Dr. JK Aier Talks About His Investor Protection and Corporate Fraud Research Center and More in the New “Researcher Spotlight’ Feature Story
Dr. JK Aier, Associate Professor; Area Chair, Accounting; and Director of the Investor Protection and Corporate Fraud Research Center at the School of Business is the newest feature story for the “Researcher Spotlight” section. Aier talks about his research interests in financial reporting decisions, his ongoing research projects, as well as his Investor Protection and Corporate Fraud Research Center.
Is there anything new that you are working on that you would be open to discussing?
One of my ongoing research projects examines the cost and consequences of switching auditors. We look at several measures of audit quality like audit fees, going concern opinions, and restatements in the terminal year of an audit engagement. An increase in any of these measures is undesirable and would be costly to the client. We find that outgoing auditors are more likely to charge higher audit fees and issue more going concern opinions during the final years of their audits suggesting that outgoing auditors charge for additional hours of audit work and are less likely to yield to client pressures However, these increased hours and costs to companies do not result in fewer restatements. Any increase in audit quality from additional audit effort in the terminal year does not overcome the incoming auditor’s incentive to push any perceived accounting error onto the prior regime. Overall, our results suggest that companies could face real economic costs from the outgoing auditor in addition to the start-up costs of the incoming auditor.
What most interests you in your field?
I am most interested in how managerial characteristics and incentives influence financial reporting decisions. My research work has focused on two broad areas that have a direct bearing on accounting quality viz., i) the governance environment and ii) executive compensation.
What should we do to raise the profile of school of business research?
The key determinants of research impact are quality and relevance. First, we should provide a supporting environment for our faculty to produce premier research that makes an impact in the academic field. Second, we need to work on making it relevant for business particularly in the local community. Transforming academic research to practical solutions is not only a win-win proposition for the school and its stakeholders but also a platform for conversations about funded research and larger community engagement. It would embody the Mason vision of being a University for the world.
What is your approach on research partnerships?
Successful research partnerships depend on trust and continuous engagement. The first step is to agree on the overall objectives and individual responsibilities before setting expectations and goals for the venture. The time spent on upfront planning and detailed process have a significant impact on fruitful completion. The best indicator of a successful partnership is when the partners continue to engage in new tasks after the culmination of the first project.
What is your view on multi-disciplinary research?
Multi-disciplinary research is the next frontier for academia but is very challenging. It requires a change in mindset whereby we need to abandon old ways of thinking and embrace the unfamiliar but promising path of the new. Such collaborative thinking is in fact necessary to tackle some of the more difficult problems that cannot be resolved using a single lens approach. However, it is imperative to create the right set of incentives and infrastructure to encourage researchers to work together.
What do you recommend for new junior facility to get started on research programs? What paths should they take?
I always encourage new junior faculty to present their work at workshops and conferences to get as much as feedback and comments. This would not only help improve their paper but also provide ideas for future extensions of their research. Another suggestion would be to engage in conversations with senior faculty and look for collaboration opportunities. Time is always at a premium and therefore it is imperative to pursue research ideas that appeal to their interests and complements their skillset.
Please tell us about what has been happening at the Investor Protection and Corporate Fraud Research Center?
The Investor Protection & Corporate Fraud Research Center strives to provide thought leadership on investor protection and fraud risk by sponsoring, conducting, and disseminating research in these areas. The Center focuses on investor protection activities such as the role corporate governance, the role of auditors, insider trading, management disclosures, and the legal and regulatory environment of business. The Center’s focus on fraud prevention includes among other things, detecting and understanding fraudulent financial and tax reporting, deliberate efforts by management to mislead stakeholders, and fraud investigation and discovery techniques.
Since 2006, the accounting area has sponsored a number of symposiums and academic conferences. The symposiums have attracted senior officials from governmental agencies such as the Public Company Accounting Oversight Board, the Securities and Exchange Commission, and the Government Accounting Office, as well as leading public accounting practitioners. The academic conferences have attracted established scholars to discuss the latest research in corporate governance and fraud. Several accounting faculty have published papers in related areas that highlight the incentives, economic costs and consequences for fraudulent activities by managers.
In addition to the ongoing activities, there are a number of new initiatives planned for the Center that include undergraduate forensic accounting courses, forensic accounting analytics, sponsored research, management development programs and consulting services.
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