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Comments of the AFAANZ Auditing and Assurance Standards Committee on Proposed International Standard on Auditing 570 (Revised) Going Concern

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The International Auditing and Assurance Standards Board (IAASB) issued for public comment Proposed International Standard on Auditing 570 (Revised) Going Concern. The Australian Auditing and Assurance Standards Board (AUASB) and New Zealand Auditing and Assurance Standards Board (NZAuASB) also called for comments. The Auditing and Assurance Standards Committee of AFAANZ prepared a submission, based on the findings reported in extant research, informing a number of the questions asked by the IAASB. This technical note presents the formal submission made to the IAASB.

Comments on Exposure Draft for Proposed ISSA 5000, sustainability assurance engagements by the Auditing and Assurance Standards Committee of AFAANZ

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The Exposure Draft for Proposed International Standard on Sustainability Assurance (ISSA) 5000 has been issued by the International Auditing and Assurance Standards Board (IAASB) because there is increasing demand by stakeholders for assurance of sustainability information. Our recommendations include: (i) a more flexible approach to ethics and quality management instead of the requirements for standards that are at least as demanding as the accounting profession's standards; (ii) more differentiation between the requirements for limited as opposed to reasonable assurance and (iii) more cautious use of the term materiality and clearer definitions of the different materiality concepts to avoid potential confusion.

On the willingness to pay for food sustainability labelling: A meta‐analysis

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Abstract

Sustainability labelling is an extremely complex, multifaceted, and debated topic. Through a systematic and meta-analytical approach, we disentangled the informative contents of environmental and social labels and investigated their effect on the consumer willingness to pay for food products. The premium prices for sustainability labels are largely heterogeneous depending on the information disclosed. Generic and specific messages seem not to differ in terms of consumer acceptance. Not all facets are equally important as social issues tend to be less considered. Policy interventions should combine hard and soft measures to holistically achieve sustainability in the food system.

Group‐based and citizen science on‐farm variety selection approaches for bean growers in Central America

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Participatory approaches for crop variety testing can help breeding teams to incorporate traditional knowledge and consider site-specific sociocultural complexities. However, traditional participatory approaches have drawbacks and are seldom streamlined or scaled. Decentralized on-farm testing supported by citizen science addresses some of these challenges. In this study, we compare a citizen science on-farm testing approach — triadic comparisons of technology options (tricot-PVS) — with the benchmark state-of-the-art group-based participatory variety testing approach (group-PVS) over a set of socioeconomic outcomes. We focus on on-farm testing of common bean (Phaseolus vulgaris L.) in the Trifinio area of Central America. We measure the impact of these two approaches on bean growers in terms of on-farm diversification and food security. We use data from 1978 smallholder farmers from 140 villages, which were randomly assigned to tricot-PVS, group-PVS or control. Utilizing a difference-in-difference model with inverse probability weighting and an instrumental variable approach, we observe that farmers involved in group-PVS, and tricot-PVS had comparable levels of on-farm varietal diversification with respect to control farmers. Nonetheless, group-PVS appears to be significantly more effective in boosting household food security, which can be attributed to improved agronomic management of the crops. This study contributes to the next generation of innovations in exploring trait preferences to produce more inclusive, demand-driven varietal design that democratize participatory varietal selection programs.

Does it matter how we ship the good apples out? On specific tariffs, transport modes, and agricultural export prices

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Free-on-board (FOB) export prices for identical products from the same origin often differ across destinations, even when accounting for the trade costs and attributes of the destination country. One explanation for this observed price difference is per-unit trade costs, and the ability of exporters to vary their markups and/or product quality. Using a novel dataset that details trade flows between countries by mode of transport, we estimate the transport mode-specific effect of a per-unit trade cost, specifically specific tariffs, on the FOB export prices of agricultural products. We find an elasticity of specific tariffs to export prices of 1.8%. However, the estimates are heterogeneous across modes of transport. The elasticity of specific tariffs to export prices is 2% for air transport, 5% for road transport, and  .3% for sea cargo. Since the observed positive export price effect can reflect product quality differences or markups, we account for the quality element and find that for a given product quality, markups increase with increasing specific tariffs. This form of price discrimination is less pronounced for higher-quality products that are predominantly shipped by air.

