Today’s News from the University of Kansas
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Inspection reports expose audit firms to litigation, study finds
LAWRENCE — A University of Kansas business researcher wrote a new scholarly article exploring how Public Company Accounting Oversight Board inspection findings can expose audit firms’ litigation exposure. Once events such as bankruptcies create the potential for legal action, these reports provide a public signal about past noncompliance, increasing lawyers’ perceived strength of case against the auditor, according to Nathan Lundstrom, assistant professor of business at the University of Kansas.
Partnership between KU, Lawrence teachers helps students ‘self-determine’ their learning
LAWRENCE — When Free State High School mathematics teacher Annette McDonald first learned about a possible way to improve learning by letting students make decisions as part of the process, she was skeptical. But a developing partnership with University of Kansas researchers led to a revolution in how McDonald’s students could learn by giving them a choice in their goals and a structure for evaluating their progress. In three years, the collaboration between Free State High School and researchers at the KU Center on Developmental Disabilities has grown to include more than 20 teachers at the school and hundreds of students with and without disabilities.
Full stories below.
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Contact: Jon Niccum, KU News Service, 785-864-7633, [email protected]
Inspection reports expose audit firms to litigation, study finds
LAWRENCE — Auditing is like few other professions because of the relationship between the client and firm.
“I was an auditor for five years, and the irony of the profession is that you have to keep your client happy, even though you are looking for what they did wrong. It’s an odd business model because the intended beneficiaries of the audit are third parties, rather than the client,” said Nathan Lundstrom, assistant professor of business at the University of Kansas.
Now Lundstrom is delving into how the Public Company Accounting Oversight Board affects this relationship with a new article titled “Does the Disclosure of PCAOB Inspection Findings Increase Audit Firms’ Litigation Exposure?” It reveals that inspection reports with audit deficiencies encourage the number of lawsuits filed against the auditor. Once events such as bankruptcies create the potential for legal action, these reports provide a public signal about past noncompliance, increasing lawyers’ perceived strength of case against the auditor.
The study is forthcoming in The Accounting Review.
“Increased litigation exposure is not something auditors want to see. However, their aversion to litigation is an important motivator for them to provide high-quality audits, which benefits capital markets,” said Lundstrom, who co-wrote the article with Brant Christensen and Nathan Newton.
The PCAOB, which is the governmental agency that oversees the auditors, expressly states in every public report released how it is not meant to be an exhaustive rating of the auditor – and the legislation that governs the PCAOB was intentional in avoiding creating reports that would serve as a roadmap for a lawsuit.
“We find people don’t really listen to that,” he said. “If you’re a shareholder and have lost money, you’re going to look at different ways to recover that money. Auditors have deep pockets, so you’re going to try to include them in the suit.”
He notes there is a discrepancy between how potential litigants use this information if dealing with major accounting firms or smaller ones. The Big Four – Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers – rank among the largest private companies in the world. (All but KPMG reside in the top 10.)
“We find that the PCAOB’s public reports are related to litigation against smaller firms but not necessarily related to litigation against larger firms, such as the Big Four,” Lundstrom said. “This is likely because there is less information available about smaller firms, so the PCAOB’s reports provide something that lawyers can’t find anywhere else.”
The creation of the PCAOB was part of the Sarbanes-Oxley Act, a 2002 federal law that established comprehensive auditing and financial regulations for public companies. But Lundstrom perceives the pendulum always swinging back and forth regarding more regulatory oversight versus less.
“We had the financial crisis, which resulted in changes as to how the audit profession operated. Recently, we’ve heard a proposal to eliminate the PCAOB, or at least merge it back into the SEC. Some people think that the SEC and other regulatory bodies have become too big, and they’re overreaching past what would be beneficial,” said Lundstrom, a first-year professor at KU who worked as a CPA and CFE (certified fraud examiner) prior to earning his doctorate in accounting.
With the U.S. deemed among the most litigious countries in the world, it’s not entirely surprising that PCAOB reports spur lawsuits.
“I hope this article brings to light at least one unintended consequence of the current model of audit regulation. Regulatory oversight always creates interesting consequences, and the purpose of studies like this one is to help interested parties consider the costs and benefits of that oversight so they can make informed policy decisions,” Lundstrom said.
