Abstract: Audit quality is a popular topic in accounting and auditing research because recent decades’ financial crises reduce the reliability of financial reports to public investors and cause significant doubt about the audit profession. Therefore, doing research to identify effective factors in improving audit quality is necessary for bringing back public investors’ trust to financial statements as well as audit reports. In this study, we explore the relationship between audit rotation and audit quality. For this purpose, we employ the Duff (2009) model of audit quality to measure audit quality and use a questionnaire survey of 27 audit service quality attributes. Our results show that there is a negative relationship between auditor’s rotation and audit quality as we consider the auditor’s reputation, capability, assurance, experience, and responsiveness as surrogates for audit quality. There is no evidence for verifying a same relationship when we use the auditor’s independence and expertise for measuring audit quality.
Abstract: Introduction of games has expanded the application area of computer-aided learning tools to wide variety of age groups of learners. Serious games engage the learners into a real-world -type of simulation and potentially enrich the learning experience. Institutional background of a Bachelor’s level engineering program in Information and Communication Technology is introduced, with detailed focus on one of its majors, Health Technology. As part of a Customer Oriented Software Application thematic semester, one particular course of “eHealth Business and Solutions” is described and reflected in a gamified framework. Learning a consistent view into vast literature of business management, strategies, marketing and finance in a very limited time enforces selection of topics relevant to the industry. Health Technology is a novel and growing industry with a growing sector in consumer wearable devices and homecare applications. The business sector is attracting new entrepreneurs and impatient investor funds. From engineering education point of view the sector is driven by miniaturizing electronics, sensors and wireless applications. However, the market is highly consumer-driven and usability, safety and data integrity requirements are extremely high. When the same technology is used in analysis or treatment of patients, very strict regulatory measures are enforced. The paper introduces a course structure using gamification as a tool to learn the most essential in a new market: customer value proposition design, followed by a market entry game. Students analyze the existing market size and pricing structure of eHealth web-service market and enter the market as a steering group of their company, competing against the legacy players and with each other. The market is growing but has its rules of demand and supply balance. New products can be developed with an R&D-investment, and targeted to market with unique quality- and price-combinations. Product cost structure can be improved by investing to enhanced production capacity. Investments can be funded optionally by foreign capital. Students make management decisions and face the dynamics of the market competition in form of income statement and balance sheet after each decision cycle. The focus of the learning outcome is to understand customer value creation to be the source of cash flow. The benefit of gamification is to enrich the learning experience on structure and meaning of financial statements. The paper describes the gamification approach and discusses outcomes after two course implementations. Along the case description of learning challenges, some unexpected misconceptions are noted. Improvements of the game or the semi-gamified teaching pedagogy are discussed. The case description serves as an additional support to new game coordinator, as well as helps to improve the method. Overall, the gamified approach has helped to engage engineering student to business studies in an energizing way.
Abstract: The purpose of this article is an examination of the meaning of theoretic aspects of audit in the context of solving of specific problems of the audit. The audit’s aim is the estimation of financial statements by the auditor, i.e. if they are prepared according to the basic requirements of current financial statements. By examination of concrete examples, we can clearly see problems created in an audit and in often cases, those contradictions which can be caused by incompliance of matters regulated by legislation and by reality. An important part of this work is the analysis of reform in the direction of business accounting, statements and audit in Georgia and its comparison with EU countries. In the article, attention is concentrated on the analysis of specific problems of auditing practice and ways of their solving by taking into consideration theoretical aspects of the audit are proposed.
Abstract: The present study aimed to assess the cost of money based on separating deposits and identifying actions and costs affecting in the process of cost of money in EN Bank of Iran (also known as Eghtesad Novin Bank). The method to calculate the cost of money is based on Activity-Based Costing (ABC). To conduct the study, the required data including deposits in banks and absorbed costs related to the same deposits were extracted from the financial statements of the bank. In order to cost the bank services properly as well as determining the commercial strategies required by commercial units, the data are precisely studied and the cost of each deposit is calculated according to the ABC. Eventually, the factors helping to improve the cost management and also a new model to calculate the cost of money in the bank are presented by some applicable formulas. Furthermore, some offers have been provided for users of both sections, in the practical section in commercial units and the theoretical one in universities.
Abstract: XHTML and XBRL are the standard languages for creating a database for the purpose of displaying financial statements on web applications. Today, XBRL is one of the most popular languages for business reporting. A large number of countries in the world recognize the role of XBRL language for financial reporting and the benefits that the reporting format provides in the collection, analysis, preparation, publication and the exchange of data (information) which is the positive side of this language. Here we present all advantages and opportunities that a company may have by using the XBRL format for business reporting. Also, this paper presents XBRL and other languages that are used for creating the database, such XML, XHTML, etc. The role of the AJAX complex model and technology will be explained in detail, and during the exchange of financial data between the web client and web server. Here will be mentioned basic layers of the network for data exchange via the web.
