We investigate the effect of politically connected boards (both supervisory boards [SBs] and boards of directors [BODs]) on cost of debt and equity capital of listed companies in Indonesia which has established a two-tier corporate governance system. The results, based on 250 firms, suggest that companies with politically connected SBs experience lower cost of debt and equity capital, whereas politically connected BODs have no association with cost of either debt or equity. Furthermore, we find that family firms and firms belonging to business groups with politically connected SBs enjoy lower cost of debt and equity capital. Our main results are robust to alternative measures and to tests for endogeneity.

Audit clients' investment opportunity sets (IOS) include firm‐specific opportunities that are unique to the client, as well as opportunities generalizable to the client's industry and opportunities even more generically available to all firms. Prior research does not examine the variation in audit fees related to firm‐specific IOS nor how firm‐specific IOS affects the premiums charged by industry specialist auditors. We find that firm‐specific IOS plays a distinct role in the pricing of audit services, leading to higher fees as the auditor demands compensation for increased audit risk. Further, we find that the ability of an industry specialist auditor to charge fee premiums is reduced in the case of clients that are highly differentiated based on firm‐specific IOS, as the knowledge gleaned in auditing other clients within the industry is often not applicable to clients in more unique IOS environments. We contribute to the literature by showing that industry specialist premiums are not constant for firms in the same industry; rather, they reflect a trade‐off between firm‐ and industry‐specific knowledge.

A joint engagement and empowerment process was used in south west Queensland to assist landholders improve their natural resource management and enterprise productivity. Meat and Livestock Australia's (MLA) EDGEnetwork Grazing Land Management (GLM) workshop equipped landholders with the resources, tools and knowledge to build on their existing grazing land management and planning, at the property level. When integrated with the South West Natural Resource Management (NRM) sub catchment planning program the joint initiative informed landholders about NRM issues and opportunities while assisting in the formulation of sub catchment plans and NRM targets for the sub catchment. Having a seamless approach for landholder engagement through both property and sub catchment level information and planning provided many benefits for all stakeholders involved in the process. Benefits included an increase in the number of on-ground, public benefit projects, backed by best practice grazing land management plans and economising of efforts for technical, extension staff and participating landholders. Continual improvement of the integrated process based on each stakeholder's objectives was on-going throughout the project.

This study investigates whether audit markets remain competitive in the wake of Arthur Andersen's demise and merger with Ernst & Young to create the Big Four. We conduct the study estimating audit fee models using Australian audit market data from both 2000 and 2003 to determine whether there is any evidence of cartel pricing either before, or subsequent to, the merger. In both years, we find evidence of a Big N price premium when estimating an audit fee model across all clients, and when we estimate the model separately across large and small client market segments. This evidence is consistent with product differentiation by Big N auditors and competitive markets.

ABSTRACT: A report issued by the U.S. General Accounting Office (GAO) in 2003 identified auditors’ industry expertise as a critical factor for firms choosing an auditor, and highlighted the extreme levels of auditor concentration in some industries. We posit that the investment opportunity set (IOS) plays a fundamental role in determining whether an industry is an attractive target for auditor specialization. When industry-specific IOS is high, specialist auditors make costly investments in industry-specific knowledge, allowing them to offer a differentiated product and to create entry barriers for other audit firms. When the IOS of firms within an industry is relatively homogeneous, auditors can transfer such knowledge across clients in the industry more easily, resulting in cost savings and scale economies. However, greater homogeneity of IOS in an industry can also increase a client’s aversion to sharing an auditor with its competitors because of concerns about transfers of proprietary information, suggesting that industries with relatively homogeneous IOS are less likely to be dominated by a single auditor. We show that auditor concentration in an industry relates positively to both the level and homogeneity of IOS in the industry, while auditor dominance relates negatively to industry IOS homogeneity. Further, we find that audit fees are positively associated with both levels and homogeneity of industry IOS.

A report issued by the U.S. General Accounting Office (GAO) in 2003 identified industry specialization as a key driver of consolidation among audit firms and highlighted the extreme levels of auditor concentration in some industries. Like the GAO, we view auditor concentration as a measure of industry specialization, and we examine one feasible explanation for why auditor specialization differs across industries. We posit that the investment opportunity set (IOS) plays an important role in determining whether an industry is an attractive target for auditor specialization and in creating barriers to auditor entry. We argue that when industry-specific IOS is high, auditors will make costly industry-specific investments that allow them to offer a differentiated product and to create entry barriers for other audit firms. However, when a large component of IOS is specific to individual firms within an industry so that IOS is highly variable within the industry, the auditors' knowledge requirements are highly specific to those firms and it is more difficult to transfer knowledge and spread costs across clients in that industry. Using two different measures of IOS and three alternative industry classification schemes, we present evidence that auditor specialization is increasing in industry IOS levels and decreasing in within-industry IOS variability.

