addresses in non-English speaking countries, duplicates, and AC members who we could not verify served on the AC, the survey finally random sample 542 members for mailing the survey to them. There is a response rate of 25.5 percent based on 526 adjusted sample size.
Assess the analysis used to identify research results. The statistical method used in the paper is examining the linear regression model. Throughout the analyses, the robust standard errors (HC3) are used as needed due to heteroscedasticity (see Table 2 of the paper), the authors investigate the effects of each of the twelve independent variables singularly on each of the two dependent variables. They find that the model is significant to get support for H1 by nding a negative association between AC social ties to the CEO (STCEO) and AC actions to assess FFR risk. The coefficient of PTOID (p=0.08) is marginally signi cant and positive (H3). However, there is no support for H2, as PTCEO and PTCFO are not signi cant.
Describe the logic used to draw conclusions. This study uses deductive logic to start with complement the archival studies and hypotheses and then collect data which used to determine whether empirical evidence to support the existence of hypotheses. The quantitative data are collected by the questionnaires that ask participants to report attitudes, experiences, demographics, etc.
The data gathered from the survey that examine the association between AC participants personal and professional ties and (a) AC members reliance on the CEO/CFO to assess fraud risk, and (b) AC members reliance on their own efforts to assess fraud risk, and the statistical inferences from the simple and multiple linear regressions can be used to emphasize the effects that social and professional ties and governance characteristics can have on AC processes related to fraudulent financial reporting risk and management integrity assessment.
However, the study has limitations. First, the study only focused on the AC participants who are likely to lack the knowledge of all other AC members' ties. And the study needs to expand to a group of AC participants because the AC process is a group activity. Second, the measurement of professional and social ties are not exactly clear even there is written descriptions of the ties.
Especially, the paper shows that the social ties to the CEO can lead a less vigilant ACs. The overall findings complement the recent archival studies that have considered different forms of relationship ties (e.g. Beasley et al. s, 2009; Bruynseels & Cardinaels, 2014).
Writing Quality
Coherent Organization. The ideas in this paper are arranged logically and the flow of thought is easy to follow and understand. The author did not use short or unnecessary long paragraphs or sentences. Currently, the ideas are extracted from the recent archival studies that have considered different forms of relationship ties (e.g. Beasley et al. s, 2009; Bruynseels & Cardinaels, 2014). The principal ideas are developed in separate paragraphs and followed by an explanation of the idea in the remaining sentences in the paragraph.
Conciseness. The paper is to communicate the research in as few words as possible. The author uses the specific words to express the ideas. There is no evidence that they use excess verbiage in communicating. However, some information does not require the full sentence, and can easily be presented as bullet points. For example, the definitions of professional and social ties can be presented as bullet points that the readers can easily notice.
Clarity. The author used clear and concise words with precise meaning to express the ideas. This study uses other statistical techniques, such as descriptive statistics to analyze the date. However, the author can put more effort on removing non-essential words and streamlining the sentence with an active verb creates a sentence construction.
Use of Standard English. Generally, this paper used the proper punctuation, capitalization, and spelling. The author rigorously wrote this paper for specialist publication.
Appropriateness for the Target Audience. This paper is published in Accounting Horizons. The target audience is financial reporting researchers, academicians, and business people. The writing style is generally formal and technical and used the third party language. However, this paper can also use bullets and summary statements as in the qualitative research.
Research Paper Format
This paper does not have a Transmittal Letter, a separate a Title Page or a Table of Contents. These are not needed for a paper published in a journal. The sufficient information about the researchers and their credentials can be found and interested readers and the researchers. This paper contains an Abstract. The abstract provides a concise statement of the objectives of the study, the method used to investigate them, and the findings that ensued in a way to get the reader's attention.
The Introduction section of this paper makes clear points of the Sarbanes-Oxley Act and identify the objectives of the research, the overall plan for the research, and the specific achievable goals for the research.