Abstract: The sectional title industry has been a part of the property landscape in South Africa for almost half a century, and plays a significant role in addressing the housing problem in the country. Stakeholders such as owners and investors in sectional title property are in most cases not directly involved in the management thereof, and place reliance on the audited annual financial statements of bodies corporate for decision-making purposes. Although the industry seems to be highly regulated, the legislation regarding accounting and auditing of sectional title is vague and ambiguous. Furthermore, there are no industry-specific auditing and accounting standards to guide accounting and auditing practitioners in performing their work and industry financial benchmarks are not readily available. In addition, financial pressure on sectional title schemes is often very high due to the fact that some owners exercise unrealistic pressure to keep monthly levies as low as possible. All these factors have an impact on the business risk as well as audit risk of bodies corporate. Very little academic research has been undertaken on the sectional title industry in South Africa from an accounting and auditing perspective. The aim of this paper is threefold: Firstly, to discuss the findings of a literature review on uncertainties, ambiguity and confusing aspects in current legislation regarding the audit of a sectional title property that may cause or increase audit and business risk. Secondly, empirical findings of risk-related aspects from the results of interviews with three groups of body corporate role-players will be discussed. The role-players were body corporate trustee chairpersons, body corporate managing agents and accounting and auditing practitioners of bodies corporate. Specific reference will be made to business risk and audit risk. Thirdly, practical recommendations will be made on possibilities of closing the audit expectation gap, and further research opportunities in this regard will be discussed.
Abstract: Enterprise growth is generally considered as a key driver of competitiveness, employment, economic development and social inclusion. As such, it is perceived to be a highly desirable outcome of entrepreneurship for scholars and decision makers. The huge academic debate resulted in the multitude of theoretical frameworks focused on explaining growth stages, determinants and future prospects. It has been widely accepted that enterprise growth is most likely nonlinear, temporal and related to the variety of factors which reflect the individual, firm, organizational, industry or environmental determinants of growth. However, factors that affect growth are not easily captured, instruments to measure those factors are often arbitrary, causality between variables and growth is elusive, indicating that growth is not easily modeled. Furthermore, in line with heterogeneous nature of the growth phenomenon, there is a vast number of measurement constructs assessing growth which are used interchangeably. Differences among various growth measures, at conceptual as well as at operationalization level, can hinder theory development which emphasizes the need for more empirically robust studies. In line with these highlights, the main purpose of this paper is twofold. Firstly, to compare structure and performance of three growth prediction models based on the main growth measures: Revenues, employment and assets growth. Secondly, to explore the prospects of financial indicators, set as exact, visible, standardized and accessible variables, to serve as determinants of enterprise growth. Finally, to contribute to the understanding of the implications on research results and recommendations for growth caused by different growth measures. The models include a range of financial indicators as lag determinants of the enterprises’ performances during the 2008-2013, extracted from the national register of the financial statements of SMEs in Croatia. The design and testing stage of the modeling used the logistic regression procedures. Findings confirm that growth prediction models based on different measures of growth have different set of predictors. Moreover, the relationship between particular predictors and growth measure is inconsistent, namely the same predictor positively related to one growth measure may exert negative effect on a different growth measure. Overall, financial indicators alone can serve as good proxy of growth and yield adequate predictive power of the models. The paper sheds light on both methodology and conceptual framework of enterprise growth by using a range of variables which serve as a proxy for the multitude of internal and external determinants, but are unlike them, accessible, available, exact and free of perceptual nuances in building up the model. Selection of the growth measure seems to have significant impact on the implications and recommendations related to growth. Furthermore, the paper points out to potential pitfalls of measuring and predicting growth. Overall, the results and the implications of the study are relevant for advancing academic debates on growth-related methodology, and can contribute to evidence-based decisions of policy makers.
Abstract: Accounting policies are a set of solutions compliant
with legal regulations that an entity selects and adopts, and which
guarantee a proper quality of financial statements. Those solutions
may differ depending on whether the entity adopts national or
international accounting standards.
The aim of this article is to present accounting principles (policies)
in Polish and international legal regulations and their adoption in
selected Polish companies listed on the Warsaw Stock Exchange. The
research method adopted in this work is the analysis and evaluation
of legal conditions in Polish companies.
Abstract: The paper gives the evidence of quality of accounting information of Czech private companies. In general the private companies in the Czech Republic do not see the benefits of providing accounting information of high quality. Based on the research of financial statements of entrepreneurs and companies in Zlin region it was confirmed that the quality of accounting information differs among the private entities and that the major impact on the accounting information quality has the fact if the financial statements are audited as well as the size of the entity. Also the foreign shareholders and lenders have some impact on the accounting information quality.