The audit fee research literature argues that auditors' costs of developing brand name reputations, including top-tier designation and recognition for industry specialization, are compensated through audit fee premiums. Audited firms reduce agency costs by engaging high-quality auditors who monitor the levels and reporting of discretionary expenditures and accruals. In this study we examine whether specialist auditor choice is associated with a particular discretionary expenditure - research and development (R&D). For a large sample of U.S. companies from a range of industries, we find strong evidence that R&D intensity is positively associated with firms' choices of auditors who specialize in auditing R&D contracts. Additionally, we find that R&D intensive firms tend to appoint top-tier auditors. We use simultaneous equations to control for interrelationships between dependent variables in addition to single-equation ordinary least squares (OLS) and logistic regression models. Our results are particularly strong in tests using samples of small firms whose auditor choice is not constrained by the need to appoint a top-tier auditor to ensure the auditor's financial independence from the client.

The audit fee research literature argues that auditors' costs of developing brand name reputations, including top tier designation and recognition for industry specialization, are compensated through audit fee premiums. Audited firms seek to reduce agency costs by engaging high quality auditors who will monitor the levels and reporting of discretionary expenditures and accruals. In this study we examine whether specialist auditor choice is associated with a particular discretionary expenditure, research and development (R&D). For a large sample of US companies from a range of industries, we find strong evidence that R&D intensity is positively associated with firms' choices of auditors who specialize in auditing R&D contracts. Additionally, we find that R&D intensive firms tend to appoint top tier auditors. We use simultaneous equations to control for interrelationships between dependent variables in addition to single equation OLS and logistic regression models. Our results are particularly strong in tests using samples of small firms whose auditor choice is not constrained by the need to appoint a top tier auditor to ensure the auditor's financial independence of the client.

We provide evidence of an association between audit partner rotation and the quality of earnings. It is a requirement for Australian firms that the engagement partner be identified by name in the annual report. Using a sample of 3,621 firm-years between 1998 and 2003, we show that audit partner changes most likely reflecting partner rotation (i.e., they are not due to a switch of audit firm) are associated with lower signed unexpected accruals, and that for Big 5 clients this relation is driven by smaller positive unexpected accruals following partner changes. This result is consistent with more conservative reporting following a rotation of audit partner, and this interpretation is further supported by evidence suggesting a significant increase in the asymmetrically timely recognition of economic losses when firms have a change of audit partner. Our tests also show that these effects occur predominantly among clients of Big 5 audit firms, and that any effect is concentrated in the latter part of our sample period, when partner rotation was a professional requirement. We therefore conclude that audit partner rotation is associated with incrementally greater conservatism in financial reporting, but only in circumstances where the ability of client firms to resist partner rotation is reduced by mandatory partner rotation requirements.

The current institutional regulatory framework for auditing is a product of the philosophy that individual property rights exist and are to be protected. These notions of property rights create the tension to which auditing is a partial solution.In this chapter, we describe the institutional regulatory framework for auditing and its relationship to markets, corporations and professional associations. Our thesis is that all the institutional arrangements are incentivised as contracting cost-reducing mechanisms to deliver 'audit reform' but residual losses are to be expected. Ethics is viewed as central to the contracting process, facilitating functional completion of contracts and helping to reduce residual losses in contracting. Auditing is also demanded (ex ante) to reduce the expected contracting residual economic loss resulting from attempts to protect individual property rights. Market participants have incentives to minimise contracting residual losses, and regulatory intervention is valued to the extent that the reforms are more efficient contracting solutions to minimise those losses.We review fallacies in the market failure arguments used as rationales for regulatory intervention and suggest that the costs of regulation could be underestimated and the benefits could be overstated. The result is that regulatory intervention could increase future bonding and monitoring costs beyond what is optimal, and thus contribute to inefficient allocation of the costs of property rights.In the same way that ethical behaviour by contracting parties can reduce contracting residual losses, ethical behaviour by politician-regulators in the political process could contribute to lowering the political residual losses and enhancing society's well-being through facilitating the economic outcomes sought by contracting parties.

