C:\_P= apers\_IFRS HPBR

10-1-= 2011_Sat_2.00pm_pdf_IFRS_IAS Impact on Auditors illicit activities, fraud, or insider abuse Report<= /o:p>

Dr. A= vi Rushinek, 321 Jenkins, Accounting, University of Miami, <= /p>

Coral= Gables FL 33124, arush@miami.edu, (305)666-7890

Dr. S= ara Rushinek, 421 Jenkins, Computer Information Systems,

Unive= rsity of Miami, Coral Gables FL 33124, s.rushinek@miami.edu,

(305)= OnTrial/666-7890

(305)= 668-7425/666-7890

IFRS= IAS Impact on Auditors illicit activities, fraud, or i= nsider abuse Report- An Empirical OLS Multiple Linear Regression Explanatory Mod= el Case-Study of the World Bank

Key w= ords: Auditor, illicit activities, fraud, insider abuse, Report, Empirical, Multiple Linear Regression, Explanatory Model, Case-Study, World Bank, International, Disclosure, Gover= nance, Financial, Crises, Regulation, IAS, IFRS, IAS 14, segment reporting, practi= ces, corporate governance, board of directors, audit committee.

Abst= ract

Recent interest in IFRS adoption leads to the need to develop some empirical understanding of the impact of IFRS[1]. IFRS IAS may Impact the Auditors illicit activities, fraud, or insider abuse Rep= ort to supervisory agencies. This manu= script is An Empirical Ordinary Least Square (OLS) Multiple Linear Regression Explanatory Model Case-Study of the World Bank. = Instructors can use such a case study as a method of teaching IFRS in accounting classrooms. Such a case study may especially applicable to teaching and Curriculum Innovations in courses such as forensic and international accounting, accounting research methods, and Accounting Information Systems (AIS). This manuscript builds a model that explains the impact of implementing the International Financial Reporting Standards (IFRS), the International Auditing Standards (IAS), and/or Generally Accepted Accounting Principles (GAAP) on “illicit activities, fraud, or insider abus= e,” in the banks. It tests the null hypothesis that the multiple linear regression model and its variables have= no statistical significance. After te= sting the hypothesis the manuscripts rejects the null hypothesis, in favor of the alternative hypothesis stating that the model and at least some of its variables are statistically significant at the .05 level of statistical significance. This study tests the hypothesis among countries that are members of the World Bank, based on its assessment of corporate governance survey. This paper applies the conclusions to the World Bank, as of 2005, driving future research to replicate the finding on more recent time period= s, additional banks that are not World Banks members, such as Cuba, and within countries, in addition to the current study between countries, to assess the reliability of data provided by the central banks in a variety of countries. The study concludes that the choice of accounting methods such as IFRS/IAS, and/or GAAP have a significant impact of anti-“illicit activities, fraud, or insider abuse.” This is a prelimin= ary exploratory study, the authors plan to replicate it and try new approaches, additional variables, and additional methods as more data becomes available= .

Over= view of Auditors Fraud Reporting and the World Banks: Financial Crises and Its Regulatory Responses

This manuscript explains the Auditors Requirement to Report Fraud in the World B= anks as phenomena that relates to the “F= inancial Crises and Its Regulatory Responses.” The enforcement of the requirement of auditors to report fraud may respond to the recent crisis in the world econ= omy, and in the financial services industries in particular. It tests empirically the hypothesis tha= t the regression model cannot explain the auditor’s requirement to report fraud. = This paper focuses on Internatio= nal Disclosure and Governance of the banking and financial services industry. It deals in part with the “Financial Cr= ises and Regulatory Responses”(Alles, 2011) to fraud and the responsibility of t= he auditors to report it[2]. It deals with the World Bank Governance= over its member banks worldwide. It dev= elops a broader focus, geographically (e= .g., the EU, Latin America, and US responses, chronologically (e.g., historical responses over time-series and cross-sectional analysis). This paper targets practitioners in the financial services sector worldwide, regulators, elected officials and academic researchers, as well as students addressing variable that affect the regulations requiring auditors to report fraud. Such requirement may in turn affect the financial recent crisis involving the financial services impact = of laws and regulations, such as Basel 3, adoption of IFRS, IAS versus GAAP and GAAS[3]. The responsibilities of auditors to rep= ort fraud, and their enforcement may also explain the causes of past crises, as well as help avoiding future ones. Requiring the auditors to report fraud may also be related to the le= gal implications and outcomes of the responses to the crisis. The “unintended consequences” that will inevitably accompany regulatory responses of countr= ies that may benefit from tax-fraud in other countries. For example, it is possible that the re= ducing the tax-fraud in countries like the US and the EU may affect adversely the tax-haven or “off-shore” banking industry and the countries that benefit fr= om it. The “Moral hazard inherent in = some aspects of regulatory responses” may be that such countries will avoid disclosure of details that will hurt their business. Thus, such countries may provide evasive responses to the World Bank surveys and similar efforts to reduce fraud, ri= sk and future crisis. This study tries to explain the factor that affect requi= ring auditors to report fraud. This is a proposal to develop predictive model as a “proposals for better, more coher= ent legislative and regulatory responses,” to auditors turning a “blind eye” to frauds that they discover during their audit. The purpose of regulatory responses maybe to protect existing institutions by “protecting a system that allows institutions to fail,” and thereby encourage risk-taking. “The conflict between preventing crises and encouraging some appropriate degree = of risk-taking” may also encourage the World Bank to promote the requirement of auditors to report fraud, and for government to enforce the laws.

Foren= sic Audit & Banking Regulation of The World Bank

Forensic Bank Accounting is a specialty of forensic accounting profession. It is also a world-wide banking system that affects all of us. The World Bank is using The American Institute Certified Public Accountants (AICPA) Forensic and Litigation specialty in preparing i= ts survey dealing with forensic accounting. This manuscript tests hypotheses about modeling legal dispute between the auditors and the banks, litigation services the enforce violation of illicit activities, fraud and abuse, as well as their investigative. <= /o:p>

This study deals with privileged information and privacy, as it relates to offsh= ore tax havens and survey technology in raising red flags. It focuses explaining fraud governance policies driving future training of future forensic accounting academics and students. It demonstrates some innovations in online, continuous, survey data collection and analysis information technology of accounting studies.

This manuscript outlines innovative and practical solutions to constantly changi= ng regulations and its related research, especially from an international bank= ing perspective. Practical solution= s to investigating suspected fraud using surveys. The relationship between forensic accountants and internal, external auditors, and supervisory agencies such as audit committees, in internation= al banking. It suggests that innovative academic research will drive Innovatio= n in practice and teaching of forensic skills, as faculty learns about it by researching the topic. Policy suggestions for the American Accounting Association (AAA) section on "Forensic Accounting," to deal with topics such as anti-sex discrimination automated forensic accounting alert systems, similar to the World Bank survey (Rushinek and Rushinek, 2011).[4]

Lite= rature Review

An example of IAS/IFRS adaption impact includes the European parliament voted to require all European Union (EU) listed companies, by 2005 at the latest, to prepare consolidated accounts in accordance with International Accenting Standards IAS/IFRS (Kobbi, Pigé, and Ridha 2011). Hence, from 2005 and onwards, all EU listed companies must ado= pt IAS 14 standard on segment information.