“People are people, and they make decisions based on the information they have. Increased litigation was not the intent of PCAOB regulation or the public release of reports about audit firms. This regulatory oversight was meant to be a deliberate approach to improve audits, not necessarily to tell the world which auditor is better than the other.”
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Contact: Jen Humphrey, Life Span Institute, 785-864-6621, [email protected], @kulifespan
Partnership between KU, Lawrence teachers helps students ‘self-determine’ their learning
LAWRENCE — When Free State High School mathematics teacher Annette McDonald first learned about a possible way to improve learning by letting students make decisions as part of the process, she was skeptical. After all, the curriculum was set, and students couldn’t just decide what they would learn.
But a developing partnership with University of Kansas researchers led to a revolution in how McDonald’s students could learn by giving them a choice in their goals and a structure for evaluating their progress as they worked toward achieving those goals. In three years, the collaboration between Free State High School and researchers at the KU Center on Developmental Disabilities has grown to include more than 20 teachers at the school and hundreds of students with and without disabilities.
A teacher with 30 years of teaching experience, McDonald credits the Self-Determined Learning Model of Instruction, or SDLMI, with giving her the structure to engage students in the learning process in a way that not only affects learning mathematics, but any subject.
“Instead of going through a process, I’m asking them, how do they want to learn?” she said. “We discuss their strengths and also what they want to improve on. Then I’m able to incorporate that into my teaching.”
At its core, the SDLMI is about setting a goal, creating an action plan to achieve that goal and self-evaluating progress to inform the next goal, said Karrie Shogren, director of the KU Center on Developmental Disabilities, professor of special education and a leading researcher in the field of self-determination.
Pioneered at KU by researchers at the Life Span Institute and the Department of Special Education in partnership with self-advocates, the SDLMI began with research on how to shift teaching models so that students have opportunities and experiences to become more self-determined. More recently, KU researchers, in partnership with teachers, have engaged in federally funded projects in inclusive, general education classrooms in Maryland, Delaware and Pennsylvania to determine how use of SDLMI affects the achievement of students with and without disabilities – especially those who are in high school, or what is known as transition age.
“We intuitively know that identifying goals and things we want to work towards are critical for us to move forward in our lives,” Shogren said. “We’ve spent a lot of time in disability supports and in schools in general talking to students about goals – even getting them to start being able to identify those for themselves. But what they’ve never really had is the strategy to move forward.”
Take a goal such as running a 5K race. Setting the goal doesn’t give you the steps to make progress on that goal, how to meaningfully navigate the barriers you might encounter, why it’s important to stay invested and what this goal leads to in the future, Shogren said.
“That translates to a school context,” she added. “You can have a goal, but you may know how to develop an action plan to implement it, or the structure to evaluate your progress.”
The SDLMI has been shown to be effective for students who are disengaged or experience challenges in learning. Researchers are increasingly seeing that it also influences high-achieving students in Advanced Placement classes where students can get too focused on specific things, she said.
“Students can ask themselves if their goal was wrong, or if they had the wrong action steps,” Shogren said. “Some students may have had a goal of scoring perfect on absolutely every test, but with the SDLMI, they can begin to determine if perfection was unrealistic. For a struggling student who just wanted to pass their classes and turn in their assignments, but they didn’t do that, they can evaluate their action plan. Maybe they had the goal, but they didn’t change anything about how often they were playing video games every night, so they didn’t have the steps in place to meet the goal. Again, so much of this seems so intuitive, but we teach students those structured steps to think through how to set and go after goals.”
Individualized Instruction
In the classroom in February, McDonald set aside 15 minutes in her pre-calculus class to talk through goals with the students. As she moved around the room, the word “perseverance” was visible over one shoulder, spelled out in large cursive letters along one wall.
“How many of you are thinking about time management?” she called out. A few hands went up. “All right. How about study strategies? How many people are thinking about AP practice test scores?”
Students met with their peers at their tables to discuss their goals and then went through more questions with McDonald. Then it was on to the mathematics lesson of the day.
Joining her that day was Sheida Raley, then a doctoral candidate at KU and now an assistant research professor at the KU Center on Developmental Disabilities and an assistant professor in KU’s special education department. While a student, Raley had worked closely with McDonald to implement the SDLMI at the school.
