MARIANNE OJO, Center For European Law and Politics
Email: marianneojo@hotmail.com

This paper will consider whether the scope of financial regulation should be extended and if so, ways in which this could occur. In order to carry out these tasks, it will not only address problems identified from the recent crises and Basel 2, gaps which exist in some of the responses to these issues, but will also consider what roles other parties such as central banks and external auditors can play in achieving financial objectives. To a certain extent, it will address these issues by making references to proposals which have been put forward from different sources. It will introduce the points of discussion through an overview of global developments which have necessitated the need for a review of financial regulation and through a review of the present regulatory objectives.

JEAN BÉDARD, Université Laval - École de comptabilité
Email: jean.bedard@ctb.ulaval.ca
YVES GENDRON, Université Laval
Email: yves.gendron@fsa.ulaval.ca

This paper reviews literature on audit committees in order to evaluate the extent to which committees are effective in terms of strengthening financial reporting. Specifically, we examine academic research on the topic of audit committee effectiveness published in a variety of accounting journals from 1994 until 2008. In particular, our review investigates from a meta-perspective the results reported in studies which examine the relationship between certain audit committee characteristics and measures of audit committee effectiveness. A large proportion of the studies report a positive association between effectiveness and the following characteristics: presence of the audit committee; audit committee members’ independence; and members’ competencies. However, the number of meetings and the size of the committee are not frequently associated positively with audit committee effectiveness. Our review also highlights important gaps in literature. Most studies are relational and explanatory; very few studies are exploratory, descriptive or transformative. Psychological and sociological perspectives of analysis are neglected. Knowledge is scant on audit committees in jurisdictions which do not follow the Anglo-Saxon model of corporate governance. Further, research on dynamics surrounding audit committee processes is scarce. As a result of these gaps in literature, our review aims to sensitize accounting researchers about the appropriateness of extending the boundaries of research on audit committees: methodologically, theoretically, and geographically speaking. Further, by summarizing research results on the effectiveness of various audit committee attributes, our review can be useful for regulators in terms of assessing the impact of extant regulation or in terms of implementing new regulation. Regulators and practitioners, however, should be careful in interpreting the results; 59 percent of the studies we reviewed focus on US public companies and most of the other studies rely on data gathered in countries characterized by the Anglo-Saxon model of corporate governance.

SOONGSOO HAN, Singapore Management University - School of Accountancy
Email: sshan@smu.edu.sg
TONY KANG, Oklahoma State University - School of Accounting
Email: tony.kang@okstate.edu
LYNN L. REES, Texas A&M University - Department of Accounting
Email: lrees@cgsb.tamu.edu

In this study, we examine how institutional ownership affects the quality and riskiness of the financial statement audit. We hypothesize that institutional investors can influence corporate policy to employ governance mechanisms that reduce their monitoring costs. Our evidence shows that firms are more likely to hire a Big 4 auditor (our proxy for audit quality) when long-term institutional ownership is high, suggesting that long-term institutional investors view high quality audits as a viable means of improving corporate governance while reducing their direct monitoring costs. We find no association between auditor choice and short-term institutional ownership. Next, we find that auditors charge higher fees (our proxy for audit risk) when short-term institutional ownership is high, consistent with short-term investors creating greater incentives for managers to act myopically. We find no association between audit fees and long-term institutional ownership. Taken together, our evidence suggests that dedicated long-term institutional investors demand higher quality audits to enhance corporate monitoring, and that short-term institutional ownership is positively associated with higher audit risk.

TIMOTHY R. YODER, Mississippi State University - Adkerson School of Accountancy
Email: try11@msstate.edu
BRIAN P. MCALLISTER, University of Colorado at Colorado Springs
Email: bmcallis@uccs.edu

This study investigates the trade�off costs faced by private foundations. Findings indicate that foundations perceive distributing funds for charitable purposes as costly and sometimes choose to pay a higher tax rate on net investment income rather than pay higher amounts of qualifying distributions. Foundations also perceive qualifying distributions as more costly in a 'bear' market, which is troublesome given philanthropic need may be the greatest during bear markets. Finally, distributions are perceived as more costly when current year income is insufficient and for older foundations. Policy implications associated with these findings are discussed.

DAVID P. BERNSTEIN, affiliation not provided to SSRN
Email: spstat@yahoo.com

Congress and the Administration are considering the possibility of taxing excessive employer sponsored insurance (ESI) benefits. This paper considers issues associated with the proposed tax on generous ESI plans. The primary purpose of a tax on ESI benefits is to restrain the growth of health insurance premiums and utilization rather than to directly raise revenue. A tax that restrains health care utilization would create economic efficiencies and reduce tax expenditures associated with ESI sponsored health insurance. An equitable ESI benefit tax would require government regulation to insure that it was imposed on firms offering generous health insurance plans instead of small undiversified firms that are charged high premiums because of their high-risk, older or sick workforce.