Prior research on segment reporting practices focused on companies applying the american accounting standard SFAS 131 (Herrmann and Thomas, 2000; Nichols a= nd al, 2000; Doupnik and Seese, 2001; Tsakumis and al, 2006) or the internatio= nal accounting standard IAS 14 (Street and Nichols, 2002; Prather-Kinsey and Me= ek, 2004; Tort, 2006). The results show diversity in segment reporting practices and even a substantial non-compliance with standard regulatory requirements= . In addition, based on a positive accounting approach (Watts & Zimmermann, 1978, 1986), some studies have highlighted the importance of some company’s characteristics as determinants of segment reporting practices (Mitchellal, 1995; Herrmann and Thomas, 1996; Prather-Kinsey and Meek, 2004; Tsakumisal, 2006) without taking into account, except for Leung and Horwitz (2004), the effect of corporate governance mechanisms on theses practices. <= /span>

Prior research suggest that several characteristics of the board of directors are relevant in explaining companies’ financial reporting practices that are the proportion or the existence of outside and/or independent directors on the = board (Forker, 1992; Chen and Jaggi, 2000; Ho and Wong, 2001; Arcay and Vasquez, 2005; Eng and Mak, 2003), the appointment of a non-executive director as chairman of the board (Forker , 1992; Ho and Wong, 2001; Arcay and Vazquez, 2005) and the existence of an audit committee (Forker, 1992, and Arcay Vaqu= ez, 2005) presenting specific characteristics (Mangena and Pike, 2005).

Data= Collection & Processing

The W= orld Bank collected the data and published in on its website, using the “TEMPLATE FOR COUNTRY ASSESSMENT OF CORPORATE GOVERNANCE,” to collect the data, and publish it as Survey III. (See Appendix) This manuscript describe= s the data processing. The authors have = to “clean” the data, and remove some incomplete outliers, improperly formatted data, and had to convert some literals to numeric data. An example of data conversion include b= ut is not limited to converting the “Yes” to a “1,” the “No” to a “0” to produce a binomial variable, the statistical software can process. The respondents could not respond to so= me of the question, due to switching to IFRS, according to their comments.

The trou= ble is switching to IFRS in mid-stream, how can you compare financials of count= ries that have switched from GAAP to IFRS, with those who did not switch? Following are some Questions and Answers (Q&A), this paper does not try to solve, solving such problems will dri= ve future research. However, this manuscript is just demonstrating the needs for research of clarifying and cleaning the data, by developing better Accounting Information Systems for better research design and administration. This data mining and cleansing t= akes a lot of time and may bias the results, due to rendering some data as useless. Following are some countr= ies Q&A, dealing with IFRS, as the World Bank Survey III quotes, from the central ba= nks of the respective countries, concerning different topics that IFRS impacts, such as the “entry into banking:”

“Portugal

1. Entry into Banking

1.2

How many commercial bank= s were there at yearend 2005?

*There were 57 commercia= l banks at the end 2005. However, in 2005 some institutions supervised by Banco de Portugal have chosen to continue to apply, on a transitory basis, the previ= ous accounting standards, while others adopted the IFRS/IAS.<= /p>

7.10 What percent of the commercial banking system’s assets is funded with deposits? * Same

7.10.1 What percent of the commercial banking system’s assets is funded with insured deposits? * Same

Lithuania

1.2 How many commercial banks were there at yearend 2005?<= o:p>

According banks accounti= ng policy which is based on IFRS.

Jamaica

10.4.2 What is the total amount of off-balance sheet items at year= end 2005?

J$11.6bn in legally bind= ing obligations under guarantees and letters of credit are included on balance sheet in keeping with IFRS requirements.”

Limitation & Remedia= tion Discussion

Without fully understand= ing the impact of IFRS, and adjusting the unknown bias that the impact creates on t= he comparative analysis, the results maybe miss-leading. This illustrates issues about IFRS that= can stimulate and drive future faculty research and at the same time help them train themselves and therefor facilitate teach about IFRS.

This may also provide us= with conceptual models that provide insight into accounting curriculum developme= nt in an IFRS world, in a research oriented university. The professor can deve= lop instructional case studies for the various country problems and their solutions. For example, for the Po= rtugal case study, how can one unbiased the entry into banking measurement, when “= some institutions supervised by Banco de Portugal have chosen to continue to app= ly, on a transitory basis, the previous accounting standards, while others adop= ted the IFRS/IAS.” Obviously, the case study has to develop conversion methods = to bring all the member banks to a comparable common denominator in a single country like Portugal, that in turn, will than make them comparable to the = rest of the international banking systems, members of the world bank, for analyt= ics that produce meaningful research results, leading to effective policies and= a more stable banking system. In contrast, what we can see today is an unstable multi-national banking systems and financial service industry companies suc= h as Leman Brothers. Some American comp= anies, such as Enron in the US were “cooking the books,” International financial services Ponzi Schemes, such as Madoff were out of control for over 50 bill= ion Dollars for over 20 years. Other multi-nat= ional banks were “cheating” and defrauding US mortgage industry organizations suc= h as the US Freddie & Mac. Thus the= US SEC is currently suing some major banks for damages, bankrupt countries’ banking systems, such as Greece, & Portugal (next in line) shaking up the foundations of the international banking systems, the currencies and exchan= ge markets, depressing currencies such as the Euro, where member countries suc= h as Germany have to “bail-out” bankrupt members such as Greece, etc.=

Likewise, research studi= es with implications for improving accounting education in an IFRS context, will provide faculty with added incentive to learn about it and include it in th= eir classes. As the World Bank is currently doing by distributing its surveys a= nd raw data on the internet’s WWW. Such research may provide a forum for shari= ng generalizable research that in turn will apply to teaching approaches ranging from curric= ula development to content delivery techniques. This paper looks at distance and blended education as a pedagogical research that contributes to more effect= ive teaching of IFRS related content and issues in colleges and universities th= at are research oriented. Blended education combines traditional “stand-up” instructor classes with remote real-time guest speaker. This particular teaching methods or curricula/programs improve IFRS education, because it will let instructors = host IFRS experts just by using a browser on a computer, or a smart phone. =

To re= duce the impact of such problems, researchers should use automated survey collection software taking advantage of the new technologies. This way the time to market of research= work will be shorter, the survey software will cleanse the data interactively, automatically, consulting the respondents in real-time. That will enable the researchers to do a better research design work, producing more accurate results, faster and better.[5] Supplementing the traditional “snail mail” and e-mail survey, the researche= rs, such as the World Banks, and academics that use its data, should add an onl= ine and offline interactive, real-time processing survey that the respondents c= an fill-out on any device, such as mobile devices, laptops, iPhone, iPad, smart cell phone, etc. Microsoft’s Share= Point survey server provides an excellent example (See Appendix). The respondents can reply to an e-mail = or click on another button to process the survey in-real time. Likewise, the respondents can simply do= wnload the survey to another device, such as a smart phone, fill-out the survey whenever they have time, and submit it by a click of a button, as soon as connectivity is renewed.