Influence of the cash conversion cycle on firm’s financial performance: Evidence from publicly traded firms in the Latin American context

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This study investigates the relationship between the cash conversion cycle (CCC) and the financial and market performances of publicly traded” firms in six Latin American (LatAm) countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. The analysis covers the period from 2000 to 2018. The results indicate that increases in CCC negatively impact the generation of operating cash flows and long-term investments, and increase financial risk. Other findings suggest that the mechanisms through which CCC affects a firm's financial performance can provide a satisfactory explanation of its market performance. The evidence is consistent with the hypothesis that CCC is a relevant driver of value in working capital management in undeveloped or emerging economies.

Consumers’ valuation of a biofortified crop: Evidence from a laboratory experiment

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Malnutrition among women of reproductive age and children remains one of the major issues in developing countries, particularly zinc deficiency. Zinc deficiency hinders cognitive and physical development in children as well as adults. This study utilized a non-hypothetical laboratory valuation experiment to analyze whether positive information about biofortified rice affects consumers’ valuations of biofortified as well as non-biofortified rice. Specifically, we designed a within-subject experiment based on Becker-DeGroot-Marschak (BDM) auction mechanism to compare consumers’ valuations of zinc-biofortified and popular non-biofortified rice varieties before and after exposure to information about the health benefits of zinc-biofortified rice. We conducted our experiments in randomly selected four districts of Bangladesh, and a total of 134 consumers participated in our study. Results reveal that consumers assign a significant premium to zinc-biofortified rice when they receive information about zinc-biofortified rice and its health benefits. Intriguingly, positive information about zinc-biofortified rice negatively affects the valuation of non-biofortified rice varieties, suggesting negative spillover effects. Moreover, our results also identify that both the information provision and labeling are important to increase consumer demand for zinc-biofortified rice.

Gender gaps in land rights: Explaining different measures and why households differ in Myanmar

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Measuring and understanding gender differences in property rights is key to informing policy decisions and guiding investments aimed at fostering gender equality. However, there are a myriad ways of assessing property rights. Firstly, we assess which indicators to use and why it matters, focusing on rural Myanmar. Myanmar provides an interesting setting, as a large part of the population customarily follows joint property rights in marriage and upon dissolution of marriage and inheritance. However, documented property rights are in the household head's name – usually a male household member. We find that capturing de facto transfer rights is essential, but understanding discrepancies between reported transfer rights and documented rights will be key to policymakers. Capturing agricultural decision-making should remain a priority for agricultural projects. Second, we perform household- and intra-household level analyses to explore why we find joint land rights in some, but not all, households; and why some household members have less land rights than others. A common property rights regime positively reinforces women's land rights, but incompletely so. Within households, a person's role in the household, age, and key life cycle events such as parenthood and marriage are key determinants of having land rights.

Love thy neighbour: Evidence from capital structure decisions

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We examine how the peer effects arising not only from the leading firm but also from a slightly better performing firm affect the capital structure decisions of a firm. There is a large body of literature documenting the importance of peer effects, but it is unclear whether managers pay close attention to activities of slightly better performers. This study uses both book- and market-value based approaches to estimate the peer effect measures. Our analysis shows that: (1) our peer effect measures induce the convergence of the follower firms' capital structure towards better performing firms; and (2) the capital structure converges more towards a slightly better performer.

Private family firms, generations and bank debt

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This paper focuses on the use of bank debt by private family firms and whether it is higher for the first generations of family businesses than for their descendants and subsequent generations. We use a unique hand-collected data set of 4,041 private Spanish firms for the years 2004 to 2013. We find statistical evidence that family-controlled firms make greater use of bank credit. Moreover, we show that first-generation family firms acquire more bank debt than those of second and subsequent generations. Furthermore, during financial crises, family-controlled firms were subjected to less rationing, with increased bank financing for first generations.