This paper does not have a The Literature search section. However, it contains a Background and Hypotheses Development section, which also provides a review of the recent archival studies that are viewed as influential on the topic in a concise and focused manner. The paper identifies the theory used in the current paper and states the research hypotheses that are addressing the specific factors identified for investigation. The theory is well enough to communicate its relevance to the study, and the hypotheses follow the theory s predictions. Also, the paper identifies most independent variables and dependent variables and defines the professional ties and social ties to the AC participants.
The Research Method section presents the details of the research design in technical terms with a justification for the appropriateness of the design. The sample selection process, the sample size, and the data collection techniques have been clearly stated in the paper. The survey is designed and used appropriately for testing the research hypotheses.
The Results section has sufficient information about the method used to analyze the data, including statistical or other techniques. First, demographics section provides the characteristics of a population, such as the age, gender and income of the people within the population. Second, the descriptive statistics give a brief summary for the result of the survey. The regression analysis used in the paper is directly related to the objectives and hypotheses.
The Conclusions section presents arguments and conclusions that are based on an appropriate inferential logic. The conclusion is briefly and presents authors insights and interpretations of the evidence. The paper also identifies the limitations and suggestions for future researches.
This paper does not contain Supplements section. However, this paper properly inserts exhibits and tables within the main body of the paper. Finally, there are endnotes at the end of the paper to present additional information of secondary importance.
Summary Statement
Validity:
This paper has a purpose to examine AC oversight of fraudulent financial reporting (FFR) risk and management integrity, and how such oversight varies with AC social ties, professional ties, and governance characteristics.
The paper is based on two published studies that examine the relation between AC social and professional ties and AC oversight processes related to FFR risk and management integrity. The paper introduces the theories and predicts the outcomes.
This study presents the testability which the research uses the valid data.
The replicability component of validity is present in this research because the research can be performed numerous times for corroborative evidence.
The research meets the precision criterion for validity because the research refers to the closeness to reality.
This paper uses the inferential statistics to provide the information and help to access confidence. This confidence level is a frequency of possible confidence intervals that contain the true value of their corresponding parameter. However, this probability will not affect the research results that are close to reality.
This paper is simple to understand, and the research process, the statistical method used, and statistical results are easily communicated.
Freedom from bias. Since the author presents the paper based on the results of the survey, the audience can access the paper to be free from bias. There are no inappropriately mixed personal statements with factual data. The interval scales, 0-100 scales, have been used in experimental studies to measure AC judgments in accounting disagreements. All independent variables in this study (AC participants' STCEO, PTCEO, PTCFO, STOAC, STOID, PTOAC, and PTOID) are measured on the ratio scale, where the scale has meaningful ratio denomination.
Variable isolation. The study succeeds in focusing on relevant variables and to control for irrelevant ones. All the independent and dependent variables clearly state the relationship in the hypotheses. The author holds the internal validity by ensuring that extraneous variables have been controlled and confounds have been eliminated.
Appropriate inferential logic. This study uses inferential logic through the use of simple linear regression models. After gathering the results from the appropriate populations and eliminating the limitations, the external validity is achieved by observing and measuring dependent variables under natural conditions or under an appropriate representation of them.
In conclusion, this study does not have serious flaws and the audience can understand the research objectives, the process, and the results. The study concludes that AC ties and governance characteristics can have on AC processes related to FFR and management integrity assessment . I would use this research paper to draw the conclusion and use for further research. The author acknowledges a limitation by detailing them and states the results may serve to bias against nding signi cant results. The researchers can use this paper which provides avenues for future research.
ADDITIONAL READING
This chapter is based on the assumption that the reader has an adequate understanding of research design and methodology. For detailed coverage of these issues see the following books:
Beasley, M. S., J. V. Carcello, D. R. Hermanson, and T. L. Neal. 2009. The audit committee oversight process. Contemporary Accounting Research 26 (1): 65 122. doi:10.1506/car.26.1.3
Bruynseels, L., and E. Cardinaels. 2014. The audit committee: Management watchdog or personal friend of the CEO? The Accounting Review 89 (1): 113 145. doi:10.2308/accr-50601