Data Analysis, And Hypothesis Testing

This manuscript analyses the data and tests the null hypothesis that the multipl= e cross sectional time series linear regression model and any of its variables, including the IFRS-IAS, or GAAP variables are all equal to zero, and theref= ore, statistically insignificant. Using= the f-test and the t-test, this study rejects both null hypotheses in favor of = the alternative hypothesis that these values are different than zero. Further, it analyzes the residual distribution, concluding that these residuals have met the assumptions that= the forecasting errors are normally distributed around the mean value of zero.<= o:p>

Table 1
SUMMARY OUTPUT
Regression Statistics
Multiple R	82%
R Square	67%
Adjusted R Square	0.62
Standard Error	0.23
Observations	119.00

Table= 1 SUMMARY OUTPUT, Regression Statistics shows a Multiple R of 82%, R Square of 67%, f= rom Observations of 119 countries. Each country’s c= entral bank authorities reported to the World Bank their data. This manuscripts’ 1^st null hypothesis states that:

The M= ultiple R in the population equals zero, 0, while the alternative hypothesis states that is it not zero.

Table 2
ANOVA
	df	SS	MS	F	Significance F
Regression	15	11.59	0.77	14.10	9.87E-19
Residual	103	5.64	0.05
Total	118	17.23

Table= 2, ANOVA, Analysis of Variance shows the df, SS, = MS, F, and Signif= icance F, columns. The Regression row sho= ws the F-value of 14.10 exceeding the Significance F with a lower value 9.87019E-1= 9. Therefore, this manuscript rejects the = null hypothesis in favor of the alternative hypothesis that the Multiple R is not equal to zero, at the .05 of the statistical significance of better. This study may conclude= that the model is statistically significant. Accordingly, the predictor and independent variables explain about (R Square) about 67% of the variability in the independent predicted variable,= of the following linear multiple regression model of the following structure:<= o:p>

Varia= ble 16 =3D f (Variable 1 through Variable 15)

Table 3	Variable 16			Dependent Predicted Variable
5.6-Fraud-Abuse_Are auditors required by law to communicate directly to the supervisory agency any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse?
Variables	Dependent=	Coefficients<= /i>	Standard Error	t Stat	P-value	Lower 95%=	Upper 95%=
Independent	Intercept	-0.64	0.22	-2.97	0.00	-1.07	-0.21
Variable1	3.1-Capital-Asset_%What is the minimum capital to asset ratio requirement?	2.51	1.40	1.80	0.08	-0.26	5.29
Variable2	3.4-Risk-Adjust_%What is the ac= tual risk-adjusted capital ratio in banks as of yearend 2005, using the 1988 B= asle Accord definitions?	0.00	0.00	-0.81	0.42	-0.01	0.01
Variable3	3.4.1-ShareHolderEquit%_What is= the actual ratio between shareholders’ equity (Tier 1 regulatory capital) and total risk-weighted assets of banks as of yearend 2005?=	0.14	0.46	0.31	0.76	-0.78	1.06
Variable4	3.8.3-Banks-Gov_How many govern= ment owned banks are there as of yearend 2005?	0.00	0.00	-0.62	0.54	0.00	0.00
Variable5	3.8.4-Banks-Pri_How many foreign owned banks are there as of yearend 2005?	0.00	0.00	1.01	0.31	0.00	0.00
Variable6	3.11-GAAPAre accounting practic= es for banks in accordance with U.S. Generally Accepted Accounting Principles (GAAP)?	0.03	0.07	0.49	0.63	-0.10	0.17
Variable7	3.10-IFRS-IAS_Internal_Account_= Are accounting practices for banks in accordance with International Accounting Standards (IAS)?	-0.02	0.06	-0.32	0.75	-0.14	0.10
Variable8	5.1.1-IFRS-IAS_Internal_Interna= l_Audit_Are auditing practices for banks in accordance with international auditing standards?	0.24	0.12	2.00	0.05	0.00	0.49
Variable9	5.6.1-External-Audit_Are extern= al auditors legally required to report to the supervisory agency any other information discovered in an audit that could jeopardize the health of a bank?	0.80	0.07	11.62	0.00	0.67	0.94
Variable10	5.7-Audit-Neglect_Can superviso= rs take legal action against external auditors for negligence?	-0.04	0.05	-0.75	0.45	-0.14	0.06
Variable11	5.8-Audit-LawSuit_Has legal act= ion been taken against an auditor in the last 5 years?	0.07	0.08	0.98	0.33	-0.08	0.22
Variable12	6.1-Org-Structure_Can the supervisory authority force a bank to change its internal organizational structure?	0.01	0.06	0.23	0.82	-0.11	0.14
Variable13	6.2-Change-Org_Has this power b= een utilized in the last 5 years?	0.04	0.05	0.70	0.48	-0.07	0.15
Variable14	7.1-Diversificate-Assets_Are th= ere explicit, verifiable and quantifiable guidelines regarding asset diversification? (For example, are banks required to have some minimum diversification of loans among sectors, or are their sectoral concentrati= on limits)?	0.05	0.05	0.93	0.35	-0.05	0.14
Variable15	7.1.1-Borrowers-Releated_Are ba= nks limited in their lending to single or related borrowers?	0.27	0.15	1.86	0.07	-0.02	0.56

Table= 3 shows Variable 1-15 regression coefficients on the dependent variable, variable 1= 6: 5.6-Fraud-Abuse (see survey) _”Are auditors required by law to communicate directly to the = supervisory agency any presumed involvement of bank directors or senior managers in ill= icit activities, fraud, or insider abuse?” Variable 16, the variability of the D= ependent Predicted Variable is explained by the independent variables, variable 1-15= and their respective. It shows the independent Variables’ Coefficients, Standard Error, t Stat, P-value, and L= ower 95%, as well as Upper 95%. Most importantly it lets the reader see Variable 9: 5.6.1-_External-Audit, asking the following: “Are external auditors legally required to report to the supervisory agency any other information discovered in an audit that could jeopardize the health of a bank?” This is a binomial variable, which like m= ost of the variables has values of zero, for ‘No’, or values of ‘1’ for ‘Yes.’ = The regression coefficient of 0.80 approaches the R Square and affects the dependent variable positively. In = other words the model is saying that if external auditors are legally required to report to the supervisory agency (such as the Securities and Exchange Commission, SEC, in the US) any other information discovered in an audit th= at could jeopardize the health of a bank,” than in 80% of the cases the audito= rs are also “required by law to communicate directly to the supervisory agency= any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse?”