The study focuses on a group of young people for whom conventional school placements had broken down and were attending vocational courses at an FE college while still of compulsory school age. The students had been excluded by, or had failed to attend, their schools or had achieved at very low levels in the academic curriculum. Over half successfully completed the vocational course at college. Many factors conventionally regarded as predictors for poor educational outcomes were not associated with completion and non-completion. For example, students who had been excluded, who had statements of special educational needs and had been involved with the criminal justice system were as likely to complete their courses as other students. However, students who had very poor attendance records at school also tended to drop out of college. The results suggest that the increased flexibility, guidance and elements of work-related learning promised in current 14 - 19 developments may help meet the needs of this group of students.

The paper draws on a research project on innovative provision in an FE college for excluded and disaffected young people. The college offers places on vocational courses to students who are still of compulsory school age who have been excluded by or have persistently failed to attend or achieve in school. One set of themes to emerge relates to the experiences of the students: the role of personal relationships and, especially, relationships with teachers, in the breakdown of school placements; the importance both of good relationships with tutors, often expressed as ‘being treated like an adult’, and of a vocational and practical curriculum in successful re-engagement at college; and positive but highly instrumental and employment related attitudes to education. Another set of themes relates to the practical and organisational difficulties and the way that a lack of flexibility in 14–19 provision, especially while students are still of compulsory school age, creates difficulties for programmes of this kind. Finally the paper considers the tensions between pressures for accountability and outcome-driven measures and the aims of increasing participation and using education to address issues of social inclusion.

The paper reports a study of alternative pre- 16 provision in a college of further education for young people who were disaffected and/or non-attenders at secondary school. The data are derived from interviews with 26 of these young people who were ‘success stories’ for the programme in that they had continued attendance up to the end of Year 11 and, in a few cases, beyond. The interviews showed that, for the most part, school placements had broken down for these young people because of difficulties in personal relationships, in particular relationships with teachers. However, for a minority a perceived irrelevance of the school curriculum was also a factor. The young people were almost all positive about their experience at college and the vocational courses they were taking. A good atmosphere, good personal relationships and being treated as adults were the key features of their positive experience at college although their positive feelings about the particular course was related to its vocational relevance. Most of the young people said that education and training was important to them and that they planned further study. The paper tentatively concludes that it is poor personal relationships that are mainly responsible for the premature exit from school and that good personal relationships have enabled them to remain in education. However, their continued involvement in college and intentions for further study are strongly influenced by vocational factors. The positive tone on the results reflects the perceptions of the young people at the point of interview and the paper does not deal with the disadvantaged situation many of them may be in. Further research will focus on longer term outcomes for employment and training.

The present study investigated the amnestic effects of N-methyl-d-aspartate (NMDA) receptor antagonist AP5 and nitric oxide (NO) synthase inhibitor 7-NI in avoidance conditioning in goldfish. The results showed that both AP5 and 7-NI, without impairing performance processes, produced anterograde amnesia when given before training. Furthermore, 7-NI produced retrograde amnesia when given immediately following training while AP5 did not. Thus, AP5 and 7-NI affected different phases of learning and memory.

International researchers investigating earnings management, and standard-setters, analysts, and auditors relying upon evidence of earnings management in their deliberations, require earnings management models to appropriately classify accruals as discretionary or non-discretionary. We examine whether refining the property plant and equipment (PPE) variable in the Jones (1991) accruals model to accommodate international differences in data availability and accounting GAAP improves the model?s explanatory power. Explanatory power increases only when the model uses gross, rather than net, PPE measures. Adjustments for international accounting differences such as amortization of intangibles and asset revaluations do not improve the model?s explanatory power. This indicates that the model is robust to international settings.

Although the philosophy of permanency planning has been attracting wide attention in relation to foster children, its significance for children in residential care has not been examined. The authors therefore review the major features of permanency planning and their application to institutional care or residential treatment, highlighting various practice issues and implications.

The perceived severity of the problem of “drift” in the foster care system has encouraged agencies nationwide to accept permanency planning, but perhaps with limited attention to the planning process. This article examines the phenomenon of permanency planning from a planning perspective by focusing on: (a) definition of the permanency planning problem, (b) understanding of issues relevant to permanency planning (caseworker, program and systemic), (c) appreciation of the operational context (political, economic and social factors), and (d) evaluation of available options and possible consequences in developing or improving a permanency planning program. Permanency planning is not a simple, ready-made program applicable to any situation; it involves coordinated efforts by workers, service systems, and society in general, and requires time, commitment and resources. Successful planning for permanency planning can permit more children to grow up in homes providing continuity and stability.