Tag: Studies

Study: Investors Might Want to Tread Carefully Around Companies with High Audit Fees

[R]esearch finds auditing fees charged to companies to be significantly related to the their financial performance for as long as five years into the future: the higher the fees this year, the lower firms’ performance next year and beyond. In the words of the journal report by Jonathan D. Stanley of Auburn University, “Primary results indicate a significant inverse relation between audit fees and the one-year ahead change in clients’ operating performance… Further analysis reveals that the primary results extend to changes in operating performance observed up to five years after the fee is disclosed; are more pronounced for future negative versus positive chances; and [are] applicable to future changes in earnings unaccounted for by analysts’ forecasts.” Asked if these findings are likely to be of value to average investors, Prof. Stanley answers in one word: “Definitely.” [AAA]

Even After Obtaining That Sweet CFO Gig, You’ll Probably Still Bitch About Your Salary

Especially if you’re the jealous type.

According to accounting firm BDO, middle market CFOs typically earn 55% to 60% of their CEO’s pay, but in 2010 they earned just 40%, on average.

In a study of 600 public companies with annual revenues ranging from $25 million to $1 billion, BDO found that CFOs earned an average of $927,743 in 2010, a 19% increase from 2010, while CEOs earned an average of $2.34 million, representing a 25% increase from the previous year.

[via CFOJ]

Study: Analysts Just as Illiterate as Investors When Reading Financial Reports

Convoluted corporate financial reports are just as unreadable for professional stock analysts as they are for the average investor, according to a new study.

The study, published in the current issue of the American Accounting Association journal Accounting Review, tested the readability of tens of thousands of company filings over 12 years and found that analysts’ earnings forecasts for firms with less readable reports “have greater dispersion, are less accurate, and are associated with greater overall analyst uncertainty.” Ironically, however, the syntactic and linguistic complexity of these reports generated greater demand from investors for analysts’ commentary and greater reliance on their forecasts. [AT]

Center for Audit Quality Thrilled That SEC Study Recommends Auditors Continue Auditing

I am pleased that the SEC’s Office of the Chief Accountant’s thoughtful study recommends retention of Section 404(b) of the Sarbanes Oxley Act for companies whose market capitalization is between $75 and $250 million. Section 404(b) requires independent auditors to attest to management’s assessment of the effectiveness of its internal controls over financial reporting […]. The study concluded that costs of Section 404(b) compliance have declined and financial reporting is more reliable when the auditor is involved with ICFR assessments. Importantly, the study found that investors generally view the auditor‘s attestation on ICFR as beneficial. [Cindy Fornelli/CAQ]

It’s Being Suggested That Higher Taxes on Alcohol Will Reduce Crime

It’s ironic that I read this this blog post today (rather than on Friday) since A) approximately a third of the country is in a some stage of a hangover B) I’m listening to “Rehab” by Amy Winehouse as I write this and C) there was a murder at a fraternity in Youngstown, Ohio over the weekend (I realize it’s a stretch to assume that anyone would have been drinking at a frat party) but this is pie-in-the-sky postulating that just begs to be mocked.


Janet Novack’s post at Forbes discusses a recent article written by two professors who are crime fighters in the economic persuasion:

Would raising the tax on beer reduce the number of young folks who get caught up in crime and the high budget and social costs of locking up so many people?

In a provocative article, The Economist’s Guide To Crime Busting, in the new issue of The Wilson Quarterly, Duke University’s Philip J. Cook and the University of Chicago’s Jens Ludwig suggest that it would. (The article is here, but isn’t free.) The profs argue that crime policy (from an economist’s point of view) should focus “both on making criminal opportunities less tempting and the law-abiding life more rewarding” and offer three strategies which they say have been shown to do just that: raising the mandatory age through which kids must attend school; creating business improvement districts with private security guards (a tactic Los Angeles has used with great success); and yes, raising taxes on alcohol.