Varia= ble 8 5.1.1-IFRS-IAS_In= ternal_Internal_Audit is asking the following: “Are auditing practices for banks in accordance wi= th international auditing standards?” with a positive regression coefficient of .24 implies that when auditing practices for banks are in accordance with international auditing standards (IAS), the in about 24% of the cases the dependent variable, variable 16, 5.6= -Fraud-Abuse will also be positive namely the auditors are” required by law to communi= cate directly to the supervisory agency any presumed involvement of bank directo= rs or senior managers in illicit activities, fraud, or insider abuse?” Which in turn may help control illicit activities, fraud, or insider abuse? With a relatively high coefficient, wit= h a t-value of 2.00 and a p-value of .05 implying that it is statistically significant, and we can reject the null hypothesis that the coefficient in = the population equal zero in favor of the null hypothesis stating that it is not zero at a .05 of statistical significant. In contrast with variable 6, 3.11= -GAAP, asking the following “Are accounting practices for banks in accordance with U.S. Generally Accepted Accounting Principles (GAAP)?” With much lower coef= ficient t-value, and p-value, compared to IAS, it appears to less significant and l= ess influential.

Table 4	RESIDUAL OUTPUT
Observation	Predicted 5.6-Fraud-Abuse_Are auditors required by law to communicate directly to the supervisory agency any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse?	Residuals=	Standard Residuals
1	0.9	0.1	0.2
2	1.0	0.0	-0.1
3	0.9	-0.9	-4.0
4	1.0	0.0	0.2
5	1.0	0.0	-0.1
6	0.2	-0.2	-0.9
7	1.0	0.0	0.0
8	0.9	0.1	0.4
9	0.9	0.1	0.4
10	1.0	0.0	0.1
11	1.1	-0.1	-0.3
12	1.1	-0.1	-0.5
13	0.1	-0.1	-0.6
14	1.0	0.0	0.0
15	0.8	0.2	1.0
16	0.1	-0.1	-0.3
17	0.1	-0.1	-0.3
18	1.0	0.0	0.1
19	0.9	0.1	0.3
20	1.0	0.0	0.2
21	0.1	-0.1	-0.5
22	0.9	0.1	0.3
23	1.0	0.0	0.1
24	0.9	0.1	0.3
25	1.0	0.0	0.1
26	1.0	0.0	0.1
27	1.0	0.0	-0.2
28	0.9	0.1	0.4
29	0.9	0.1	0.5
30	0.9	0.1	0.4
31	0.9	0.1	0.2
32	0.9	0.1	0.3
33	1.0	0.0	0.1
34	1.1	-0.1	-0.3
35	1.0	0.0	0.2
36	0.7	-0.7	-3.3
37	1.0	0.0	0.2
38	0.9	0.1	0.7
39	1.0	0.0	0.1
40	1.0	0.0	0.0
41	0.9	0.1	0.3
42	0.8	0.2	0.7
43	1.0	-1.0	-4.4
44	1.0	0.0	0.0
45	0.9	0.1	0.4
46	1.0	0.0	0.0
47	1.0	0.0	-0.1
48	1.0	0.0	0.2
49	0.9	0.1	0.4
50	-0.3	0.3	1.2
51	0.6	0.4	1.6
52	1.0	0.0	-0.2
53	0.3	0.7	3.4
54	0.9	0.1	0.4
55	1.0	0.0	0.1
56	1.0	0.0	-0.2
57	0.9	0.1	0.4
58	0.9	0.1	0.5
59	1.1	-0.1	-0.3
60	1.0	0.0	0.2
61	0.9	0.1	0.3
62	0.9	0.1	0.5
63	1.0	0.0	-0.1
64	0.9	0.1	0.4
65	1.0	0.0	0.2
66	0.9	-0.9	-4.1
67	0.9	0.1	0.4
68	0.1	-0.1	-0.4
69	0.9	0.1	0.6
70	1.0	0.0	0.1
71	0.7	0.3	1.4
72	1.0	0.0	-0.1
73	0.9	0.1	0.3
74	0.9	0.1	0.5
75	1.0	0.0	0.2
76	0.9	0.1	0.3
77	0.6	-0.6	-2.8
78	1.0	0.0	0.1
79	0.9	0.1	0.3
80	0.2	0.8	3.7
81	0.9	0.1	0.5
82	1.0	0.0	0.2
83	1.0	0.0	0.0
84	0.2	-0.2	-0.9
85	1.0	0.0	0.0
86	1.0	0.0	0.1
87	1.0	0.0	-0.1
88	1.0	0.0	0.2
89	0.9	0.1	0.4
90	1.0	0.0	-0.1
91	0.2	-0.2	-0.9
92	0.1	-0.1	-0.4
93	0.9	0.1	0.3
94	1.0	0.0	0.1
95	1.0	0.0	0.1
96	1.0	0.0	0.0
97	0.9	0.1	0.3
98	0.9	0.1	0.2
99	0.2	-0.2	-1.0
100	0.9	0.1	0.4
101	0.8	0.0	0.0
102	0.9	0.1	0.3
103	0.9	0.1	0.3
104	0.9	0.1	0.3
105	0.1	-0.1	-0.5
106	0.9	0.1	0.5
107	1.1	-0.1	-0.6
108	0.9	0.1	0.3
109	1.0	0.0	-0.1
110	0.9	-0.1	-0.4
111	1.0	0.0	-0.1
112	0.9	0.1	0.6
113	0.1	-0.1	-0.6
114	1.0	0.0	0.0
115	1.0	0.0	0.1
116	0.0	0.0	0.0
117	0.0	0.0	0.0
118	0.2	-0.2	-0.8
119	1.0	0.0	0.0

Chart

Variables

Table of Contents

Independent Predictor Variable = List

Number

Variable1

3.1-Capital-Asset_%What is the minimum capital to asset ratio requirement?

Chart1

Variable2

3.4-Risk-Adjust_%What is the ac= tual risk-adjusted capital ratio in banks as of yearend 2005, using the 1988 B= asle Accord definitions?

Chart2

Variable3

3.4.1-ShareHolderEquit%_What is= the actual ratio between shareholders’ equity (Tier 1 regulatory capital) and total risk-weighted assets of banks as of yearend 2005?=

Chart3

Variable4

3.8.3-Banks-Gov_How many govern= ment owned banks are there as of yearend 2005?

Chart4

Variable5

3.8.4-Banks-Pri_How many foreign owned banks are there as of yearend 2005?

Chart5

Variable6

3.11-GAAPAre accounting practic= es for banks in accordance with U.S. Generally Accepted Accounting Principles (GAAP)?

Chart6

Variable7

3.10-IFRS-IAS_Internal_Account_= Are accounting practices for banks in accordance with International Accounting Standards (IAS)?

Chart7

Variable8

5.1.1-IFRS-IAS_Internal_Interna= l_Audit_Are auditing practices for banks in accordance with international auditing standards?

Chart8

Variable9

5.6.1-External-Audit_Are extern= al auditors legally required to report to the supervisory agency any other information discovered in an audit that could jeopardize the health of a bank?

Chart9

Variable10

5.7-Audit-Neglect_Can superviso= rs take legal action against external auditors for negligence?

Chart10

Variable11

5.8-Audit-LawSuit_Has legal act= ion been taken against an auditor in the last 5 years?

Chart11

Variable12

6.1-Org-Structure_Can the supervisory authority force a bank to change its internal organizational structure?

Chart12

Variable13

6.2-Change-Org_Has this power b= een utilized in the last 5 years?

