Accounting & Management

- January 2021
- Article
Measuring Audit Quality

By: Shivaram Rajgopal, Suraj Srinivasan and Xin Zheng

In this paper, we document 45 specific allegations related to audit deficiencies based on GAAS, as detailed in 141 AAERs and 153 securities class action lawsuits over the violation years 1978–2016. Next, we use these allegations to validate existing popular proxies of audit quality. Of all the audit quality proxies, we find that restatements consistently predict all of the top six most cited audit deficiencies. The ratio of audit fees to total fees and the presence of a city specialist auditor predict five of the most cited deficiencies. Overall, our results suggest that the predictive power of audit quality proxies depends on (i) the settings that researchers are interested in and (ii) the specific audit deficiencies hypothesized to matter in the investigated setting. For instance, future studies related to auditor independence might consider using restatements and the ratio of audit fees to total fees as proxies of audit quality.
- January 2021
- Article
Measuring Audit Quality

By: Shivaram Rajgopal, Suraj Srinivasan and Xin Zheng

In this paper, we document 45 specific allegations related to audit deficiencies based on GAAS, as detailed in 141 AAERs and 153 securities class action lawsuits over the violation years 1978–2016. Next, we use these allegations to validate existing popular proxies of audit quality. Of all the audit quality proxies, we find that restatements...
- June 2021
- Article
Developing a Value Framework: Utilizing Administrative Data to Assess an Enhanced Care Initiative

By: Casey J. Allen, Jarrod S. Eska, Nikhil G. Thaker, Thomas W. Feeley, Robert S. Kaplan, Ryan W. Huey, Ching-Wei D. Tzeng, Jeffrey E. Lee, Steven J. Frank, Thomas A. Aloia, Vijaya Gottumukkala and Matthew H.G. Katz

We used national administrative data to assess multiple domains of value associated with enhanced recovery pathways for patients undergoing pancreatic surgery. Value metrics included in-hospital mortality, complication rates, length of stay (LOS), 30-day readmission rates, and institutional costs. We compared performance at MD Anderson with other hospitals both before and after implementation of the pathways. Metrics were graphed on radar charts to assess overall value. Results: 22,660 cases were assessed. Overall, length of stay and other institutional costs were reduced at MD Anderson after implementation of the enhanced clinical care pathways. Our costs were higher than comparators before implementation, but lower than comparators after implementation.
- June 2021
- Article
Developing a Value Framework: Utilizing Administrative Data to Assess an Enhanced Care Initiative

By: Casey J. Allen, Jarrod S. Eska, Nikhil G. Thaker, Thomas W. Feeley, Robert S. Kaplan, Ryan W. Huey, Ching-Wei D. Tzeng, Jeffrey E. Lee, Steven J. Frank, Thomas A. Aloia, Vijaya Gottumukkala and Matthew H.G. Katz

We used national administrative data to assess multiple domains of value associated with enhanced recovery pathways for patients undergoing pancreatic surgery. Value metrics included in-hospital mortality, complication rates, length of stay (LOS), 30-day readmission rates, and institutional costs. We compared performance at MD Anderson with other...
- April 2021
- Case
Accounting for Bitcoin at Tesla

By: Charles C.Y. Wang and Siyu Zhang

In February of 2021, Tesla revealed that it had purchased $1.5 billion of Bitcoin, totaling 7.5% of the company's cash. This announcement came after a series of cryptocurrency-related tweets from Elon Musk, the company's CEO, and a surge in cryptocurrency values. The announcement was met with mixed reactions by stock investors and market participants. This case centers around the accounting treatment of Bitcoin at Tesla: what does the company's choice of accounting treatment say about Bitcoin as an asset, and what are its implications for Tesla's profitability measures under the Generally Accepted Accounting Principles? The case also raises questions about whether investing in Bitcoin is consistent with the company's strategy, and whether Musks' public communications constitute a form of market manipulation.
- April 2021
- Case
Accounting for Bitcoin at Tesla

By: Charles C.Y. Wang and Siyu Zhang

In February of 2021, Tesla revealed that it had purchased $1.5 billion of Bitcoin, totaling 7.5% of the company's cash. This announcement came after a series of cryptocurrency-related tweets from Elon Musk, the company's CEO, and a surge in cryptocurrency values. The announcement was met with mixed reactions by stock investors and market...

About the Unit

The Accounting & Management unit at Harvard Business School strives to be the worldwide leader in research, course development, and teaching on top managements' use of performance measurement systems to:

Communicate with external investors to ensure that their firms' securities are fairly priced and that they are able to access capital,
Measure and evaluate their firms' economic performance,
Improve resource allocation and strategy implementation within their firms, and
Build accountability for performance through effective external and internal governance.