Abstract: The aim of this paper is to raise general awareness of transparency importance for audit firms and for audit services’ users. This paper analyzes transparency of audit firms that audited financial statements of listed companies, for year 2011 and 2012. We use this two years because in the meantime Code of Ethics for Professional Accountants has been adopted. This paper investigates whether transparency reports of audit firms are in accordance with the Croatian Audit Act and whether there is a difference on transparency in observed years. For this paper quality index of transparency report and financial indicators of audit firms are used to get conclusion about condition of audit firms transparency reporting. Results of our study indicate that audit firms are not fully transparent, looking for both years. Transparency of audit firms in 2012 has improved significantly, compared with transparency in 2011.
Abstract: The banking sector poses a lot of problems in Nigeria in general and the non-oil export sector in particular. The banks' lack effectiveness in handling small, medium or long-term credit risk (lack of training of loan officers, lack of information on borrowers and absence of a reliable credit registry) results in non-oil exporters being burdened with high requirements, such as up to three years of financial statements, enough collateral to cover both the loan principal and interest (including a cash deposit that may be up to 30% of the loans' net present value), and to provide every detail of the international trade transaction in question. The stated problems triggered this research. Consequently, information on bank financing of non-oil exports was collected from 100 respondents from the 20 Deposit Money Banks (DMBs) in Nigeria. The data was analysed by the use of descriptive statistics correlation and regression. It is found that, Nigerian banks are participants in the financing of non-oil exports. Despite their participation, the rate of interest for credit extended to non-oil export is usually high, ranging between 15-20%. Small and medium sized non-oil export businesses lack the credit history for banks to judge them as reputable. Banks also consider the non-oil export sector very risky for investment. The banks actually do grant less credit than the exporters may require and therefore are not properly funded by banks. Banks grant very low volume of foreign currency loan in addition to, unfavorable exchange rate at which Naira is exchanged to the Dollar and other currencies in the country. This makes importation of inputs costly and negatively impacted on the non-oil export performance in Nigeria.
Abstract: The move from cash accounting to accrual accounting, or rule-based to principle-based accounting, by many governments is part of an ongoing efforts in promoting a more business-like and performance-focused public sector. Using questionnaire responses from preparers of financial statements of public universities in Malaysia, this study examines the implementation challenges and benefits of principle-based accounting. Results from these responses suggest that most respondents perceived significant costs would be incurred in relation to staff training and recruitment of staffs with relevant technical knowledge. In addition, most respondents also perceived that there will be significant changes in the current accounting system and structure in order to comply with the principle-based accounting requirements. However, most respondents perceived that these changes might not result in significant benefits for management purposes, for example, financial management, budgeting and allocation of resources. Nevertheless, most respondents perceived that principle-based accounting information would facilitate the monitoring function of the board. The general perception is that adoption of principle-based accounting information is not significantly useful than rule-based accounting information is expected to change over time as preparers of the financial statements gradually understand and appreciate the benefits of principle-based accounting information. This infers that the perceived usefulness of different accounting system is a function of familiarity by the preparers.
Abstract: In the current context of globalization, a large number of companies sought to develop as a group in order to reach to other markets or meet the necessary criteria for listing on a stock exchange. The issue of consolidated financial statements prepared by a parent, an investor or a venture and the financial reporting standards guiding them therefore becomes even more important. The aim of our paper is to expose this issue in a consistent manner, first by summarizing the international accounting and financial reporting standards applicable before the 1st of January 2013 and considering the role of the crisis in shaping the standard setting process, and secondly by analyzing the newly issued/modified standards and main changes being brought
Abstract: This paper analyzes the effect of a single uniform accounting rule on reporting quality by investigating the influence of IFRS on earnings management. This paper examines whether earnings management is reduced after IFRS adoption through the use of “loss avoidance thresholds”, a method that has been verified in earlier studies. This paper concentrates on two European countries: one that represents the continental code law tradition with weak protection of investors (France) and one that represents the Anglo-American common law tradition, which typically implies a strong enforcement system (the United Kingdom).
The research investigates a sample of 526 companies (6822 firm-year observations) during the years 2000 – 2013. The results are different for the two jurisdictions. This study demonstrates that a single set of accounting standards contributes to better reporting quality and reduces the pervasiveness of earnings management in France. In contrast, there is no evidence that a reduction in earnings management followed the implementation of IFRS in the United Kingdom. Due to the fact that IFRS benefit France but not the United Kingdom, other political and economic factors, such legal system or capital market strength, must play a significant role in influencing the comparability and transparency cross-border companies’ financial statements. Overall, the result suggests that IFRS moderately contribute to the accounting quality of reported financial statements and bring benefit for stakeholders, though the role played by other economic factors cannot be discounted.
