Team presentation -current issues
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The document tests three objectives related to whether audit fees vary with agency problems in high free cash flow companies. The objectives are: 1) test if audit fees are higher for high vs low free cash flow companies, 2) test if debt reduces audit fees by acting as a monitoring mechanism for high free cash flow companies, and 3) test if dividends and share repurchases mitigate audit fees. The document finds audit fees are higher for high free cash flow companies and vary negatively with debt, but not dividends or share repurchases. It concludes by noting limitations and areas for future improvement.
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The document discusses ratio analysis, which involves determining the quantitative relationship between items in financial statements. It defines different types of ratios like liquidity, leverage, activity, and profitability ratios. Specific ratios discussed include current ratio, quick ratio, debt-equity ratio, debt-to-total funds ratio, proprietary ratio, and fixed assets to proprietor's funds ratio. Advantages of ratio analysis include aiding analysis, comparative studies, locating weaknesses, and forecasting. Limitations include inability to compare firms with different accounting policies and ratios being impacted by inflation.
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http://flevy.com/blog/whats-the-impact-of-ratios-in-financial-analysis/
Financial statement analysis can be referred as a process of understanding the risk and profitability of a company by analyzing reported financial info, especially annual and quarterly reports. In other words, financial statement analysis is a study about accounting ratios among various items included in the balance sheet.
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The most important benefit if financial statement analysis is that it provides an idea to the investors about deciding on investing their funds in a particular company.
Another advantage of financial statement analysis is that regulatory authorities can ensure the company following the required accounting standards.
Financial statement analysis is helpful to the government agencies in analyzing the taxation owed to the firm.
Above all, the company is able to analyze its own performance over a specific time period.
From the above, it is obvious that only way for financial analysis is ratio analysis.
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What is the role/Importance of ratio analysis in financial analysis?
What are its advantages?
How it helps out in decision making?
How it helps the auditor in assessment of the risk of material misstatement?
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Weight
%
1/Poor /Lacking Info
2/Sufficient
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4/Advanced
Score
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10
Introductory elements were omitted and/or contained errors.
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Introductory elements were included and completed correctly, including a detailed executive summary that thoroughly summarizes the business model and captures the interdependence of 9 blocks.
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CVP was partially discussed or some was omitted. Explanation of how a CVP which distinguishes itself from its competitors was missing.
CVP was partially discussed and seemed to lack a complete line of solutions on “jobs-to-be-done”. Explanation of how a CVP which distinguishes itself from its competitors was missing.
CVP was clearly identified and included a complete line of solutions on “jobs-to-be-done”. Explanation of how a CVP which distinguishes itself from its competitors was unclear.
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The different types of customer segments was discussed including the identification of the target customer.
The different types of customer segments was thoroughly discussed including for whom are firm creating value, why are they firm’s most important customer.
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The types of customer relationship was partially discussed but lacked mention of any specific information.
The types of customer relationship was partially discussed, but have not enough explanation on establishing and maintaining process.
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The types of customer relationship was fully identified, and how firm established and maintained them are thoroughly discussed.
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How a firm deliver its value proposition to its targeted customers through different channels was partially discussed but lacked mention of any specific information.
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How a firm deliver its value proposition to its targeted customers through different channels was identified. Speed and cost-efficiency are discussed
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Financial statement analysis can be referred as a process of understanding the risk and profitability of a company by analyzing reported financial info, especially annual and quarterly reports. In other words, financial statement analysis is a study about accounting ratios among various items included in the balance sheet.
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Above all, the company is able to analyze its own performance over a specific time period.
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What is the role/Importance of ratio analysis in financial analysis?
What are its advantages?
How it helps out in decision making?
How it helps the auditor in assessment of the risk of material misstatement?
These are some questions the answer of each must be known by every professional, business man and by user of financial statement. Some of you may already know about these. The answer of these questions must be part of professional’s life and business man must know to keep check on the management progress.
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Project 1 Rubrics
Weight
%
1/Poor /Lacking Info
2/Sufficient
3/Proficient
4/Advanced
Score
General business model details, comprehensive 9 blocks process
10
Introductory elements were omitted and/or contained errors.
Introductory elements were included but contained errors.
Introductory elements were included and completed correctly, including an executive summary.
Introductory elements were included and completed correctly, including a detailed executive summary that thoroughly summarizes the business model and captures the interdependence of 9 blocks.
Customer Value Proposition
10
CVP was partially discussed or some was omitted. Explanation of how a CVP which distinguishes itself from its competitors was missing.
CVP was partially discussed and seemed to lack a complete line of solutions on “jobs-to-be-done”. Explanation of how a CVP which distinguishes itself from its competitors was missing.
CVP was clearly identified and included a complete line of solutions on “jobs-to-be-done”. Explanation of how a CVP which distinguishes itself from its competitors was unclear.
CVP was clearly identified and included a complete line of solutions on “jobs-to-be-done” and included reasoning for the selection. Includes explanation of a CVP which distinguishes itself from its competitors.
Customer Segments
10
The different types of customer segments was partially discussed but lacked mention of any specific information.
The different types of customer segments was partially discussed, but have not enough explanation.