Chart13

Variable14

7.1-Diversificate-Assets_Are th= ere explicit, verifiable and quantifiable guidelines regarding asset diversification? (for example, are banks required to have some minimum diversification of loans among sectors, or are their sectoral concentrati= on limits)?

Chart14

Variable15

7.1.1-Borrowers-Releated_Are ba= nks limited in their lending to single or related borrowers?

Chart15

Variable16

5.6-Fraud-Abuse_Are auditors required by law to communicate directly to the supervisory agency any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse?

Observation Predicted 5.6-Fraud-Abuse “Are auditors required by law to communicate directly to the supervisory agency any presumed involvement of = bank directors or senior managers in illicit activities, fraud, or insider abuse= ?” shows the Residuals and Standard Residuals. These residuals should be normally distributed around the long term = mean of zero. That means that as an independent variable, such as ( Chart4) Variable 5, 3.8.4-Bank-Pri “asking about How many foreign owned ba= nks are there as of yearend 2005?” forecasts the dependent variable accurately overtime, since the errors average 0 and form approximately a bell shape no= rmal distribution curve.

Chart4

Variable5

3.8.4-Banks-Pri_How many foreign owned banks are there as of yearend 2005?

Summery, Conclusions and Implicat= ions

In summary, this study rejects the hypothesis that the accounting methods such as IFRS-IAS or GAAP do not affe= ct the Observation of the Predicted variable, variable 16, the degree to which= auditors are “required by law to communicate directly to the supervisory agency any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse?” Thereby, reducing the potential risk = of “illicit activities, fraud, or insider abuse.” It also con firms the theory advanced= by other publications that added supervisory authority improves the stability = of the financial markets and the financial services industries, such as the banking industries. Such superviso= ry authorities enables auditors, and central banks of countries around the wor= ld to not only communicate and report “illicit activities, fraud, or insider a= buse,” but also enforce them legally, by suing the fraudsters in a court of law.

In conclusion, his study concludes that the world banks trend of applying IAS around the world and the increas= ing popularity of IFRS among countries and multi-national corporations is going= to continue, eventually leading to their adoption in most of the countries and companies including the US. Thus, teaching IAS and IFRS in colleges and universities will become much more popular, due to increasing market demands for IFRS-IAS skilled accountants = and auditors. Such IAS-IFRS skills wil= l help university graduates to find better jobs faster compared to their competito= rs without IFRS-IAS skills. Furthermo= re, providing more research opportunities to academics about IFRS-IAS by conduc= ting transparent surveys such as the World Bank has done, and publishing the raw data on the WWW will enable them to further study the topics, providing more solutions to problems, and in the process train academics to teach their students about it, giving the students the skills they need.

The implication of this study is = that IFRS/IAS has positive impact on whether auditors are required by law to communicate directly to t= he supervisory agency any presumed involvement of bank directors or senior managers in illicit activities, fraud, or insider abuse. Such requirements may help control the = risk of illicit activities, fraud, or insider abuse, especially if the countries enforce the laws and take legal action against the violators of public trust. Future studies may replicat= e this approach using non-parametric method, to construct models that may confirm = the results of this study, in the event the all the statistical assumption of linear regression have been met. Otherwise, in the event that some assumptions have not been met, the results may differ from the current results. Likewise, the authors may segm= ent the countries into more homogenous segments, by population size, by region,= by whether the countries are tax havens or not, etc. It is possible that segmenting the countries may reveal new insights into the questions that th= is study raises. This survey is based= on a large number of binomial variable, which like most of the variables has val= ues of zero, for ‘No’, or values of ‘1’ for ‘Yes.’ Future studies may replicate= the hypothesis using more objective ratio level data that is more conducive to empirical studies.

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APPR= ENDIX

Appendix 1:

TEMPLATE FOR COUNTRY ASSESSMENT OF CORPORATE GOVERNANCE

http://www.worldbank.org/ifa/CG_template.pdf<= /span>

= http://www.worldbank.org/ifa/rosc_cg.html

Sample Survey Question=

Revision 3

June = 2003

Template for

Country Assessment of =

Corporate governance

&nbs= p;

=

This template is designed for use by policy makers, advisers and standards setters,

As a diagnostic to= ol for assessing the strengths and weaknesses of the corporate governance framewor= k

in a particular co= untry, initially by identifying:

·         the key features of the ownership and control pattern of publicly listed companies and a description of the capital market structure and relevant institutions;

·         the main elements of the legal and regulatory systems affecting corporate governance;

·         specific provisions which offer protecti= on to shareholders, particularly minorities;

·         the role of stakeholders in relation to corporate governance;

·         material financial and non-financial disclosures relevant to corporate governance;

·         the functions and responsibilities of the governing body of the corporation;

·         where applicable, the above features, functions roles and provisions as they relate to banking and non-banking financial institutions.

&nbs= p;

=

=

=

=

=

=

=

=

<= /span>

<= /span>

<= /span>

Country:

Date of Preparation

Prepared By:

=

Name:                                               <= /span>

=

Organizational Affiliation:

Address:

=

&nbs= p;

Contact Phone Number:=

=

Fax Number:

=

E-mail Address:

T= his template and resulting country assessments will contribute to the World Bank/IMF Reports on the Observance of Standards and Codes (ROSC), an initiative of the Financial Stability Forum that seeks to develop guidelines that will contribute to the strengthening of the internation= al financial architecture. It can also be used for self assessments by domestic policy makers/standard setters.

<= span style=3D'font-size:8.0pt;mso-bidi-font-size:10.0pt'>

T= he template complements parallel ROSC work in the fields of auditing and accounting, and creditor rights and insolvency. The Financial Stability Forum has recognized the OECD Principles of Corporate Governance as one= of its 12 core standards. These, therefore, form the conceptual framework = for this template. The template provides a starting point for assessment by policy makers, advisers and standard setters, and attempts to capture b= oth quantitative and qualitative information. The results are intended to be the basis for an inclusive dia= logue on reform with the countries concerned, in the first step towards identifying needs for technical assistance, and support for both institutional development and building of capacity in corporate governa= nce reform.

&nbs= p;

=

=

=

=

=

=

=

=

=

Contents<= /o:p>

<= /span>

<= /span>

A       &nbs= p;             Capital Mark= et Overview                                =                                                                            =                1

<= /span>

B       &nbs= p;             Principles i= & ii: the rights of shareholders &am= p;

the equitable treatment of shareholders                                                  =      7  =

<= /span>

C       &nbs= p;             principle iii: the role of stakeholders in corporate Governance                    =                                                                            =                                                                                                                 <= /span>21

=

D       &nbs= p;             principle iv= : Disclosure and transparency                                                  = 23

=

E       &nbs= p;             principle v:= the responsibilities of the board                                             33

= f                =       COMMENTS ON THE TEMPLATE                       ________________________            39

A. CAPITAL Market overview

Where available, please cross the appropriate box. If available, please use World Bank data. Where data, information or comment is provided by third parties, please use full reference for the source and a d= ate. Please indicate FX rate and date when converting local currency into USD. <= o:p>

Accounti= ng Questions=

B.10. = Are listed companies required to make the following disclosures (through accounting requirements or other regulations):

(i) &nb= sp; = Nat= ure of relationship where control exists, even if there were no transactions betwe= en the related parties.