Our favorite passage being the “making criminal opportunities less tempting and the law-abiding life more rewarding” because this what someone walking into the liquor store is thinking, “Jeepers, the cost of binge drinking on the weekend has gone up significantly and no longer fits my monthly budget. I guess I’ll stay sober and won’t break the law today.”

It continues:

The average state excise tax on beer, they note, is now only about 10 cents per 12 ounce bottle. Raising it to 55 cents they write, would persuade some teenagers “not to pick up that second six-pack on Thursday night” and would produce such extra benefits such as “fewer auto accidents and more money for state treasuries.” Data from Cook’s 2007 book, Paying The Tab, suggests a 55 cent per bottle levy would reduce beer consumption perhaps 10% and crime maybe 6%, they note.

Never mind how the neo-con scamps over at American for Tax Reform would react; this assumes that the demand for alcohol is elastic. You could easily argue that most people with the necessary means will pick their potent potable of choice regardless of price and even if they did decided to tighten the booze budget, they’d just go for a cheaper alternative, they wouldn’t actually buy or drink less.

I’m no economist but this kind of reasoning simply defies logic. People will drink regardless of the cost and they will continue to act like idiots and commit crimes when doing so. If you want to discuss that from a tax/fiscal policy standpoint raising taxes on booze (or taxing other sins) is a good idea then a discussion can be had. But let’s not get all crazy and start claiming that our country will become a bunch of law-abiding teetotalers the second a sixer of suds goes up $6.

Super Bowl Question:Would Higher Beer Tax Reduce Crime? [Forbes]

Key Steps for CFOs Starting at a New Company

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Last year, 13 percent of chief financial officers changed jobs. Although this was down from 18 percent the prior year, Deloitte’s CFO Programs predicts CFO turnover will rise again this year.

The ramifications of turnover are huge. Tom Bonney, founder and managing director of CMF Associates, which offers temporary CEO, COO and controllership services, estimates that when a CFO leaves, efficiency in the finance department is automatically cut in half and exposure to risk i CFO joins the company, the ramp up period is longer than other key executive roles, due to the CFO’s broad array of responsibilities.


A recent report from Deloitte CFO Services highlights practices that successful CFOs have used to get off on the right start in their new positions based in large part on interviews with more than 20 CFOs from varied companies with nearly $170 billion in combined revenues, most with more than $2 billion in revenues.

Step one: Get to know the business. Learn what works and needs to be changed. Use your team as a resource in the process. The ability to be a good listener, as well as a clear communicator is crucial as CFOs establish relationships and plan for the long term. Listening to your team will not only help you plan your business goals, but reveal your company’s culture, and establish you as a trusted leader.

Step two: Create a 180-day agenda. Most CFOs surveyed by Deloitte felt they had six months to establish their roles. This includes creating an agenda with their CEOs and peer executives, as well as recruiting and renewing talent to build an ideal team. Then clearly communicate your agenda to your team and begin establishing a long term vision.

Step three: Make an impact on the business. If the first 180 days are about getting to know the company, choosing what to do and getting the right team in place, the next 12 months are about execution and ratcheting up the contribution of finance to the business. Making this difference requires deploying resources and capabilities effectively to achieve key initiatives. To do this, align talent with top priorities, delegate with confidence, adopt effective practices, and encourage transparency and accountability throughout your team.

Be mindful about how you allocate your time. Focus on where you can get results, sooner rather than later. “You need to get quick wins,” says Ajit Kambil, Deloitte’s global research director.

You also need to gain a quick understanding of the trends and metrics of your company, especially as it relates to the industry you are serving. “This knowledge, along with the ability to communicate with the management team, will foster success for the executive and assist in reaching corporate goals,” says Thomas Galvan, CFO of Rising Medical Solutions, a medical-financial solutions firm.

Think strategically. If you move up from controller to CFO, instead of worrying about GAAP and FASB, you may be asked to participate in strategic decisions. “The critical relationships are now not so much between the income statement and balance sheet, but between the CFO and a CEO – as well as the board of directors,” explains Todd Ordal, president of consulting firm Applied Strategy. “The political skills required can be significant.”

