The Development of Accounting and Financial Reporting Practices in Sri Lanka: An Exploratory Investigation

2019 ◽  
Vol 54 (02) ◽  
pp. 1950008
Author(s):  
Jayasinghe Hewa Dulige ◽  
Nadana Abayadeera ◽  
Muhammad Jahangir Ali ◽  
Paul Mather
Keyword(s):  
Sri Lanka ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Sri Lankan ◽  
Reporting Practices ◽  
Political Interference ◽  
Key Stakeholders ◽  
Exploratory Investigation ◽  
Chartered Accountants

In this paper, we examine the factors that influence the development of accounting and reporting practices in Sri Lanka in the backdrop of its political and economic environment. We find that the early days of accounting in Sri Lanka were heavily influenced by the British colonial system. Subsequently, its greatest influence was derived from the regulatory and institutional framework backed by local and British professional accounting bodies. We also interview key stakeholders to draw insights on how the institutional factors contribute to the development of financial reporting in Sri Lanka. We discover that the Institute of Chartered Accountants of Sri Lanka (ICASL) is a key player in developing and implementing accounting standards and the best financial reporting practices. We observe that although the Sri Lankan Government has undertaken many initiatives to improve the quality of financial reporting, monitoring and enforcing regulations remain weak partly due to political interference. Therefore, we suggest that strengthening the existing regulatory mechanisms will help to improve the reporting quality and build investor confidence.

The usefulness of IFRS-compliant reports: perceptions of Sri Lankan investors and lenders

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saman Bandara ◽  
Michael Falta
Keyword(s):  
Sri Lanka ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Perceived Usefulness ◽  
Survey Study ◽  
Annual Reports ◽  
Sri Lankan ◽  
Developing Economy ◽  
Content Type ◽  
Context Specific

PurposeThis paper aims to examine differential perceptions of lenders and investors on (1) the use, perceived usefulness, importance and adequacy of annual reports, (2) the importance of qualitative characteristics (QCs) and (3) the perceived impact of International Financial Reporting Standards (IFRS) on financial reporting quality (FRQ) in Sri Lanka.Design/methodology/approachA questionnaire survey study of practising professionals consisting of Sri Lankan investors (N = 214) and lenders (N = 235).FindingsIn relation to (1), lenders and investors rank three out of ten information sources ahead of the remaining seven: both include annual reports and personal knowledge. However, the highest average response for lenders is direct communication with clients, and for investors, it is stock market publications. Within annual reports, both decision-makers identify financial statements as the most useful part. Concerning (2), they both identified understandability as the most important QC followed by timeliness. Relevance ranked last, surprisingly. In relation to (3), both groups perceived that the new IFRS reporting environment improved the FRQ compared to the previous Sri Lanka Accounting Standards regime.Practical implicationsRanking understandability as the most important QC in terms of decision usefulness contradicts IASB's categorisation. The authors provide empirical data on the perceived degree of success of adopting IFRS in a developing economy.Originality/valueThe authors design a decision-oriented (lending vs investing) and context-specific (IASB's financial reporting framework) questionnaire to examine the perceptions of key capital providers separately on the issues mentioned above in “Purpose” within a developing economy. The survey fits into two aspects of the decision-useful theory: useful to make what decisions and useful to whom.

scholarly journals Influence the Quality of Accounting Information Systems and the Effectiveness of Internal Control on Public Financial Reporting Quality; an Empirical Sturdy

2021 ◽  
Vol 04 (02) ◽  
Author(s):  
Mayadunnege Senaka Anuruddha ◽  
Keyword(s):  
Public Sector ◽  
Sri Lanka ◽  
Financial Reporting ◽  
Internal Control ◽  
Accounting Information ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
The Public ◽  
The Government

There is a growing concern over the public financial management practices including financial reporting of governments. People's concern over more productive public resource utilization has flourished. Not only that, transparency, accountability, and openness of public money utilizations have become more common. Financial reporting is a key leading instrument that is able to prove both ideas. The requirement stimulates governments to concern about the quality of financial reporting in the public sector. The government of Sri Lanka has already taken several steps to strengthen their public financial reporting while there are still being criticisms by critical interest parties. The situation creates a drought over the effectiveness and the direction of the initiatives. Based on the public financial reporting environment in Sri Lanka, the research investigates the determining factors of Public Financial Reporting Quality (PFRQ). Scholars acknowledge the influence of the Accounting Information System (AIS) and Internal Control (IC) to determine the PFRQ in different organizational environments. A questionnaire survey seeking opinions on these two areas was distributed to a sample of Accountants working in the central government ministries and departments in Sri Lanka. The results reveal the strong contribution of AIS and IC to enhance the PFRQ. The results further acknowledge the findings of previous scholars over the positive influence of AIS and IC to determine the FRQ. These findings contribute to the literature by analyzing the determinants of financial reporting quality in the public sector. Finally, it is recommending to the government of Sri Lanka to take steps to strengthen their public financial reporting in a correct and more influential direction.