= =

(a) Yes (b) No=

= ;

(ii) &n= bsp; = Type of transactions with related parties.[6]

= =

(a) Yes (b) No=

= ;

(iii) &n= bsp; Details of t= he transaction(s) including:

&nbs= p;

1.&n= bsp; = ; Indication of volume = (a) Yes (b) No

2.&n= bsp; = ; Outstanding = item = (a) Yes (b) No

3.&n= bsp; = ; Terms and conditions including whether they are

secured, and the nature of the consideration to be <= /p>

provided in the settlement = (a) Yes (b) No

4.&n= bsp; = ; Pricing policies = = (a) Yes (b) No

&nbs= p;

5.&n= bsp; = ; Details of g= uarantees given or received = (a) Yes (b) No

6.&n= bsp; = ; Provision for doubtful debt = (a) Yes (b) No

7.&n= bsp; = ; The expense recognized during the period in = (a) Yes = (b) No =

respect of bad or do= ubtful debts due from

related parties

D.22. &n= bsp; Are auditors prohibited from performing the following non-audit services:

(i)&= nbsp; &nbs= p; Bookkeeping or other services related to accounting re= cords or financial statements.

(a) Yes = (b) No

(ii)= &nb= sp; Financial information system design and implementation consulting.<= /p>

(a) Yes = (b) No

(iii) &n= bsp; Appraisal or= valuation services, fairness opinions, or contribution-in-kind reports.

(a) Yes = (b) No

(iv)= &nb= sp; Actuarial services.

(a) Yes = (b) No

(v)&= nbsp; &nbs= p; Internal aud= it outsourcing services.

(a) Yes = (b) No

D.27. &n= bsp; To which com= pany organ does the auditor report?

(i)&= nbsp; &nbs= p; What mechani= sms are in place in companies to ensure effective oversight of the audit functi= on? (For example, an audit committee of the board or a group of shareholders appointed to oversee the audit e.g. fiscal board, statutory examiners.)

(ii)= &nb= sp; Is the audit= or required to report the following to the audit committee:

(a)&= nbsp; All critical account= ing policies and practices to be used.

(a) Yes = (b) No

(b)&= nbsp; All alternat= ive treatments under GAAP that have been discussed with management, as well as = the impact of such treatments and preference of the auditor.<= /p>

(a) Yes = (b) No

(c)&= nbsp; Any other wr= itten communications between the auditor and management

(a) Yes = (b) No

(iii) &n= bsp; Please speci= fy the rules and provide examples of current practice.

(iv)= &nb= sp; In your opin= ion, are such oversight mechanisms effective?

&nbs= p;

(a) Yes = (b) No

Sources:

http://www.= thecorporatelibrary.com/study/glossary.asp<= o:p>

http://www.= preferredgroup.com/Glossary/g1.htm<= o:p>

http://www.= eseclending.com/industry/glossary.html#s<= o:p>

http://www.= solutionsabroad.com/d_setbusiness.asp<= o:p>

http://www.= investorwords.com/cgi-bin/getword.cgi?2840

IAS International Accounting Sta= ndards

GAAP

Fraud

D.28. = Is there a requirement for external auditors to inform the supervisory authorities and= /or the shareholders about any involvement of board members or senior managemen= t in illegal activities,<= span style=3D'color:red'> fraud or insider abuse?

(a) Yes = (b) No

D.29. &n= bsp; Can sharehol= ders and/or stakeholders sue external auditors?

&nbs= p;

= (a) Yes = (b) No

(i) Are there examples of auditors being sued successfully or unsuccessfully under these rules?

&nbs= p;

= (a) Yes = (b) No

<= /span>1. If so, please give examples.

(ii) &n= bsp; Are there pr= eset liabilities or maximum penalties in case of negligence or fraud fou= nd?

&nbs= p;

= (a) Yes = (b) No

IAS International Standards on Auditing (ISA)[7]?

B.11. &n= bsp; Are the foll= owing entities included in the scope of related party transactions disclosures (t= he following questions are based on IAS 24)?

(i)&= nbsp; &nbs= p; Holding comp= any / controlling entity.

&nbs= p;

(a) Yes = (b) No

(ii)= &nb= sp; Subsidiary o= f the company (i.e. a company controlled by another enterprise (parent).

(a) Yes = (b) No

(iii) &n= bsp; Fellow subsi= diary (i.e. an entity under common control with the reporting entity).

&nbs= p;

(a) Yes = (b) No

(iv)= &nb= sp; Associates (= i.e. an enterprise, other than a subsidiary or a joint venture, over which the investor has significant influence. Significant influence means the power to participate in financial and operating policy decisions. Such influence is presumed to exist if the investor owns more than 20 percent of= the associate).

&nbs= p;

(a) Yes = (b) No

(v)&= nbsp; &nbs= p; Individuals = who, through ownership, have significant influence over the company and close members of their families.

&nbs= p;

(a) Yes = (b) No

(vi)= &nb= sp; Key manageme= nt personnel (including executive and non-executive board members) and their c= lose families.

&nbs= p;

(a) Yes = (b) No

(vii) &n= bsp; Enterprises = in which a substantial interest is owned by any of the individuals included above.

(a) Yes = (b) No

(viii)Parties with= joint control over the reporting enterprise, co-venturers with the reporting enterprise in joint venture, and close family members of those parties if t= hey are individuals.

&nbs= p;

(a) Yes = (b) No

(ix)= &nb= sp; Pension plans.

&nbs= p;

(a) Yes = (b) No

D.18. = Are auditing standards materially in conformity with International Standards on Auditing (ISA)[8]?

&nbs= p;

= = (a) Yes = (b) No

(i)&= nbsp; &nbs= p; If the answe= r is “Yes,” prepare an overview of domestic auditing standards as they relate to=

1.&n= bsp; Ethical requirements – by comparison to= ISA 100 and the November 2001 version of the IFAC C= ode of Ethics for Professional Accountants.

2.&n= bsp; Communicatio= ns of Audit Matters with Those Charged with Governance – by comparison to ISA 260.

(ii)= &nb= sp; If the answe= r is “No,” please specify where domestic auditing standards depart materially fr= om ISA. Specifically identify any material departure pertaining to any of the areas under part (i) above.

GAAP

D.30. &n= bsp; To which com= pany organ does the auditor report?

(ii)= &nb= sp; Is the audit= or required to report the following to the audit committee:

(a)&= nbsp; All critical accounting policies and practices to be used.

(a) Yes = (b) No

(b)&= nbsp; All alternat= ive treatments under GAAP that have been discussed with management, as well as the impact of such treatments and preference of the auditor.

(a) Yes = (b) No

(c)&= nbsp; Any other wr= itten communications between the auditor and management

(a) Yes = (b) No

(iii) &n= bsp; Please speci= fy the rules and provide examples of current practice.

(iv)= &nb= sp; In your opin= ion, are such oversight mechanisms effective?

