The Potential Impact of More Frequent Financial Reporting and Assurance: User, Preparer, and Auditor Assessments (Retracted)

2007 ◽  
Vol 4 (1) ◽  
pp. 47-67 ◽  
Author(s):  
James E. Hunton ◽  
Arnold M. Wright ◽  
Sally Wright
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Cost Of Capital ◽  
Market Price ◽  
Price Volatility ◽  
Financial Statements ◽  
Future Earnings ◽  
Decision Usefulness ◽  
Consensus Forecasts

The purpose of this study is to examine some of the potential impacts of more frequent financial reporting and concurrent assurance, as assessed by members of the assurer, preparer, and investor communities. Two hundred and fifteen participants (84 auditors, 30 controllers, 80 investors, as surrogated by MBA students, and 21 sell-side analysts) took part in an experiment where they received a case situation involving a company that was planning to voluntarily change from quarterly to monthly (daily) external financial statement reporting, without (with) assurance. After reading the case materials, the participants assessed the likely effects of such changes on the decision usefulness of financial statements, quality of earnings, financial reporting behavior, stock market price volatility, analysts' consensus forecasts, and cost of capital. The results indicate that monthly reporting without assurance would significantly enhance the decision usefulness of financial statements, improve the quality of earnings, and reduce managements' aggressiveness with respect to discretionary accounting accruals, estimates, and principles; further, the findings suggest stock price volatility would be lower, analyst consensus of future earnings estimates would increase, and cost of capital would decrease. Assessments of daily reporting were consistent with monthly reporting, yet significantly stronger. The inclusion of concurrent auditor assurance resulted in directionally consistent yet significantly pronounced results in both monthly and daily reporting conditions on all measures. Additionally, participants agreed that providing monthly reports would be technically and economically feasible at this time, while daily reporting would not be feasible.

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.

Timeliness of Tunisian Audit Reports: An Empirical Investigation based on Ownership and Partnership Visions

2015 ◽  
Vol 5 (3) ◽  
Author(s):  
Mondher Fakhfakh
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Empirical Investigation ◽  
Financial Statements ◽  
Qualitative Feature ◽  
Transmission Delays ◽  
Emerging Country ◽  
Audit Reports ◽  
Audit Information

Timeliness of audit reports is a qualitative feature that enhances the usefulness of audited financial statements. As an emerging country, Tunisia has modernized its accounting legislation to enhance the quality of financial reporting. This legislation encourages independent auditors to optimize the transmission delays of audit reports. The authorities assume that the satisfaction of stakeholders is secured by regulating disclosure of audit reports. Our research analyses the date of issue of Tunisian audit reports and timeliness of audit information for shareholders and all users of financial statements (stakeholders). This paper provides new empirical evidence about the timeliness of audit reports in Tunisia. It holds two dates that influence the needs of users of financial statements: the date of signature of the auditors and the date of publication of the audit reports in the financial bulletin. The same article discusses the variability of the timeliness of audit reports and the factors that explain the delay information.

scholarly journals Statutory audit in Slovakia – significant phenomenon of global European changes

2020 ◽  
Vol 74 ◽  
pp. 06006
Author(s):  
Denisa Domaracká ◽  
Veronika Kňažková
Keyword(s):  
Financial Reporting ◽  
Global Economy ◽  
Financial Statements ◽  
Legislative Regulation ◽  
Significant Phenomenon ◽  
The Subject ◽  
The Impact ◽  
Regulation Changes ◽  
Audit Performance

The changing global economy environment also affected the area of statutory audit. Nowadays, statutory audit faces the significant changes not only because of the processes of digitization and automation in accounting and auditing, but because of increased and tightened legislative regulation, too. The most important aspects of financial reporting and auditing are subject to EU Regulations and EU Directives. For this reason, the issue of legislative regulation changes in field of statutory audit in Slovakia has become the subject of our article. Currently, the proposal of amending and supplementing Act. No 431/2002 Coll. on Accounting, as amended underwent an interdepartmental comment procedure. The proposal includes the changes on requirements for statutory audit. This article examines the current proposal to change (mainly increase) the conditions for performing the mandatory statutory audit of financial statements in Slovak audit environment. Our goal is to clarify the reasons and implications behind the changes of Slovak legislation as well as the impact of these changes on audit performance in Slovakia. We believe conducting statutory audits in accordance with the applicable legislation accepted and implemented at international European level can contribute to transparency and improve the quality of audit performance. In order to achieve the goal, it was necessary to choose a purposeful work methodology and research methods.

scholarly journals Transparency of local government in Indonesia

2018 ◽  
Vol 3 (1) ◽  
pp. 123-138 ◽  
Author(s):  
I Made Pradana Adiputra ◽  
Sidharta Utama ◽  
Hilda Rossieta
Keyword(s):  
Local Government ◽  
Financial Reporting ◽  
Local Governments ◽  
Financial Statements ◽  
Political Environment ◽  
Content Type ◽  
Audit Opinion ◽  
Government Response ◽  
Positive Effect

