02 Accounting Information Systems (including topics about technology in accounting and blockchain) (AIS)

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    Internal Information Quality and Investment Efficiency: Evidence from Firms’ Mobile App Adoption
    ( 2022) Koo, Minjae ; Lee, Mary
    We explore whether firms’mobile app adoption has real effects on capital investment decisions. Mobile apps provide a vast amount of real-time, high-quality customer data, which can enhance firms’internal information environment and arguably induce a more efficient investment decision. Using a sample of 3,476 unique firms, we document that app adoption is associated with higher investment efficiency. This association is stronger for apps with location tracking and app analytics software, and a greater number of third-party software likely used to collect and process personal data, and for firms that primarily serve B2C customers and under greater demand uncertainty in the past. Furthermore, we leverage a quasi-experimental setting, the General Data Protection Regulation (GDPR), which curbs firms from collecting customer information without consent, and document that the effect of app adoption on investment efficiency decreases following the GDPR implementation, particularly among the affected firms that release apps predominantly in EU countries. Taken together, our results suggest that mobile apps serve as an effective internal information channel, which helps improve firm' investment decisions.
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    The Implications of IT Environment on the Audit and Financial Reporting Quality
    ( 2022) Choudhary, Preeti ; Sigler, Jake ; Ramadas, Vik
    This study explores the impact IT complexity and IT control deficiencies have on the audit and financial reporting. We create and validate a new theory-based measure of IT financial reporting complexity at the client level. Next, we quantify the cost of IT complexity and IT control deficiencies on audit effort. We find that, on average, an increase of one (out of 18) on the client’s complexity score relates to an increase of 6% in IT audit hours. In comparison, the presence of an IT control deficiency relates to a 70% increase in IT audit hours. We further investigate and find that IT specialist experience partially mitigates the cost of IT complexity and IT control deficiencies, in particular, experienced IT managers and senior managers rather than experienced IT partners and directors. Finally, we find that experienced IT specialists are able to mitigate some but not all of the cost of IT complexity on financial reporting reliability. Overall, our results provide some of the first insight into complex IT environments’ costs over financial reporting and highlights the importance of staffing decisions at the manager level.
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    Metaphysics of Internal Controls
    ( 2022) Gal, Graham
    A quality internal control system has been seen as a remedy for various corporate governance issues. Two pieces of legislation, the Foreign Corrupt Practices Act (FCPA) and the Sarbanes-Oxley Act (SOX) deal with very different corporate governance issues, but each argue for a similar remedy. Both the FCPA and the SOX legislation argue that improved (or proper) internal controls are necessary to root out bribery of foreign officials, in the case of the FCPA, and (in the case of SOX) to support the accurate preparation of financial statements. An issue that has yet to be resolved is that the quality of internal control systems is subject to subjective assessments of the internal control deficiencies and their impact. This paper presents a mathematical model of internal controls based on Gӧdel number of axioms. This results in the representation of quality internal controls in terms of an integer. This approach also allows for inferences about financial statements and various auditing judgements.
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    Identifying Important Variables in Bankruptcy Prediction Models with Interpretable Machine-Learning – The Difference between Crisis and Non-Crisis Periods
    ( 2022) Radovanovic, Jelena ; Haas, Christian
    The share of companies that file for bankruptcy is a countercyclical variable, as it increases during a recession. Although some bankruptcy prediction models also include macroeconomic factors as input variables, the literature about the differences between the companies that file during a crisis period and those which file during an economic boom is still limited. We analyze which factors determine if companies will fail during an economic crisis, and if they are different than those during the non-crisis period. Therefore, we divide the data, which is obtained from Compustat North America and the UCLA LoPucki Bankruptcy Research Database, into two datasets. One set contains the observations from the crisis periods, and the other contains observations from the non-crisis periods. We apply different machine learning models for bankruptcy prediction on both datasets separately and analyze the variable importance of the individual models. Our results show that the leverage ratio, as well as growth and profitability ratios are more important during and non-crisis period, while the liabilities to assets ratio and the inventory intensity ratios are more important during an economic crisis.
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    Cybersecurity, Internal Control, and Brand Capital
    ( 2022) Hsu, Po-Hsuan ; Kao, Wei-Chuan ; Wang, Yanzhi
    In this paper, we examine whether and how firms’ brand capital is hurt by cybersecurity breaches. Our difference-in-differences analysis based on matched pairs indicates that firms suffering cybersecurity breaches are associated with more canceled trademarks, fewer trademark registrations, and fewer trademark citations, all pointing to weakened brand capital. We also show that cybersecurity breaches are associated with more negative news sentiments and poorer operating performance, suggesting the loss of clients’ trust being the underlying mechanism. Additional analyses show that brand capital is hurt more by cybersecurity breaches when firms have more internet advertising activities, when firms are in states with enactments of notification laws, or when firms have poorer internal controls. We also find an intriguing pattern that cyberattacks on a firm also hurt its peers’ brand capital, which supports a contagion effect.
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    Critical Realism: A vital philosophical consideration for research on emerging technologies in auditing
    ( 2022) Fotoh, Lazarus Elad ; Lorentzon, Johan
    The purpose of this study is to explore the potential of critical realism as an important philosophical consideration for research on emerging technologies in auditing. Particularly, this study explores the ontological tenets of critical realism with its epistemological and methodological implications and examines its potential for research on the impact of emerging technologies on auditing. This paper appears to be the first to implements critical realism in studying the impact of emerging technologies on auditing. Our narrow focus in this area mainly results from the trumpeted transformational role of these technologies on auditing and the proliferation of contemporary research in this area touting these technologies for their prospects in enhancing audit efficiency, effectiveness, and audit quality. We conclude that the stratified ontology of critical realism is useful both for research on emerging technologies in auditing, specifically in understanding complexities, and for enhancing professional scepticism. The contribution of this study is multifaceted. Firstly, there is a great potential for research to go beyond the empirical domain in order to get a deeper understanding of different research problems. With a focus on generative mechanisms, critical realism also enables researchers to look beyond their intradisciplinary areas. Secondly, the adoption of critical realism may enhance scepticism (necessary for audit quality) among practitioners as they may sceptically question the benefits of these technologies. The adoption of critical realism can result in new research questions and challenge prior research through the implementation of a plurality of research methods.