scholarly journals Self-Harm and Suicide Coverage in Sri Lankan Newspapers

Crisis ◽  
2019 ◽  
Vol 40 (1) ◽  
pp. 54-61 ◽  
Author(s):  
Jane Brandt Sørensen ◽  
Melissa Pearson ◽  
Martin Wolf Andersen ◽  
Manjula Weerasinghe ◽  
Manjula Rathnaweera ◽  
...  
Keyword(s):  
Help Seeking ◽  
Reporting Quality ◽  
Sri Lankan ◽  
Quality Of Reporting ◽  
Reporting Practices ◽  
Short Period ◽  
Self Harm ◽  
The Individual ◽  
English Articles

Abstract. Background: Irresponsible media reporting may influence suicidal behavior. Adherence to guidelines for responsible reporting of suicide has not been examined in Sri Lanka in recent times. Aims: To examine the quality of reporting on self-harm and suicide in Sri Lankan newspapers and compare the quality between Sinhala and English newspapers. Method: From December 1, 2014 to January 31, 2015, 407 editions of newspapers were screened. Reporting quality was measured using the PRINTQUAL tool. Results: We identified 68 articles covering an episode of self-harm or suicide (42 Sinhala and 26 English). The majority of articles were noncompliant with guidelines for sensitive reporting. Indicators of noncompliance included that newspaper articles frequently reported method in the headline (53%), included detailed characteristics of the individual (100%), used insensitive language (58% of English articles), and attributed a single-factor cause to the self-harm (52%). No information about help-seeking was included. Limitations: The study involved a relatively short period of data collection. Including social media, Tamil language newspapers, and online publications would have provided additional understanding of reporting practices. Conclusion: The majority of Sri Lankan newspapers did not follow the principles of good reporting, indicating a need for further training of journalists.

The Impact of Going Concern on Financial Reporting Quality: Evidence from Vietnam

2018 ◽  
Vol 34 (3) ◽  
Author(s):  
Phung Anh Thu ◽  
Nguyen Vinh Khuong
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Distress ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Viet Nam ◽  
Listed Firms ◽  
Going Concern ◽  
Debt Covenant

The investigation was conducted to contribute empirical evidence of the association between going concern and financial reporting quality of listed firms on the Vietnam stock market. Based on data from 279 companies listed on the HNX and HOSE exchanges in Vietnam for the period 2009-2015, the quantitative research. Results found that the relationship between the going concern and financial reporting quality of listed firms. Research results are significant for investors, regulators to the transparency of financial reporting information. Keywords Going concern, financial reporting quality, listed firms References Agrawal, K., & Chatterjee, C. (2015). Earnings management and financial distress: Evidence from India. Global Business Review, 16(5_suppl), 140S-154S.Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126.Charitou, A., Lambertides, N., & Trigeorgis, L. (2007a). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43(3), 271–296.Chen, Y., Chen, C., & Huang, S. (2010). An appraisal of financially distressed companies’ earnings management: Evidence from listed companies in China. Pacific Accounting Review, 22(1), 22–41Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77, 35-59.DeFond, M., & Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1), 145–176.DeFond, M.L., & Park, C.W. (1997). Smoothing income in anticipation of future earnings. Journal of Accounting and Economics, 23(2), 115–139.Dichev, I., & Skinner, D. (2004). Large sample evidence on the debt covenant hypothesis. Journal of Accounting Research, 40(4), 1091–1123.Đinh Thị Thu T., Nguyễn Vĩnh K. (2016). Tác động của hành vi điều chỉnh thu nhập đến khả năng hoạt động liên tục trong kế toán: Nghiên cứu thực nghiệm cho các doanh nghiệp niêm yết tại Việt Nam, Tạp chí phát triển khoa học và công nghệ, Quí 3, tr.96-108.Đỗ Thị Vân Trang (2015). Các mô hình đánh giá chất lượng báo cáo tài chính, Tạp chí chứng khoán Việt Nam, 200, tr 18-21.Habib, A., Uddin Bhuiyan, B., & Islam, A. (2013). Financial distress, earnings management and market pricing of accruals during the global financial crisis. Managerial Finance, 39(2), 155-180.Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295–324.Kasznik, R., (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), pp.57-81.Lu, J. (1999). An empirical study of earnings management by loss-making listed Chinese companies. KuaijiYanjiu (Accounting Research), (9), 25–35.McNichols, M.F. and Stubben, S.R., (2008). Does earnings management affect firms’ investment decisions?. The accounting review, 83(6), pp.1571-1603.Selahudin, N.F., Zakaria, N.B., & Sanusi, Z.M. (2014). Remodelling the earnings management with the appear- ance of leverage, financial distress and free cash flow: Malaysia and Thailand evidences. Journal of Applied Sciences, 14(21), 2644–2661.Skinner, D.J., & Sloan, R. (2002). Earnings surprises, growth expectations, and stock returns or don’t let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2/3), 289–312.Sweeney, A.P., (1994). Debt-covenant violations and managers' accounting responses. Journal of Accounting & Economics, 17(3): 281-308.Trần Thị Thùy Linh, Mai Hoàng Hạnh (2015). Chất lượng báo cáo tài chính và kỳ hạn nợ ảnh hưởng đến hiệu quả hoạt động của doanh nghiệp Việt Nam, Tạp chí phát triển kinh tế, 10, tr.27-50.Trương Thị Thùy Dương (2017). Nâng cao chất lượng báo cáo tài chính công ty đại chúng, Tạp chí tài chính, 1(3), tr.55-56.Uwuigbe, Ranti, Bernard, (2015). Assessment of the effects of firm’s characteristics on earnings management of listed firms in Nigeria, Asian Economic and Financial Review,5(2):218-228.

