Author
Listed:
- Mark Kohlbeck
- Brian W. Mayhew
Abstract
This study investigates whether or not related party transactions serve as “red flags†that warn of potential financial misstatement. We hand†collect related party transactions for S&P 1500 firms in 2001, 2004, and 2007 and find a positive correlation between these transactions and future restatements, suggesting restatements are more likely when a firm engages in related party transactions. The association is concentrated among transactions that appear to reflect “tone at the top†rather than arguably more necessary business transactions. We also find RPT firms pay lower audit fees. However, “tone RPT†firms that subsequently restate pay higher audit fees, providing evidence that auditors recognize the individual restatement risks of these firms. Our results suggest that tone†based RPTs serve as signals of higher risk of material misstatement.Les auteurs se demandent si les opérations entre apparentés servent ou non de « signaux d'alarme » annonçant des anomalies financières potentielles. Ils relèvent manuellement les opérations entre apparentés des sociétés composant l'indice S&P 1500 en 2001, 2004 et 2007 et observent une corrélation positive entre ces opérations et les retraitements ultérieurs, ce qui semble indiquer que les retraitements sont plus probables lorsque les sociétés concluent des opérations entre apparentés. Le lien se manifeste davantage parmi les opérations qui semblent refléter le « ton donné par la direction » plutôt que parmi les opérations commerciales pouvant être qualifiées de plus nécessaires. Les auteurs constatent également que les sociétés qui concluent des opérations entre apparentés paient moins d'honoraires d'audit. Toutefois, les sociétés dont la direction donne le ton aux opérations entre apparentés et qui procèdent subséquemment à un retraitement paient des honoraires d'audit plus élevés, ce qui permet de conclure que les auditeurs reconnaissent les risques de retraitement que présentent individuellement ces sociétés. Les résultats de l'étude semblent indiquer que les opérations entre apparentés reflétant le ton donné par la direction signalent un risque plus élevé d'anomalies significatives.
Suggested Citation
Mark Kohlbeck & Brian W. Mayhew, 2017.
"Are Related Party Transactions Red Flags?,"
Contemporary Accounting Research, John Wiley & Sons, vol. 34(2), pages 900-928, June.
Handle:
RePEc:wly:coacre:v:34:y:2017:i:2:p:900-928
DOI: 10.1111/1911-3846.12296
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