When Myron Graber, principal of Free State High School, learned how McDonald was using the SDLMI and the partnership with KU, he enthusiastically supported it and encouraged other teachers to adopt it for their classrooms. Raley trained McDonald to be an SDLMI coach for other teachers, who could pursue a professional development track to learn how to implement SDLMI. To date, more than 20 teachers across mathematics, special education, social studies and other areas have implemented it, and more than 800 students have experience with planning and evaluating goals through the SDLMI.
Sam Hutfles, a senior at Free State High School last spring, said he had applied the SDLMI to learn better study strategies, including better focus on homework and reducing distractions. He said he also saw how SDLMI had helped McDonald connect with the students in the class.
“I think it’s helped her in the sense that it allowed her to individualize the learning a little more because she’s able to know what works well for us,” he said. “She’s adjusting it so that fits our needs.”
National in scope
Self-determination, and its implementation through the SDLMI and other tools, has been a major focus of research at the KU Life Span Institute and resulted in several federally funded grants to develop it.
Shogren is the primary investigator on a $3.3 million, four-year project launched in 2017 across high schools in Maryland, Delaware, and Pennsylvania. The focus of the grant is to identify effective strategies, knowledge and the skills necessary for teachers and other personnel to improve outcomes for students with disabilities and their peers in the classroom. It’s also a study of what supports, like online resources or coaching, teachers need to implement SDMLI effectively to improve those outcomes across all students.
Preliminary results from the first year of the longitudinal, multiyear trial demonstrated that using the SDLMI to set goals and work toward them resulted in small changes in overall student self-determination across ninth-graders, as well as consistent patterns of change for students with and without disabilities. Findings from the first year also suggested that the vast majority of goals set by students in inclusive, general education classes focused on academic learning (93%) and students with and without disabilities set similar goals. KU researchers are currently analyzing data from the second year of the trial, which included ninth- and 10th-graders, and they are planning for the final year during 2020-2021,which will include ninth-, 10th- and 11th-grade students.
Interestingly, Raley said, the initial results suggested slight differences in goal completion and attainment outcomes based on disability status, with students with disabilities being slightly more likely to complete their goals set using the SDLMI but also having slightly lower levels of attainment when they complete their goal, regardless of the type and intensity of implementation supports their teachers received. That suggests the importance of providing the supports needed by all students to go after their goals, she said.
Next steps for Free State High School and beyond
A key difference between the federally supported research conducted in other states the partnership with Free State High School in Kansas is funding, Raley said. In the multiyear trial funded by the Institute of Education Sciences, there are funds to pay for substitute teachers so that teachers can complete the training as well as resources for materials, coaching and instruction. At Free State, the process has been self-funded, with the school covering the costs of substitute teachers so that teachers can participate in professional development to learn and practice SDLMI.
Graber, the principal, is an enthusiastic supporter of the model and of more teachers learning to use it to improve student outcomes. The root of the issue is making sure that the school can graduate independent learners who are prepared to transition to the next stage in their lives, he said.
“You can’t argue with something that works,” Graber said. “It fits nicely with the direction we’re trying to go on to some of the changes we’re making at the school. Ultimately, my vision is that it would be embraced by all to bring some common terms and some common language to a process that could be heard across the whole school.”
McDonald added that using the method reveals how students learn, whether it’s through explanation or by practicing or by talking through the material with a friend. That in turn prompts her to give them opportunities to learn in different ways.
That also personalizes instruction, she said.
“They’re telling me their strengths, their weaknesses and what they want to improve on,” she added. “So I’m gathering this information and as I do that, I get to know them. This person wants to play football, so I want to bring some football examples into the class, or this person wants to be an aerospace engineer, so I should have an example that includes that.”
As for the partnership with Lawrence Public Schools, much more is on the horizon. Free State is going schoolwide with the SDLMI next year and training all 120 teachers in the model so they can use it with over 1,800 students. Also, a web-based app that supports students to set goals has been in development with funding from the Institute of Education Sciences and will be tested by teachers and students at Free State and Lawrence High School next year. The timing for a web-based version may be important if classes must be held online because of COVID-19.
Anthony Lewis, superintendent of Lawrence Public Schools, has also taken an interest in SDLMI. He often says that the goal is that “students become CEOs of their own learning” and the SDLMI support teachers and students in making that happen.
With more funding, Raley said, the SDLMI could be implemented at more schools in Lawrence, and in more grade levels including middle schools, too.
“Everyone can benefit from learning through self-determination,” Raley said.
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Erinn Barcomb-Peterson, director of news and media relations, [email protected]
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