scholarly journals The effect of governance system and degree of convergence to IFRs on the quality of financial reporting: Evidence from Asia

2015 ◽  
Vol 12 (4) ◽  
pp. 409-423
Author(s):  
Ratna Wardhani ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Reporting Quality ◽  
International Standards ◽  
Financial Reporting Quality ◽  
Governance System ◽  
Governance Practice ◽  
Corporate Governance Practice ◽  
Degree Of Convergence

This research investigates the effect of governance system and degree of convergence to IFRS on financial reporting quality. With sample of Asian countries, this study concludes that country level and firm level governance systems, both at, and the degree of convergence have positive influence on financial reporting quality.The effect of degree of convergence of local GAAP to IFRS and corporate governance practice to financial reporting quality will be stronger for companies in countries with weak investor protection. Also, we find that in company with weak corporate governance practice, the adoption of international standards will increase the quality of financial reporting.The results indicate that the adoption of international accounting standard become more important in the countries and companies with weak governance system.

scholarly journals A literature review on the impact of IAS/IFRS and regulations on quality of financial reporting

2016 ◽  
Vol 6 (4) ◽  
pp. 102-114 ◽  
Author(s):  
Newman Wadesango ◽  
Edmore Tasa ◽  
Khazamula Milondzo ◽  
Ongayi Vongai Wadesango
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Statements ◽  
Conclusive Evidence ◽  
Financial Reporting Quality ◽  
International Accounting Standards ◽  
Ifrs Adoption ◽  
The Impact

The International Accounting Standards Board (IASB) in its objectives and preamble, presume that IFRS adoption and perceived compliance to regulatory framework is associated with increased financial reporting quality. Based on these assumptions, this desktop study reviewed several documents to determine whether the IFRS adoption has led to increased financial reporting quality in Zimbabwe. The researchers reviewed literature on how the IAS/IFRS and regulations affect the financial reporting quality of listed companies. The factors around IFRS adoption were identified (mandatory, voluntary and convergence) and discussed in relation to the financial reporting quality. Evidence from previous studies conducted in line with this same issue shows that there is no conclusive evidence on how IFRS and regulations affect the financial reporting quality. Issues to be addressed in further studies include the importance of financial statements prepared under IFRS framework and the importance of compliance with accounting and auditing requirements.

scholarly journals An Investigation on the Audit Committees Effectiveness: The Case for GLCs in Malaysia

2011 ◽  
Vol 13 (3) ◽  
pp. 287 ◽  
Author(s):  
Nurul Nazlia Jamil ◽  
Sherliza Puat Nelson
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Financial Expertise ◽  
Monitoring Mechanism ◽  
The Impact

Financial reporting quality has been under scrutiny especially after the collapse of major companies. The main objective of this study is to investigate the audit committee’s effectiveness on the financial reporting quality among the Malaysian GLCs following the transformation program. In particular, the study examined the impact of audit committee characteristics (independence, size, frequency of meeting and financial expertise) on earnings management in periods prior to and following the transformation program (2003-2009). As of 31 December 2010, there were 33 public-listed companies categorized as Government-Linked Companies (GLC Transformation Policy, 2010) and there were 20 firms that have complete data that resulted in the total number of firm-year observations to 120 for six years (years 2003-2009).  Results show that the magnitude of earnings management as proxy of financial reporting quality is influenced by the audit committee independence. Agency theory was applied to explain audit committee, as a monitoring mechanism as well as reducing agency costs via gaining competitive advantage in knowledge, skills, and expertise towards financial reporting quality. The study is important as it provides additional knowledge about the impact of audit committees effectiveness on reducing the earnings management, and assist practitioners, policymakers and regulators such as Malaysian Institute of Accountants, Securities Commission and government to determine ways to enhance audit committees effectiveness and improve the financial reporting of GLCs, as well as improving the quality of the accounting profession.     

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