Uncovering the Emerging Intangibles: A longitudinal Study on Value Drivers in IT Sector and Inherent Audit Risk

Author:Sergiu PETRICĂ, Ph. D.

JEL: M 42, L24

DOI:

Keywords:value drivers, intangible asstes, intellectual capital, stock prices, value relevance, inherent risk, going concern

Abstract:
Auditing knowledge-based companies has become increasingly challenging, especially considering that the main value drivers of „new economy” entities have been placed outside balance sheets in the form of emerging intangible assets. Current economic conditions, characterized by an increased uncertainty may, also, contribute to the complexity of the issue.\r\n\r\nTo facilitate auditors work the author has formulated a longitudinal study over a number of 20 NASDAQ listes organizations for a period comprised between 2004 and 2011 aiming to provide quantifications to the IT companies resources in relation to stock prices based on an adapted Ohlson Model. At the same time, the correlation between reported intangible assets and the same stock prices was investigated.\r\n\r\nAfter examining the influence of over 80 value drivers the author consider that its findings will help auditors understand the key elements of major IT businesses and will provide guidelines for assessing inherent risks in order to make decisions regarding the going concern assumptions, based on measurable indicators.

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