The effect of applying the accounting of the fair value in the quality of financial reporting based of the view of Sudanese external auditors - Field studies. أثـر تطبیق محاسبة القیمة العادلة فی جودة التقاریـر المالیة من وجهة نظر المراجعیـن الخارجییـن السودانییـن: دراسة میدانیة

2019 ◽  
Vol 39 (3) ◽  
pp. 107-122
Author(s):  
عمر السر محمد ◽  
محمد أبکر محمد
Keyword(s):  
Financial Reporting ◽  
Field Studies ◽  
Fair Value ◽  
External Auditors

scholarly journals ФОРМУВАННЯ ОБЛІКОВОЇ ПОЛІТИКИ ЗА ПРИНЦИПОМ БЕЗПЕРЕРВНОСТІ ДІЯЛЬНОСТІ ПІДПРИЄМСТВ

2021 ◽  
pp. 74-81
Author(s):  
Олена Сергіївна Юрченко
Keyword(s):  
Financial Reporting ◽  
Information Needs ◽  
Accounting Standards ◽  
Financial Statements ◽  
Fair Value ◽  
The Real ◽  
Real Value ◽  
The Impact ◽  
Accounting Policy

Formulation of the problem. Based on the study, the prerequisites, features and components of the formation of accounting policies in the context of business continuity are revealed. The purpose of the article is to substantiate the theoretical and methodological and organizational provisions of accounting policy formation in the context of the implementation of the concept of continuity. The object of research is the process of formation of accounting policy and its impact on the quality of corporate financial reporting information. Methods used in the study: scientific knowledge, method of generalization, comparison, logical - meaningful, methods of induction and deduction. The main hypothesis is that the formation of accounting policies aimed at determining the regulations of accounting and reporting from the standpoint of reflecting complete and reliable information about the real value of assets and liabilities will help reconcile the interests of all stakeholders. Presenting main material. The article identifies the prerequisites, directions and elements of the formation of accounting policies on the principle of continuity of enterprises. Provisions on the development of theoretical and methodological foundations for the formation of accounting policies of enterprises on the basis of risk-oriented approach are revealed. The necessity of valuation of assets and liabilities according to the criteria: fair, discounted and market value of enterprises is substantiated and the methodological support of valuation of financial instruments in accounting is revealed. Originality and practical significance are proposals for the formation of methodological and organizational support and recommendations for the measurement of assets and liabilities at fair value in order to improve the quality of financial statements. Research findings. The formation of accounting policy in the context of the principle of continuity is based on the requirements of International Accounting Standards and National Accounting Standards and depends on the needs of management, methods and techniques of accounting. In the process of developing an accounting policy, it is necessary to take into account the information needs of various stakeholders to disclose information in corporate financial statements. The introduction of theoretical and methodological provisions for the formation of elements of accounting policy on the principle of continuity will meet the information needs of different users, improve the quality of financial reporting and assess the impact of accounting policies on the real value of enterprises in the future.

scholarly journals Earnings quality before and after the implementation of PSAK 69

Accounting ◽  
2021 ◽  
pp. 727-734 ◽  
Author(s):  
Naniek Noviari ◽  
I Gusti Ayu Eka Damayanthi ◽  
I Gusti Ngurah Agung Suaryana
Keyword(s):  
Financial Reporting ◽  
Agricultural Sector ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Fair Value ◽  
Cross Sectional ◽  
Current Period ◽  
Before And After ◽  
Earnings Response

PSAK 69 Agriculture regulates the accounting treatment of agricultural activities in Indonesia. The measurement of biological assets is the most important part of the arrangement of PSAK 69. PSAK 69 deals with biological assets measured at fair value less costs to sell at the beginning and end of the reporting period. Characteristics of growing biological assets will have an impact on the growth in fair value of assets, so there will be differences in fair value at the beginning and end of the financial reporting period. The difference in fair value of biological assets, whether realized or not, is recognized as gain in the current period. This will have an impact on the quality of the company's earnings. This study aims to examine differences in earnings quality before and after the implementation of PSAK 69 in agricultural sector companies listed on the Indonesia Stock Exchange. The research was conducted on 14 agricultural companies listed on the Indonesia Stock Exchange in the 2016-2019 observation period. Earnings quality is measured by the earnings response coefficient. Earnings response coefficients are estimated using the firm specific coefficient model (FSCM) and pooled cross-sectional regression model (CSRM) methods. This study measures the quality of earnings before and after the application of PSAK 69. The quality of earnings before and after the application of PSAK 69 is tested by a paired two-sample t-test. The results of this study found no difference in earnings quality before and after the application of PSAK 69.

scholarly journals Fair value accounting and earning management: The impact of unobservable inputs on earning quality. Evidence from the US

