Strengthening the Governance of National Financial Supervision in the EU: Existing Weaknesses and a Proposal for Reform
In: ERA Forum, Vol 15 No 2
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In: ERA Forum, Vol 15 No 2
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In: Bank of Italy Occasional Paper No. 466
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Working paper
In: Journal of Accounting, Auditing, and Finance, Volume 35, Issue 1, pp. 106-138, 2020
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Corruption represents one of the major causes of poverty all over the world and European Union is fighting against it. In the last few years, the corruption phenomenon registered a high level in some European countries and became one of the most problematic factors for doing business, due to the evolution of the perceived top five global risks: interstate conflict and regional consequences, extreme weather events, failure of national governance, state collapse or crises, high structural unemployment or underemployment (WEF-Global Risk Report 2015, p. 14).One of the modalities in combating corruption is implementing the internal control and most of the governments and organizations adopted strong control techniques. Most of the control weaknesses are related to the financial procedures and the number of controllers. Some of the controllers do not have enough financial expertise or do not understand the importance of informatics systems.
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In: http://hdl.handle.net/2027/uiug.30112033944874
"B-22712."--p.[1]. ; Cover title. ; "GAO/AFMD-88-35BR." ; "February 1988." ; Mode of access: Internet.
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In: Babak Mammadov, Avishek Bhandari; Stressed About Money: The Effect of Employee Financial Pressure on Financial Reporting Outcomes. AUDITING: A Journal of Practice & Theory 2022; doi: https://doi.org/10.2308/AJPT-19-045
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A chapter report issued by the General Accounting Office with an abstract that begins "Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) program to audit income tax returns through correspondence, focusing on: (1) the number, results, and duration of correspondence audits as well as the characteristics of the audited returns; and (2) processes and requirements that IRS has had for years to govern correspondence audits."
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In: 2016, The American Journal of Political Science. Vol 60, Issue 2: 456-471.
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This study aims at examining and analysing factors that cause weaknesses in internal control system of provincial local government. Population of this study is all 34 provincial governments in Indonesia and the studied object is internal control weaknesses identified in the Provincial Government Audit Reports produced by the Audit Board of the Republic of Indonesia. Eighty three reports were used as sample ranging from 2011 to 2015. The research model of this study indicates adjusted R2 at 86% which is much higher than previous studies on this topic, Based on the multiple regression analysis, it is found that the size of local government and the use of information technology have a significant negative effect on the weaknesses of internal control. This implies that Provincial Government needs to use more information technology and allocate more resources on internal control improvement. On the other hand, the complexity of local government and the quality of human resources have positive effect on the weaknesses of internal control. These findings suggest provincial governments with large number of sub-districts to put more efforts in internal control system improvement than others. The provincial government with higher human development index needs more efforts on ethical conduct. This study contributes in investigating both financial and non-financial factors affecting internal control weaknesses of provincial government for longer period of analysis.
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In: Corporate governance: an international review, Band 8, Heft 2, S. 101-116
ISSN: 1467-8683
In: Corporate governance: an international review, Band 32, Heft 3, S. 474-499
ISSN: 1467-8683
AbstractResearch Question/IssueThe objective of this study is to examine whether the effectiveness of internal governance is associated with internal control material weaknesses. We employ the concept of internal governance as the checks‐and‐balances mechanism that subordinate executives apply to the chief executive officer (CEO). We predict that with long horizons and long‐term interests aligned with firms' long‐term growth, subordinate executives may have the incentive to support a high‐quality internal control system, which is an important factor contributing to firms' long‐term success.Research Findings/InsightsUsing data on CEOs' and other highest paid executives' age and compensation to measure the effectiveness of internal governance, we empirically find consistent evidence that internal governance effectiveness is associated with higher internal control quality. In particular, we find that effective internal governance is related to a lower likelihood of firms reporting internal control material weaknesses, fewer material weaknesses in internal control (ICMWs), a lower chance of firms disclosing internal control weaknesses for multiple years, and a lower probability of firms reporting entity‐level and/or account‐level material weaknesses in internal control. We also show that among the two factors forming the internal governance measure, only subordinate executives' horizon is associated with the probability of firms disclosing ICMWs. Our further analysis reveals that the probability of reporting ICMWs is lower for growth firms with effective internal governance.Theoretical/Academic ImplicationsOur findings contribute to the literature on internal governance and internal control quality. The impact of the checks‐and‐balances mechanism inherent in internal governance on firms' investment in the internal control system and thus the probability of disclosing ICMWs has not received sufficient attention from accounting researchers. While prior studies focus on individual members of the management team, our finding implies that the quality of the internal control system is a result of the joint effort of the whole management team. Unlike the extant literature that captures only certain aspects of reporting quality and information disclosures, our study emphasizes the role of the horizon dimension of internal governance in enhancing the reliability of financial reporting (measured as the quality of the internal control system).Practitioner/Policy ImplicationsOur results shed light on the important role of subordinate executives in monitoring CEOs' short‐term interests.