Abstract: In this content analysis research note the aim was to explore to how sustainability and especially environmental issues are conveyed into environmental items in annual reports and disclosures. As The Global Reporting Initiative (GRI) is a globally wide multistakeholder process, the enterprises using voluntarily GRI framework are considered to be aware of sustainability and environmental concerns. The findings were that although these enterprises included in an environmentally sensitive industry sector and had special capabilities to consider environmental issues there were few GRIreporting enterprises presented substantially detailed environmental items in audited financial statements. There were only slight differences between publishing years 2008 and 2009 - the beginning years of economic turmoil. The environmental issues seemed not to be considered substantial enough for financial reporting as a basis for concerning investment or voting decisions.
Abstract: There is limited evidence from various countries
about the possible impact of various criteria to be used to determine
the scope of the IFRS for SMEs issued in 2009 and, research is
needed in this area. We provide evidence from Romania, an
emerging economy member of the European Union. The aim of this
paper is to analyze in a local setting if size is a relevant factor for
deciding between local and global standards for SMEs. Our results
indicate that size is a moderate indicator of the existence of possible
users interested in financial statements and that there is a difference
between the scopes of the standard determined on various criteria..
Also, we suggest that the international exposure is quite reduced in
the case of SMEs, but is sufficient to suggest that at least some SMEs
would benefit from international comparability of financial
statements
Abstract: A Decision Support System/Expert System for stock
portfolio selection presented where at first step, both technical and
fundamental data used to estimate technical and fundamental return
and risk (1st phase); Then, the estimated values are aggregated with
the investor preferences (2nd phase) to produce convenient stock
portfolio.
In the 1st phase, there are two expert systems, each of which is
responsible for technical or fundamental estimation. In the technical
expert system, for each stock, twenty seven candidates are identified
and with using rough sets-based clustering method (RC) the effective
variables have been selected. Next, for each stock two fuzzy rulebases
are developed with fuzzy C-Mean method and Takai-Sugeno-
Kang (TSK) approach; one for return estimation and the other for
risk. Thereafter, the parameters of the rule-bases are tuned with backpropagation
method. In parallel, for fundamental expert systems,
fuzzy rule-bases have been identified in the form of “IF-THEN" rules
through brainstorming with the stock market experts and the input
data have been derived from financial statements; as a result two
fuzzy rule-bases have been generated for all the stocks, one for return
and the other for risk.
In the 2nd phase, user preferences represented by four criteria and
are obtained by questionnaire. Using an expert system, four estimated
values of return and risk have been aggregated with the respective
values of user preference. At last, a fuzzy rule base having four rules,
treats these values and produce a ranking score for each stock which
will lead to a satisfactory portfolio for the user.
The stocks of six manufacturing companies and the period of
2003-2006 selected for data gathering.
Abstract: This paper explores the effectiveness of machine
learning techniques in detecting firms that issue fraudulent financial
statements (FFS) and deals with the identification of factors
associated to FFS. To this end, a number of experiments have been
conducted using representative learning algorithms, which were
trained using a data set of 164 fraud and non-fraud Greek firms in the
recent period 2001-2002. The decision of which particular method to
choose is a complicated problem. A good alternative to choosing
only one method is to create a hybrid forecasting system
incorporating a number of possible solution methods as components
(an ensemble of classifiers). For this purpose, we have implemented
a hybrid decision support system that combines the representative
algorithms using a stacking variant methodology and achieves better
performance than any examined simple and ensemble method. To
sum up, this study indicates that the investigation of financial
information can be used in the identification of FFS and underline the
importance of financial ratios.
Abstract: This paper examines the readability of the chairman’s narratives, as determined by the Flesch score, of a Malaysian public listed company’s corporate reports from 1962 to 2009. It partially supports earlier studies which demonstrated that corporate reports were difficult to read, and had shown very negligible decrease in difficulty over time. Net profit to sales and readability was significantly positively correlated but number of financial statements was significantly negatively correlated with readability.
Abstract: This study examines the possibility to apply the theory of multidimensional accounting (momentum accounting) in a Brazilian Navy-s Services Provider Military Organization (Organização Militar Prestadora de Serviços - OMPS). In general, the core of the said theory is the fact that Accounting does not recognize the inertia of transactions occurring in an entity, and that occur repeatedly in some cases, regardless of the implementation of new actions by its managers. The study evaluates the possibility of greater use of information recorded in the financial statements of the unit of analysis, within the strategic decisions of the organization. As a research strategy, we adopted the case study. The results infer that it is possible to use the theory in the context of a multidimensional OMPS, promoting useful information for decision-making and thereby contributing to the strengthening of the necessary alignment of its administration with the current desires of the Brazilian society.