Purpose The purpose of this paper is to provide empirical evidence about the influence of the size of local government, the quality of local government financial statements, the level of local government response to the disclosure of financial information and the local political environment on the transparency of local government in Indonesia. Design/methodology/approach The study sample consisted of 34 regional governments (provinces) in Indonesia in 2016, using purposive sampling and multiple regression analysis. Findings The results showed that the quality of financial reporting through the audit opinion and political environment have a significant positive effect on the transparency of local government in Indonesia. On the other hand, the size of the local government and local government response rate on the regulation do not affect the transparency of local government in Indonesia. Originality/value The agency, legitimacy and institutional theory have an important role in the underlying local government transparency practices in Indonesia. The results of this study should be used as the basis of thought and study to determine the factors that affect the performance of local governments from the financial and non-financial aspects.

scholarly journals EARNINGS MANAGEMENT AS A MANIPULATIVE FORM OF FINANCIAL REPORTING

2019 ◽  
Vol 34 (5) ◽  
pp. 1323-1328
Author(s):  
Marija Milojičić ◽  
Snežana Knežević ◽  
Aleksandar Grgur
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Analysis ◽  
Balance Sheet ◽  
Financial Statements ◽  
Legal Framework ◽  
Business Decisions ◽  
Accounting Principles ◽  
The Republic

The financial statements, as the end product of the accounting information system, are a structural account of the financial position and financial success of an entity's business over a period. Earnings or net profit indicates an important position in the financial statements and is considered as a measure of a company’s success. Earnings management comes from the accounting skills that executives and business owners use when making business decisions. The Generally Accepted Accounting Principles set out in International Accounting Standards (hereinafter IAS) and International Financial Reporting Standards (hereinafter referred to as IFRS) generally give the owner or manager the choice between several accounting methods within the various stages of the accounting process. One of these methods is creative accounting, which is often correlated with the manipulation of financial statements. Creativity in accounting is known to be legal and to stay within the legal framework, but it is often the case that, with its creativity, it is beyond its boundaries. The way managers exercise this discretion is very important to the quality and objectivity of financial reporting.The tendency of the owners, and then the managers, to show the performance of the company better than they really are, is certainly not new. The reason that in the world from the beginning of the 2000s to the present day, both by the scientific and professional public and by the regulatory bodies in charge of financial reporting, particular attention is paid to this problem are the major political and economic scandals caused by the inaccurate presentation of financial statements. It is considered that manipulative accounting practices are applied in the preparation of financial statements when the application of accounting principles is made with the intention of achieving the desired objective, such as, for example, generating greater profit regardless of whether the procedures selected are in accordance with international and local prescribed rules.The prevalence of manipulation of financial statements depends on the situation in the environment, the quality of the normative basis of financial reporting, the quality of management and the ability of accountants to comply with professional and ethical standards. The environment implies the general economic situation, the existence or absence of appropriate legislation, including its implementation, as well as the relation to tax liabilities.The result of the original empirical research is presented in this paper. The research was conducted in the form of a case study of a domestic business entity (the Republic of Serbia), whose main activity is trade in sports and fashion products. The financial analysis was performed using the Beneish model, which was derived from the official financial statements of the companies, collected from publicly available databases (Balance Sheet and Income Statement 2016-2018) as the basic information base in order to discover the degree of possible manipulation of their own earning capacity. This model has become particularly popular since the Beneish M-scoring model revealed the manipulation of the financial results of the US company Enron, which went bankrupt in 2001.

scholarly journals Information Content of Earnings Managements: Implications on Growth and Value Companies

2016 ◽  
Vol 2 (1) ◽  
pp. 47-56
Author(s):  
Windu Mulyasari ◽  
Slamet Sugiri ◽  
Heyvon Herdhayinta
Keyword(s):  
Earnings Management ◽  
Information Content ◽  
Market Price ◽  
Accounting Information ◽  
Future Earnings ◽  
Cycle Growth ◽  
Incremental Information ◽  
Growth Firms ◽  
Management Behaviors

Objective: The purpose of this study is to investigate the pattern of earnings management on growth and value companies in Indonesia. This study predicts that earnings management has information contents. Therefore, earnings management tends to degrade the quality of earnings, then affect the future profitability. This study analyzes the effect of earnings management information content to the company's future profitability. This study provides an understanding about accounting information at certain market price levels for growth and value companies. Findings: Findings of this study indicate the differences between earnings management influence on growth and value companies. The results also support the differences of relative incremental information content of earnings management on growth and value companies. The growth firms tend to do earnings management and have higher profitability compared to the value firms. The implication is that the incremental information content of earnings management on growth firms is lower than those of the value firms to predict future profitability.   Implication: The contribution of this research is to provide an in-depth review on earnings management study associated with company life cycle (growth and value), as well as  to give additional understanding about the existence of incremental information content of earnings management. Thus, firms show different earnings management behaviors and ultimately those behaviors affect the quality of profit to predict future earnings