&nbs= p;

(a) Yes = (b) No

= (iv)= &nb= sp; Do the dutie= s and responsibilities of the audit committee include:

(a) Direct responsibility for the appointment, termination, compensation and oversight= of auditors?

(a) Yes = (b) No

(a)&= nbsp; Authority to approve any significant non-audit relationship with the independent auditors/pre-approve allowable services to be provided by the auditor of the issuer’s financial statements?

(a) Yes = (b) No

(b)&= nbsp; At least ann= ual review of a report from the independent auditors describing the audit firm’s internal quality-control procedures and material issues raised by the most recent internal quality-control review ?

(a) Yes = (b) No

(c)&= nbsp; At least ann= ual review of a report from the independent auditor detailing all relationships between the independent auditor and the company?

(a) Yes = (b) No

(d)&= nbsp; At least ann= ual evaluation of the lead partner of the independent audit (taking into account opinions of management and the company’s internal auditors / personnel responsible for the internal audit function)?

(a) Yes = (b) No

(e)&= nbsp; Consideratio= n of regular rotation of the audit firm?

(a) Yes = (b) No

(f)&= nbsp; Presentation= of its conclusions with respect to the independent auditor to the full board?<= o:p>

(a) Yes = (b) No

(g)&= nbsp; Discussion of annual audited financial statements and quarterly financial statements with management and the independent auditor?

(a) Yes = (b) No

(h)&= nbsp; Discussions = of earnings press releases, as well as financial information and earnings guid= ance provided to analysts and rating agencies?

(a) Yes = (b) No

(i)&= nbsp; The authorit= y and funding to engage independent counsel or other outside advisors?=

(a) Yes = (b) No

(j)&= nbsp; Discussion o= f risk assessment and risk management policies?

(a) Yes = (b) No

(k)&= nbsp; Separate and periodic meetings with management, internal auditors and independent audito= rs?

(a) Yes = (b) No

(l)&= nbsp; Review with independent auditor any audit problems or difficulties (e.g. any accounting adjustments that were noted or proposed by the auditor but were “passed”), = and management’s response?

(a) Yes = (b) No

(m)&= nbsp; Set clear hi= ring policies for employees or former employees of the independent auditors?

(a) Yes = (b) No

(n)&= nbsp; Regular repo= rting to the board of directors?

(a) Yes = (b) No

(o)&= nbsp; Have procedu= res in place for receiving accounting complaints?

(a) Yes = (b) No

(p)&= nbsp; Review of ma= jor issues regarding accounting principles and financial statement presentation= s, including any significant changes in the company’s selection or application= of accounting principles?

(a) Yes = (b) No

(q)&= nbsp; Review of ma= jor issues as to the adequacy of the company’s internal controls and any special audit steps adopted in light of material control deficiencies?

(a) Yes = (b) No

(r)&= nbsp; Review of an= alyses prepared by management and/or the independent auditor setting forth signifi= cant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects = of alternative GAAP methods on the financial statements?

(a) Yes = (b) No

(s)&= nbsp; Review of th= e effect of regulatory and accounting initiatives, as well as off balance sheet structures, on the financial statements of the company?

(a) Yes = (b) No

(t)&= nbsp; Oversee the internal audit function?

(a) Yes = (b) No

(u)&= nbsp; Approve rela= ted party transactions? =

(a) Yes = (b) No

(v) = Please specify any others.

Audit<= /o:p>

Rights to participat= e in fundamental corporate changes

B.12. &n= bsp; Do sharehold= ers have the right to vote on:

= Exclusive power of the shareholder’s meeting?

= Can be delegated to the Board by charter?

= Majority required to pass measures?

(i) appointment and removal of directors=

(ii= ) appointment and removal of auditors

(iii) autho

D.31. &n= bsp; What mecha= nisms are in place in companies to ensure effective oversight of the audit function? (For example, an audit committee of the board or a group of shareholders appointed to oversee the audit e.g. fiscal board, statutory examiners.)

(ii)Is the aud= itor required to report the following to the audit committee:

(a) All critic= al accounting policies and practices to be used.

(a) Yes (b)= No

(b) All altern= ative treatments under GAAP that have been discussed with management, as well as the impact of such treatments and preference of the auditor.

(a) Yes (b)= No

(iii)In your op= inion, are such oversight mechanisms effective?

&n= bsp;

(a) Yes = (b) No

(v) &n= bsp; Do the dut= ies and responsibilities of the audit committee include:

(a) Direct responsibility for the app= ointment, termination, compensation and oversight of auditors?

(a) Yes (b)= No

(w) Authority = to approve any significant non-audit relationship with the independent auditors/pre-approve allowable services to be provided by the auditor of = the issuer’s financial statements?

(a) Yes (b)= No

(x) At least a= nnual review of a report from the independent auditors describing the audit fir= m’s internal quality-control procedures and material issues raised by the most recent internal quality-control review ?

(a) Yes (b)= No

(y) At least a= nnual review of a report from the independent auditor detailing all relationshi= ps between the independent auditor and the company?

(a) Yes (b)= No

(z) At least a= nnual evaluation of the lead partner of the independent audit (taking into acco= unt opinions of management and the company’s internal auditors / personnel responsible for the internal audit function)?

(a) Yes (b)= No

(aa)Considerat= ion of regular rotation of the audit firm?

(a) Yes (b)= No

(bb)Presentati= on of its conclusions with respect to the independent auditor to the full board= ?

(a) Yes (b)= No

(cc)Discussion= of annual audited financial statements and quarterly financial statements wi= th management and the independent auditor?

(a) Yes (b)= No

(dd)Discussion= of earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies?

(a) Yes (b)= No

(ee)The author= ity and funding to engage independent counsel or other outside advisors?=

(a) Yes (b)= No

(ff)Discussion= of risk assessment and risk management policies?

(a) Yes (b)= No

(gg)Separate a= nd periodic meetings with management, internal auditors and independent auditors?

(a) Yes (b)= No

(hh)Review with independent auditor any audit problems or difficulties (e.g. any accounti= ng adjustments that were noted or proposed by the auditor but were “passed”), and management’s response?

(a) Yes (b)= No

(ii)Set clear = hiring policies for employees or former employees of the independent auditors?

(a) Yes (b)= No

(jj)Regular reporting to the board of directors?

(a) Yes (b)= No

(kk)Have proce= dures in place for receiving accounting complaints?

(a) Yes (b)= No

(ll)Review of = major issues regarding accounting principles and financial statement presentati= ons, including any significant changes in the company’s selection or applicati= on of accounting principles?

(a) Yes (b)= No

(mm)Review of = major issues as to the adequacy of the company’s internal controls and any spec= ial audit steps adopted in light of material control deficiencies?=

(a) Yes (b)= No

(nn)Review of analyses prepared by management and/or the independent auditor setting fo= rth significant financial reporting issues and judgments made in connection w= ith the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements?

(a) Yes (b)= No

(oo)Review of = the effect of regulatory and accounting initiatives, as well as off balance s= heet structures, on the financial statements of the company?=

(a) Yes (b)= No

(pp)Oversee the internal audit function?