The different types of customer segments was discussed including the identification of the target customer.
The different types of customer segments was thoroughly discussed including for whom are firm creating value, why are they firm’s most important customer.
Customer Relationship
10
The types of customer relationship was partially discussed but lacked mention of any specific information.
The types of customer relationship was partially discussed, but have not enough explanation on establishing and maintaining process.
The types of customer relationship was discussed including and establishing and maintaining process was discussed.
The types of customer relationship was fully identified, and how firm established and maintained them are thoroughly discussed.
Channels
10
How a firm deliver its value proposition to its targeted customers through different channels was partially discussed but lacked mention of any specific information.
How a firm deliver its value proposition to its targeted customers through different channels was identified, but have not enough explanation on Speed and cost-efficiency.
How a firm deliver its value proposition to its targeted customers through different channels was identified. Speed and cost-efficiency are discussed
How a firm deliver its value proposition to its targeted customers through different channels was fully identified. Speed and cost-efficiency are thoroughly explaine ...
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The research paper examines the corporate governance and earning management in Saudi Arabia. It
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Authority (CMA) on compelling income administration hone in Saudi Arabia. Corporate governance theory is
discussed here that elaborates the procedures of organization and different strategies. At that point speculations
are tried utilizing multivariate procedure to figure out whether corporate administration qualities essentially
oblige optional accumulations. The paper also discusses literature of previous studies and some methodologies are
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organization. At the end, conclusion is presented.
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Financial Reporting and External Audit - Quick Guide
Financial Reporting and External Audit - Quick GuideStanford GSB Corporate Governance Research Initiative
The board of directors is responsible for ensuring the integrity of published financial statements. This includes working with management to set the parameters for accounting quality and internal controls, and retaining an external auditor to test financial statements for material misstatements.
This Quick Guide reviews the process by which the board carries out this function.
It provides answers to the questions:
• What does the audit committee do?
• How does it oversee financial reporting?
• How often do companies restate financials and why?
• What does the external audit do?
• Do auditors have agency problems?
For an expanded discussion, see Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences (Second Edition) by David Larcker and Brian Tayan (2015): http://www.gsb.stanford.edu/faculty-research/books/corporate-governance-matters-closer-look-organizational-choices
Buy This Book: http://www.ftpress.com/store/corporate-governance-matters-a-closer-look-at-organizational-9780134031569
For permissions to use this material, please contact: E: corpgovernance@gsb.stanford.edu
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Team presentation -current issues
- 1. Agency problems and audit fees: further tests of the free cash flow hypothesis TEAM PRESENTATION WANG QI 42272645 GUO LIN 41948807 YU NING 41430581 JI DANDAN 42322723
- 2. OUTLINE Main Aim Three Difficulties Conclusions and Objectives limitations • Introduction • Explanation of the main • Demonstration of • Conclusions aim of three hypotheses of this paper objectives in detail • limitations/Ar • Hypotheses eas need raised in future relation to these objectives improvement
- 3. MAIN AIM Provide further evidence on whether the audit fees vary in relation to the agency problems in high FCF companies Specifically, test whether high FCF companies with low growth/high growth prospects have higher audit fees and which mechanisms can mitigate the agency cost.
- 4. THREE MAIN OBJECTIVES 1st objective: test the audit fees/high FCF relationship Hypothesis 1 : Audit fees for high FCF companies > low FCF companies’ audit fees.
- 5. THREE MAIN OBJECTIVES 2nd objective: test whether debt is acting as a monitoring mechanism that can reduce audit fees for these high FCF companies Hypothesis 2: Audit fees for high FCF companies low levels of debt > high levels of debt.
- 6. THREE MAIN OBJECTIVES 3rd objective: whether dividend and share repurchase can mitigate audit fees Hypothesis 3: Audit fees for high FCF companies low level of dividends > high level of dividends low share repurchase > high share repurchase
- 7. DIFFICULT TO UNDERSTAND FCF hypothesis Underlying assumption: self-interest Managers invest in non- value maximizing projects Lower level of efficiency
- 8. DIFFICULT TO UNDERSTAND Debt -monitoring hypothesis funds available to managers debt holders monitor managers’ behaviors debt covenant
- 9. DIFFICULT TO UNDERSTAND Audit fees relationship FCF Hypothesis ( Increase with higher audit risk & audit efforts) High FCF/Low High FCF/High growth growth Fund growth More internally intangible Manager Manipul & assets & Less Debt s invest -ate Monitoring Less unwisely accounts capital Growth market options Monitoring
- 10. THREE IMPORTANT CONCLUSIONS Audit fees for High FCF companies(low growth and high growth) are significantly higher than those for low FCF companies. Audit fees vary negatively with debt for companies with high FCF; However, No evidence to suggest that audit fees vary negatively with dividends or share repurchase.
- 11. THREE WAYS OF IMPROVEMENT (LIMITATIONS) Samples used- US capital markets, where the agency problem of FCF can be more significant for auditors than elsewhere. Only supply-side explanation of the positive relation between the agency problems of FCF and audit fees. May consider other explanations; no comparison of audit fees between high FCF/ low growth companies and high FCF/high growth companies