The press has a long history of cracking investigative reporting in various aspects of society. Such investigative report give information to highlight a wrongdoing.This watchdog role is often cited as one of the most
important functions of the press or media as whole. The press also is a vital information intermediary in the economy. It deliver information to society. But the choice of items covered and investigated, impacts the information set, actions and opinions of large portion of society. This is what so-called 'The Power of Media". However the nature of pressas what i claim is they prefer to reveal stories that can be personalized and involve controversy, conflict and deviant behavior.
Then what is up between press and accounting??
Well, honestlyspeaking there's no perfect system in the world that will hamper someone to ruin pattern or structure that had been organized. Because there's always doers or agents who perform the system. The problem within doers or agents mostly is the factor that cause damage in system and unfortunately some systems are related to social welfare --> accounting.
Accounting fraud is any act or attempt to falsify an accounting statement for financial gain (Wikipedia). The doer could be management as an internal part of the firm or in some extreme cases it involved external body such as accounting firm.
Accounting fraud presents a good opportunity for the business press to undertake a role as watchdog. Frauds are often filled with conflict, drama and deviant behavior, all of which are considered components of a compelling story. Compelling and entertaining stories lead to a larger reader base and a related increase in revenues from subscriptions and advertising, creating an incentive to aggressively fulfill the watchdog role.
However, not to forget that the press is also part of the market. So risen consequences are there may be incentives not to harm those markets due to relations with affiliated companies, advertisers, or simply upsetting the reader-base. Further, uncovering accounting fraud is likely to be time consuming, costly and lead to many dead ends. So here, the press must consider costs and benefits of revealing such stories or when deciding whether and how to identify accounting fraud.
Research by Miller (2003) from Harvard University deliver some conclusions upon the likelihood of the press when revealing accounting fraud, here are some of them...
1. Press is more likely to write an article identifying accounting fraud if the firm has a high information environment which proxied by (1) many press articles in general (2) high analyst following and (3) a large market value of equity.A rich information environment indicates the press can obtain information at a lower cost and that a large number of potential readers would be interested in the firm.
2. The characteristics of the fraud also impact the likelihood the press will write an article. Fraud that includes material publicly misleading statements or management misappropriation of funds is more likely to trigger an article. A public statement can both attract the presses attention, thus reducing identification cost, and assure more people are interested in a follow-up to information they have used. Management misappropriation of funds, whether theft or insider trading, is likely to make a story more interesting to the public, and thus increase the benefits to the writer.
3. The press relies on many sources, but particularly on analysts, legal suits and auditor changes.
The result above appears as the consequences of cost/benefit model and it's pretty logic i think. But to remember the role of press not only as a watchdog of wrong doing occurred, but there are many others like keep people informed about what events in the world, broader dissemination of public information and others..
However there are countervailing pressures that may reduce the press’ activities as watchdogs over firms. Large portion of the press is non-government owned and thus a market participant themselves. As such, their interests are likely to be aligned with those of the market, making it less likely that they desire to cause concern regarding this market or to be scrutinized themselves (Herman, 2002).
The press also may censor stories in an attempt to keep ongoing sources available for future information (Jensen, 1979; Herman, 2002).
So, we should support press to be more active in implementing their role, it is to hope that the firm or any other organizations that related to majority of society will also realize that their works is under control.
Read More … The Press and Accounting Fraud
important functions of the press or media as whole. The press also is a vital information intermediary in the economy. It deliver information to society. But the choice of items covered and investigated, impacts the information set, actions and opinions of large portion of society. This is what so-called 'The Power of Media". However the nature of press
Then what is up between press and accounting??
Well, honestly
Accounting fraud is any act or attempt to falsify an accounting statement for financial gain (Wikipedia). The doer could be management as an internal part of the firm or in some extreme cases it involved external body such as accounting firm.
Accounting fraud presents a good opportunity for the business press to undertake a role as watchdog. Frauds are often filled with conflict, drama and deviant behavior, all of which are considered components of a compelling story. Compelling and entertaining stories lead to a larger reader base and a related increase in revenues from subscriptions and advertising, creating an incentive to aggressively fulfill the watchdog role.
However, not to forget that the press is also part of the market. So risen consequences are there may be incentives not to harm those markets due to relations with affiliated companies, advertisers, or simply upsetting the reader-base. Further, uncovering accounting fraud is likely to be time consuming, costly and lead to many dead ends. So here, the press must consider costs and benefits of revealing such stories or when deciding whether and how to identify accounting fraud.
Research by Miller (2003) from Harvard University deliver some conclusions upon the likelihood of the press when revealing accounting fraud, here are some of them...
1. Press is more likely to write an article identifying accounting fraud if the firm has a high information environment which proxied by (1) many press articles in general (2) high analyst following and (3) a large market value of equity.A rich information environment indicates the press can obtain information at a lower cost and that a large number of potential readers would be interested in the firm.
2. The characteristics of the fraud also impact the likelihood the press will write an article. Fraud that includes material publicly misleading statements or management misappropriation of funds is more likely to trigger an article. A public statement can both attract the presses attention, thus reducing identification cost, and assure more people are interested in a follow-up to information they have used. Management misappropriation of funds, whether theft or insider trading, is likely to make a story more interesting to the public, and thus increase the benefits to the writer.
3. The press relies on many sources, but particularly on analysts, legal suits and auditor changes.
The result above appears as the consequences of cost/benefit model and it's pretty logic i think. But to remember the role of press not only as a watchdog of wrong doing occurred, but there are many others like keep people informed about what events in the world, broader dissemination of public information and others..
However there are countervailing pressures that may reduce the press’ activities as watchdogs over firms. Large portion of the press is non-government owned and thus a market participant themselves. As such, their interests are likely to be aligned with those of the market, making it less likely that they desire to cause concern regarding this market or to be scrutinized themselves (Herman, 2002).
The press also may censor stories in an attempt to keep ongoing sources available for future information (Jensen, 1979; Herman, 2002).
So, we should support press to be more active in implementing their role, it is to hope that the firm or any other organizations that related to majority of society will also realize that their works is under control.
So,, this is my first writing blog written in English (eeehh O.o), i hope more readers will enjoy my blog...