Culture also counts. For example, in a small organization, it can be critical for a CFO to be hands-on, but in a larger organization, it can be critical for the CFO to delegate. Do your homework and don’t assume anything.

Ultimately, the Deloitte study found the critical issues fell into three buckets: time, talent and relationships. Says Kambil: “If you don’t get them right, you diminish the opportunity to succeed.”

Good News Bosses: Lots of Employees Are Satisfied with Not Being Fired

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Here’s one thing you don’t have to worry about: whether your employees care a great deal about getting a raise. Looks like they’re not all that focused on their pay, as long as they can keep their job.

A recent study asking employees to rate contributors to job satisfaction conducted by the Society for Human Resource Management found that compensation dropped to number five for the first time since the organization started doing the survey eight years ago. It was number three on the list last year.

But top on the list of contributors was “job security”. That outranked such choices as “benefits,” “the work itself,” “opportunity to use skills,” and “feeling safe in the work environment.”


What’s more, a new contributor to job satisfaction, “organization’s financial security”, also outranked compensation, placing fourth on the list.


It wasn’t always thus. In 2006 and 2007, compensation was the winner. In fact, in 2006, 67 percent of respondents picked that as the most important factor in job satisfaction. In the most recent survey, just 53 percent chose pay.

Apparently, that attitude is not shared equally among all levels of the organization, however. Job security ranked at the top for non-management and middle management employees. But it didn’t make the top five for executives, who chose “the work itself” as the number one contributor.

Other data indicates that it’s probably a good thing employees are less focused on pay than they were in better times. According to a survey of small businesses by SurePayroll, a Chicago-based payroll processing company, the average paycheck dropped .4 percent year-to-date. June marked the first month this year with negative year-to-date paychecks. In fact, pay hasn’t been this low since October 2005.

The bottom line: Quite simply, for most employees, it’s the job, stupid. And that means wage pressure is unlikely to require employers to raise prices to maintain margins anytime soon.

Inflation? Where?

SHOCKER: New Study Says Work Interferes with Life

ilovemyjob.jpgWe realize this is hard to believe — especially during this time of year — but yes, it’s true!
According to the University of Toronto’s new survey of 1,800 American workers, 50% of those surveyed take work home on a regular basis. Not a surprising result since the authors asked questions that easily solidified the “Americans live to work” mantra:
• How often does your job interfere with your home or family life?
• How often does your job interfere with your social or leisure activities?
• How often do you think about things going on at work when you are not working?
Scott Schiemen, one of the authors of the study, informs us of the grim but dead on conclusions:

Schieman says, “Nearly half of the population reports that these situations occur ‘sometimes’ or ‘frequently,’ which is particularly concerning given that the negative health impacts of an imbalance between work life and private life are well-documented.”


The study’s core findings indicate some things that may sound familiar to you:

• People with college or postgraduate degrees tend to report their work interferes with their personal life more than those with a high school degree;
• Professionals tend to report their work interferes with their home life more than people in all other occupational categories;
• Several job-related demands predict more work seeping into the home life: interpersonal conflict at work, job insecurity, noxious environments, and high-pressure situations; however, having control over the pace of one’s own work diminishes the negative effects of high-pressure situations;
• Several job-related resources also predict more work interference with home life: job authority, job skill level, decision-making latitude, and personal earnings;
• As predicted, working long hours (50-plus per week) is associated with more work interference at home — surprisingly, however, that relationship is stronger among people who have some or full control over the timing of their work;

Again, shout if this sounds familiar. The sorry thing is that 50+ hours a week is considered “long hours.” Most of you can do 50 standing on your head. Plus, those of you that are eating hours are doing yourself an even greater disservice. But that’s a whole other discussion.
Maybe we should just own up to it? We love working! To hell with family, friends, hobbies, etc. We’ve got work to do!
When Work Interferes With Life [Science Daily]
More Work/Life Balance:
Moss Adams Values ‘A Balanced Life’ over ‘Accountability’
Is the Era of Work/Life Balance Over?
Jack Welch is Not Buying the Whole Work-Life Balance Thing