2019 ◽  
Vol 16 (2) ◽  
pp. 8-18 ◽  
Author(s):  
Marco Pompili ◽  
Marco Tutino
Keyword(s):  
Financial Reporting ◽  
Negative Impact ◽  
Evaluation Process ◽  
Strong Relationship ◽  
Fair Value ◽  
Financial Instruments ◽  
Fair Value Accounting ◽  
Earning Quality ◽  
The Impact

Accounting standard boards (IASB and FASB) are aimed at designing high-quality standards able to increase transparency and comparability of financial reporting. They have chosen fair value accounting (FVA) approach to improve the quality of financial reporting and at the same time help financial reporting users in the decision-making process. During recent years, an intense debate has arisen about the trade-off between relevance and reliability of accounting information using this approach. Many authors outline problems related to the fair value hierarchy valuation of financial instruments, in particular, the discretionary use of unobservable inputs in financial instruments valuation process in support of earnings management. Tutino and Pompili (2018) have identified a general negative correlation between the extent of FVA and earning quality. Stating this, the main objective of the paper, using the same approach of the previous one, is to identify the specific impacts of unobservable inputs on earning quality. Theory and previous literature suggest a major negative impact of unobservable inputs than observable ones on the quality of information provided within financial reporting. Results show a negative and strong relationship between FVA and earning quality for US banks that do not depend on the hierarchy of input used in the evaluation process. These results suggest new considerations on the reliability of fair value concerning the possibilities of manipulation given to the management with this approach.

scholarly journals An empirical analysis of the effect of audit quality on financial reporting fraud

2012 ◽  
Vol 9 (4-4) ◽  
pp. 391-399
Author(s):  
Fujen Daniel Hsiao ◽  
Jerry W. Lin ◽  
Joon S. Yang
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Quality ◽  
Reporting Quality ◽  
Auditor Independence ◽  
External Auditors ◽  
The Relationship ◽  
Financial Reporting Fraud

Several highly publicized financial reporting fraud cases (e.g., Enron, Tyco International, and WorldCom) have put the role of external auditors and quality of their audit in ensuring corporate financial reporting quality under considerable scrutiny. Much research has been conducted on the determinants of earnings management. Since earnings management is inherently unobservable, most studies use various measures of accruals as proxies for earnings management. This study examines the relationship between audit quality and a more direct measure of earnings management – financial reporting fraud. Contrary to the concerns that nonaudit services are the primary reason for auditor independence impairment that results in lower audit and earnings quality, this study finds no significant relationship between reporting fraud and fees paid to auditors for various services.

scholarly journals Determinan Fraudulent Financial Reporting Using Fraud Pentagon Analysis

2019 ◽  
Vol 6 (2) ◽  
pp. 105-114
Author(s):  
Fidyah Quraini ◽  
Yuni Rimawati
Keyword(s):  
Financial Reporting ◽  
Financial Stability ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
External Pressure ◽  
Fraudulent Financial Reporting ◽  
Financial Report ◽  
External Auditors ◽  
Monitoring Quality

This research aimed at knowing factors of fraudulent financial reporting using pentagon fraud analysis. This research analyzed the influence of financial target, financial stability, external pressure, institutional ownership, ineffective monitoring, quality of external auditors, change of auditors, change of directors, and number of CEO’s picture in fraudulent financial report. Sample in this research were 14 go public government companies from 2013 to 2017. Source of data in this research were secondary data in form of annual report in official website of Indonesia Stock Exchange. The examination of this research used logistic regression. The result of this study showed that the influence of external pressure expected fraudulent financial report, while financial target, financial stability, institutional ownership, ineffective monitoring, quality of external auditors, changing auditors, changing directors, and a number of CEO’s picture often did not influence the fraudulent financial reporting.

Assessing the Financial Reporting Consequences of Conversion to IFRS: The Case of Equity-Based Compensation

2010 ◽  
Vol 24 (4) ◽  
pp. 589-621 ◽  
Author(s):  
Mary Lea McAnally ◽  
Sean T. McGuire ◽  
Connie D. Weaver
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Intrinsic Value ◽  
Price Volatility ◽  
Fair Value ◽  
Cash Flows ◽  
Tax Benefits ◽  
The Difference ◽  
Accounting Reports

SYNOPSIS: The potential conversion of accounting standards from U.S. GAAP to International Financial Reporting Standards (IFRS) raises the issue of unknown financial reporting consequences. We consider one important accounting issue, namely equity-based compensation, and study how IFRS conversion will affect financial statements and the quality of reported numbers. The difference between the two standards is that IFRS reports tax benefits from equity-based compensation at their intrinsic value each period. This amounts to quasi fair-value accounting under IFRS compared to historic-cost accounting under GAAP. We develop and compare pro forma GAAP and IFRS accounting reports for a broad cross section of U.S. firms. We find that IFRS yields lower deferred tax assets and recognized tax benefits for approximately two-thirds of the option grants in our sample. Moreover, reported tax items will be more volatile under IFRS and these effects will be more pronounced for firms with greater option use and stock price volatility. Importantly, we find that IFRS tax items are better able to predict future cash flows. One conclusion is that IFRS improves the relevance, and thereby, the quality, of at least some reported numbers.