(a) Yes (b)= No

(qq)Approve re= lated party transactions? =

(a) Yes (b)= No

(rr)= Please specify any others.

riz= ing share capital

(iv= ) issuing share capital

(v)= waiver of pre-emption rights

(vi= ) amendments to company articles or st= atute

(vi= i) remuneration of board members <= /o:p>

(vi= ii) major corporate transactions, such as acquisitions, disposals, mergers and takeovers

(ix= ) transactions with related parties

(x)= changes to company business, or obje= ctives

B.13.<= span style=3D'font:7.0pt "Times New Roman"'> = Specify the rights of shareholders to obtain information on the content in meeting notices such as:

(i) = &nb= sp; agenda;

(ii) = location;

(iii)<= span style=3D'font:7.0pt "Times New Roman"'> = relevant company documents including the company charter, report and accounts;

(iv) = additional financial information;

(v) = share register;

(vi) = a= uditors; and <= /o:p>

B.14. &n= bsp; Are members = of the board (supervisory board in a two-tiered board structure) and senior manage= rs (management board in a two-tiered board structure) required to disclose any material interests in transactions or matters affecting the corporation?

&nbs= p;

= (a) Yes = (b) No

(i)&= nbsp; &nbs= p; If yes, how,= when and to whom (e.g. the board, shareholders, stock exchange, regulator) is th= is information disclosed?

(ii)= &nb= sp; What are the= audit procedures that the external auditor has to perform with respect to related parties and related party transactions in the context of a statutory audit = of the (consolidated) financial statements ?

(iii) &n= bsp; Do the discl= osure requirements equally apply to large/controlling shareholders?

= <= /span>(a) Yes = (b) No

Appendix II

This is a description of how data can be collected to continuously test for regulatory compliance, such as anti-Sex discrimination compliance with the EEOC. The Microsoft® SharePoint® server will collect the data, regress the Ra= nk promotion on Sex[9], test the significance and issue a warning as soon as it finds statistically significant Sex effect on Rank, of Accounting Information Sys= tems (AIS) faculty members, in a participating university. The same survey methods apply to other compliance issues such as GAAP, IFRS, SOX, and even adoption of teaching IF= RS on colleges in the US, where a non-programmer can easily drive a transparent program code generator, invisible to the end-user, just by filling out some dialog box forms:

Scre= en Shot 1

Screen Shot 1 describes how to setup the surv= ey online for a lay-person (not an IT professional), such as a paralegal, a forensic auditor etc. After select= ing from a menu, the option to display a survey the user will start picking up questions. In step 6, the user will pick multiple choice questions. In our case, the system will apply to t= he rank of the professor that joins a class or responds to the survey. Thus, the question will read as follows= :

What= is your rank?

1. Adju= nct Professor

2. Assi= stant Professor

3. Asso= ciate Professor

4. Full Professor

5. None= of the above

As t= he tip suggests “On the <Survey Name>: New Quest= ion page, in the Question box, type the question you want to ask, and th= en select the type of answer you want.”

Scre= en Shot 2

Screen Shot 2 shows some of the advantages of= an interactive online survey over a traditional survey, which is the branching capability. As the instructions su= ggest that branching lets you simplify your surveys for your respondents by displ= aying only questions that are relevant to each respondent. Questions that are not relevant are not displayed. The relevance is determined by the respondent’s answer to the preceding question. = For example, you might have the following questions in your survey:”=

For our survey, we will ask the following:

1.&n= bsp; Are you an Accounting Facul= ty Member? (choices: Yes or No)

2.&n= bsp; What sub-specialty are you? (choices: AIS, Audit, Tax, Financial, Managerial, Governmental, Others)

3.&n= bsp; For which department do you work?

If a survey respondent’s answer to question 1= is “No,” question 2 becomes irrelevant. Using branching, only respondents who choose “Yes” for question 1 will be asked question 2. All others are taken directl= y to question 3.

Scre= en Shot 3

Screen Shot 3 shows another advantage of an online survey, the ability to preview the survey and find out if the survey developer made mistakes, and correct them ASAP. Likewise, the user can create an e-mail message and include hyperlin= ks, as the instructions suggest: “After confirming that your survey operates as= intended, send the survey. Rather than sending an e-mail message with a link to the h= ome page of a team site, you can send a URL (Universal Resource Locator) that t= akes survey recipients directly to the survey.” Entering the information directly into the survey by-passes the prob= lems with e-mail delivery that can be delayed and misclassified as “junk mail,” never reaching its destination. T= hus, we “create an e-mail message, and paste the survey address into the message. Your respondents will be able to click the link to go directly to the surve= y.”

Scre= en Shot 4

Scr= een Shot 4 shows some instructions: “When drafting the e-mail message to survey recipients, be sure to include the following: 1) a concise description of w= hat data the survey will collect, 2) an explanation of how this data will be us= ed, 3) how long the survey will take to complete, and 4) whether the survey is anonymous.” In our case such a tip= is very important since most people disregard the survey as a waste of time and fail to respond, or fail to respond accurately. So it is important to explain the rationale for the survey as follow= s:

1) A concise description of what data the sur= vey will collect: this an EEOC anti-discrimination class action suit survey,

2) An explanation of how this data will be us= ed: the data will be used exclusively for testing whether you are entitled to g= et paid due to illegal Sex discrimination against you (a respondent maybe more likely to respond knowing that it is not just an “academic” survey,

3) How long the survey will take to complete: this survey will take only 5 minutes to complete, and

4) Whether the survey is anonymous: we need to get your information to decide whether the organization discriminated again= st you, and we need to verify it (most of it is available publicly such as Sex, Publications, and Rank) so it cannot be anonymous.

Another advantage is the graphical summary of responses. An example of a graphical summary is shown which helps the respondents avoid mistakes as they can see graphically their responses and = how it compares to the average of all other responses. So for example, when we ask for a numbe= r of refereed journal articles, of top journals, a faculty member will not enter journal not listed on a hyperlinked “top journals” list, and overstate their publication rate unintentionally. Otherwise, we may have to remove outliers of faculty members that say that they have published several hundred articles...

Most important advantage is the instant and programmatic export to Microsoft Excel, which can calculate the regression analysis, and issue an alert based on predetermined conditions of deviations from the standard. Much like manag= ement by exception, we can get an alert only in the case that the variance is significant, exceptional, and warrants additional rapid action.<= /span>

Contents<= /o:p>

A &nbs= p; Capital Mark= et Overview = = 1

B &nbs= p; Principles i= & ii: the rights of shareholders &am= p;

the equitable treatment of shareholders = 7 =

C &nbs= p; principle iii: the role of stakeholders in corporate Governance = = <= /span>21

=

D &nbs= p; principle iv= : Disclosure and transparency = 23

=

E &nbs= p; principle v:= the responsibilities of the board 33

= f = COMMENTS ON THE TEMPLATE ________________________­­­­­­­­­­ 39

=

= G = GLOSSARY ___________________= ______________________________­­­­­­­­­­ 40

A. CAPITAL Market overview

= f = COMMENTS ON THE TEMPLATE ________________________ 39

= G = GLOSSARY _= ____________ 40