Unit research, course development, and teaching fall into two broad areas: Financial Reporting and Analysis and Management Accounting. Our research helps scholars and educators understand current best practices for the design and use of performance measurement systems that help managers to build more effective, value-creating organizations. Our teaching materials enable us to bring the results of this research into the classroom, and to practice.

Recent Publications

Developing a Value Framework: Utilizing Administrative Data to Assess an Enhanced Care Initiative

By: Casey J. Allen, Jarrod S. Eska, Nikhil G. Thaker, Thomas W. Feeley, Robert S. Kaplan, Ryan W. Huey, Ching-Wei D. Tzeng, Jeffrey E. Lee, Steven J. Frank, Thomas A. Aloia, Vijaya Gottumukkala and Matthew H.G. Katz

June 2021 |
Article |
Journal of Surgical Research

We used national administrative data to assess multiple domains of value associated with enhanced recovery pathways for patients undergoing pancreatic surgery. Value metrics included in-hospital mortality, complication rates, length of stay (LOS), 30-day readmission rates, and institutional costs. We compared performance at MD Anderson with other hospitals both before and after implementation of the pathways. Metrics were graphed on radar charts to assess overall value. Results: 22,660 cases were assessed. Overall, length of stay and other institutional costs were reduced at MD Anderson after implementation of the enhanced clinical care pathways. Our costs were higher than comparators before implementation, but lower than comparators after implementation.

Keywords: Value-based Health Care; Health Care and Treatment; Data and Data Sets; Outcome or Result; Measurement and Metrics; Performance Improvement

Citation

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Measuring Audit Quality

By: Shivaram Rajgopal, Suraj Srinivasan and Xin Zheng

January 2021 |
Article |
Review of Accounting Studies

In this paper, we document 45 specific allegations related to audit deficiencies based on GAAS, as detailed in 141 AAERs and 153 securities class action lawsuits over the violation years 1978–2016. Next, we use these allegations to validate existing popular proxies of audit quality. Of all the audit quality proxies, we find that restatements consistently predict all of the top six most cited audit deficiencies. The ratio of audit fees to total fees and the presence of a city specialist auditor predict five of the most cited deficiencies. Overall, our results suggest that the predictive power of audit quality proxies depends on (i) the settings that researchers are interested in and (ii) the specific audit deficiencies hypothesized to matter in the investigated setting. For instance, future studies related to auditor independence might consider using restatements and the ratio of audit fees to total fees as proxies of audit quality.

Keywords: Audit Quality; Audit Deficiency; Aaer; Securities Class Action Lawsuits; Enforcement; Accounting Audits; Quality; Measurement and Metrics

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Valuing Employment Teaching Plan Spreadsheet Supplement

By: George Serafeim, Ethan Rouen and Katie Panella

May 2021 |
Supplement |
Faculty Research

Citation

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Valuing Employment Case Spreadsheet Supplement

By: George Serafeim, Ethan Rouen and Katie Panella

May 2021 |
Supplement |
Faculty Research

Citation

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Accounting for Bitcoin at Tesla

By: Charles C.Y. Wang and Siyu Zhang

April 2021 |
Case |
Faculty Research

In February of 2021, Tesla revealed that it had purchased $1.5 billion of Bitcoin, totaling 7.5% of the company's cash. This announcement came after a series of cryptocurrency-related tweets from Elon Musk, the company's CEO, and a surge in cryptocurrency values. The announcement was met with mixed reactions by stock investors and market participants. This case centers around the accounting treatment of Bitcoin at Tesla: what does the company's choice of accounting treatment say about Bitcoin as an asset, and what are its implications for Tesla's profitability measures under the Generally Accepted Accounting Principles? The case also raises questions about whether investing in Bitcoin is consistent with the company's strategy, and whether Musks' public communications constitute a form of market manipulation.

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BlackRock: Linking Purpose to Profit

By: Rohit Deshpandé, Aiyesha Dey and George Serafeim

May 2021 |
Teaching Note |
Faculty Research

Teaching Note for HBS Case No. 120-042

Keywords: Blackrock; Investment Management; Stewardship Codes; Stewardship Role Of Institutions; Esg; Purpose; Corporate Purpose; Investment; Asset Management; Corporate Governance; Financial Services Industry; United States

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Financial Flexibility and Corporate Employment

By: Rebecca Lester, Ethan Rouen and Braden Williams

2021 |
Working Paper |
Faculty Research

We study the role of financial flexibility on COVID-19 employment actions. Using daily data from March through May 2020 for 354 of the largest U.S. employers, we find that firms facing a negative demand shock were 28.8 percentage points more likely to reduce their workforce and 17.3 percentage points less likely to provide pay increases to frontline workers, compared to other sample firms. Pre-pandemic financial flexibility attenuates these effects, reducing the likelihood of workforce reductions by almost half. The role of financial flexibility is greatest in firms with better governance, a more asymmetric cost structure, and better treatment of workers.

Keywords: Employment; Covid-19; Pandemic

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