Testimony issued by the General Accounting Office with an abstract that begins "Pursuant to a congressional request, GAO discussed the Defense Security Service's (DSS) personnel security investigation program, focusing on: (1) how decisions to grant or deny security clearances to Department of Defense (DOD) employees and contractors are made; (2) key findings from GAO's October 1999 report; and (3) DOD's actions on GAO's recommendations."
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A letter report issued by the General Accounting Office with an abstract that begins "The Department of Education relies heavily on the central automated processing system (EDCAPS) to support its core financial management information functions, including general ledger and funds management, grant planning and payment processing, and purchasing and contract management. Education's Inspector General (IG) has reported serious information system control weaknesses in this system. These weaknesses increase the risk of unauthorized access or disruption of services and make Education's sensitive grant and loan data vulnerable to misuse, fraud, improper disclosure, or destruction, which could go undetected. Education is making progress in correcting security weaknesses identified by the IG, and the department has taken other steps to improve security. However, GAO identified weaknesses that place critical financial and sensitive grant information at risk of unauthorized access and disclosure and key operations at risk disruption. Specifically, Education did not adequately protect its network from unauthorized users, effectively manage user IDs and passwords, appropriately limit access to unauthorized users, effectively maintain system software controls, or routinely monitor user access activity. Furthermore, Education did not provide adequate physical security for its computer resources, appropriately segregate all key operations and computer functions, effectively control changes to its applications, or fully address its service continuity needs. Education has since corrected some of the weaknesses and developed a corrective action plan to address the others."
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In: Journal of enterprise information management: an international journal, Band 30, Heft 6, S. 964-986
ISSN: 1758-7409
PurposeWith computer technology fast becoming the engine that drives productivity, IT systems have become more pervasive in the daily operations of many businesses. Large, as well as small, businesses in the USA now rely heavily on IT systems to function effectively and efficiently. However, past studies have shown CEOs do not always understand how reliant their business is on IT systems. To the authors' knowledge, no research has not yet examined if financial markets understand how IT affects the performance of businesses. The paper aims to discuss these issues.Design/methodology/approachIn this study, the authors utilize the event study method to examine how financial markets interpret weaknesses in businesses IT systems. The authors examine this in the context of the Sarbanes-Oxley Act – Section 404 requirements and utilize the internal reporting requirement in the annual financial statement filing with the Securities Exchange Commission as a proxy to evaluate how the financial markets interpret IT weaknesses.FindingsUsing an event study, the authors show that the market does not necessarily understand and respond to the effects of IT weaknesses on overall financial performance of firms and thus challenge the efficient market hypothesis theory.Originality/valueA second contribution is methodological in nature. IS researchers thus far have been using limited market benchmarks, statistical tests, and event windows in their respective event studies of market performance. This study shows shortcomings of that approach and the necessity of expanding usage of available event analysis tools. The authors show that using more than one market benchmark and statistical test across multiple time frames uncovers the effects that using a single benchmark and test over a single window would have overlooked.