scholarly journals The transparency of derivative disclosures by Australian firms in the extractive industries

2007 ◽  
Vol 4 (2) ◽  
pp. 257-270 ◽  
Author(s):  
Mohamat Sabri Hassan ◽  
Majella Percy ◽  
Jenny Goodwin-Stewart
Keyword(s):  
Financial Reporting ◽  
Fair Value ◽  
The United States ◽  
Extractive Industries ◽  
Firm Characteristics ◽  
Financial Reports ◽  
The United Kingdom ◽  
Price Earnings Ratio ◽  
Equity Ratio

This paper investigates the transparency of derivative disclosures of Australian firms in the extractive industries using 1998 to 2001 financial reports. The quality of financial reporting has become a major corporate governance issue since the collapse of prominent companies such as Enron in the United States, HIH Insurance in Australia, and, of particular relevance here, Barings PLC in the United Kingdom, where the losses were caused by derivative instruments. Disclosure transparency is an important component of the quality of financial reporting. We measure transparency based on a disclosure index developed from AASB 1033 Presentation and Disclosure of Financial Instruments. We examine the relationship between transparency and firm characteristics represented by size, performance, growth opportunities, auditor and type of extractive firm. The results indicate that the transparency of derivative disclosures among firms in the extractive industries has increased over the period. However, there is still evidence of non-compliance with the disclosure requirements, especially in relation to net fair value. We find that firm size, price-earnings ratio and debt-to-equity ratio, and to a lesser extent, market-to-book ratio and profitability are associated with disclosure transparency.

scholarly journals Audit Quality And Accrual Quality: Do Big 4 Auditors Indeed Enhance Accrual Quality Of ‘Powerful’ Clients?

2017 ◽  
Vol 33 (2) ◽  
pp. 343-350 ◽  
Author(s):  
Sorah Park
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Stock Exchange ◽  
Accrual Quality ◽  
External Auditors ◽  
Big 4 ◽  
Accounting Scandals ◽  
Quality Of Accounting Information ◽  
Audit Reports

External auditors are considered ‘watchdogs’ which closely monitor corporate financial reporting process and provide guidelines for investors and financial institutions. However, recent accounting scandals in Korea indicate that external auditors may cater their audit reports to their clients’ needs. Based on a sample of listed companies on the Korea Stock Exchange from 2001 to 2010, this study finds the evidence consistent with such conjecture. First, large business conglomerates in Korea (so called ‘chaebols’) audited by Big 4 have lower accrual quality than the others, indicating that Big 4 auditors may not serve as watchdogs to enhance accrual quality of ‘powerful’ clients. However, powerful clients who pay greater non-audit service fees to Big 4 auditors have higher accrual quality than the others. This result suggests that non-audit services provided by Big 4 may not necessarily harm the quality of accounting information, contrary to the traditional view in the literature.

Internal Audit Quality and Earnings Management

2009 ◽  
Vol 84 (4) ◽  
pp. 1255-1280 ◽  
Author(s):  
Douglas F. Prawitt ◽  
Jason L. Smith ◽  
David A. Wood
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Quality ◽  
Internal Audit ◽  
Earnings Forecasts ◽  
Data Set ◽  
Research Attention ◽  
Internal Auditors ◽  
External Auditors

ABSTRACT: Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.

scholarly journals The Effect Of Accrual Reliability On Audit Pricing

2012 ◽  
Vol 29 (1) ◽  
pp. 257
Author(s):  
Jong Eun Lee ◽  
Cheol Lee
Keyword(s):  
Financial Reporting ◽  
Audit Fees ◽  
Fair Value ◽  
Litigation Risk ◽  
Fair Value Accounting ◽  
Audit Pricing ◽  
External Auditors ◽  
Sarbanes Oxley ◽  
Accounting Estimates ◽  
Reporting Environment

This study investigates how accrual reliability is associated with audit fees. Since the enactment of the Sarbanes-Oxley Act of 2002, financial reporting has shifted toward a more principles-based accounting paradigm, along with an emphasis on fair value accounting by standard setters. As a result, auditors are exposed to more subjective accrual estimation processes, including accounting estimates. In the current financial reporting environment, external auditors are required to pay greater attention to accrual components that are largely based on accounting estimates to evaluate the reasonableness of accrual measurements. In this study, we find a negative association between the level of accrual reliability and audit fees. That is, the greater the potential litigation risk (due to accrual components based on more subjective or less reliable estimation processes), the more the audit work, and the higher the fees paid to external auditors.

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