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 Analysis on the Effects of Quality of Financial Statements, Over GDP Forecasting Models. An Empirical Cross-Country Approach

2020 ◽  
Vol 15 (3) ◽  
pp. 236-260
Author(s):  
Burca Valentin ◽  
Mates Dorel ◽  
Bogdan Oana
Keyword(s):  
Economic Growth ◽  
Financial Reporting ◽  
Structural Changes ◽  
Causal Relation ◽  
Forecast Error ◽  
Financial Statements ◽  
Institutional Framework ◽  
Gdp Growth ◽  
The Impact

Abstract Under increasing macroeconomic uncertainty, governments base their economic policies on high-precision GDP estimates. The models considered based on building-up government budgets incorporate main drivers of economic growth, identified along a large range of empirical studies, mostly focused on economic productivity, factor accumulation, human capital, innovation and transfer of technology, structural changes, or institutional framework. However, there is little evidence related to the impact of accounting and assurance regulation on economic growth. Our study attempts to assess the significance of causal relation between forecasting error on GDP growth and quality of accounting standards, respectively quality of financial statements. The study analyzes the causal relation between country level measures of quality of financial reporting, synthetized by Isidro et. al. (2019), and the measure of GDP growth estimate mean error. Our results confirm a significant impact of quality of the output of financial reporting practice, related to disclosure quality and asymmetric timeliness. The results remain similar, even after controlling for accounting convergence influence. Checking for robustness of the model, we observe the main drivers of one year ahead GDP forecast error are related to institutional framework to issue high quality standards and enforce them properly. The results emphasize once again the role of economic development and corresponding complexity of economic activities and political framework impact on accounting regulation and subsequently on macroeconomic measures.

scholarly journals Relevance of financial reporting quality - Theory and practice in Vietnamese enterprises

2017 ◽  
Vol 1 (Q2) ◽  
pp. 119-128
Author(s):  
Thuan Quoc Pham
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Professional Associations ◽  
Financial Statements ◽  
Theory And Practice ◽  
Financial Information ◽  
Financial Reporting Quality

Financial reporting quality is one the most interesting topics which draw a great deal of attention to researchers and scientists in the field of accounting (Céline Michailesco, 2010). In the review of research on financial information from 1980 to 2016, Pham (2016) found that characteristics of useful financial information are relatively diverse with as many as 15 attributes being identified. In addition, he also found that all research in any period has employed the characteristics published by professional associations such as American Institute of Accountants, Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB as theoretical basis. Research on the quality of financial information is diverse yet have many things in common, above all is the Relevance characteristic which considered to be the basic qualitative component of the quality of financial information in financial statements. Conceptual Framework officially issued by FASB & IASB in 2010 (FASB & IASB 2010) has further confirmed Relevance is the basic quality component of financial information. Compared with previous announcements, there has been a considerable change in the criteria and attributes used to evaluate the appropriateness of Relevance characteristic of financial information in financial statements. This study aims at confirming the importance of the Relevance component in evaluating the quality of financial information, clarifyingg the characteristics of Relevance measurement before and after Conceptual Framework 2010 and constructing relevant scales as well as measuring the qualitative characteristic of Relevance among enterprises in Vietnam.

The efficiency of corporate boards and firms’ audit fees: the case of the FTSE financial institutions

2018 ◽  
Vol 30 (3) ◽  
pp. 297-317 ◽  
Author(s):  
Rabih Nehme ◽  
Mohammad Jizi
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Governance Structure ◽  
Negative Consequences ◽  
Reverse Causality ◽  
Content Type

Purpose The quality of financial reporting for the financial institutions is vital for the public, as the negative consequences of manipulated financial statements will not only affect shareholders but also the regulators’ reputation and the society at large. The purpose of this paper is to assess the association between different corporate governance mechanisms and their impact on audit and reporting quality. The gender factor is introduced from a diverse boards’ perspective to highlight any impact of female presence on the quality of financial statements. Design/methodology/approach The authors examine a sample of financial institutions listed on the FTSE-350 index for the years 2011 to 2015. The financial sector has its own and different regulations, and financial reporting framework and auditors are expected to behave into more scrutiny. Bloomberg database is used to obtain governance and financial data, while firms’ annual reports are used to collect audit fees and audit committee information. A panel data regression is used to test hypotheses. The authors also control for unobservable heterogeneity, reverse causality and endogeneity. Findings The results suggest that boards with larger size and higher independence pay higher audit fees to enhance the monitoring capacity and protect the wider group of stakeholders. The results also show that women on boards are likely to reduce the risk of manipulated financial statements, as women are more inclined toward truthfulness, cautiousness and conservatism. In addition, the reported results show that audit committees with more independent members are more inclined toward obtaining higher quality audit to enhance firm’s reporting quality. Originality/value Given the recent governments’ intervention to avoid financial institutions’ negative impact on the economy, this study is relevant and provide policymakers insights into the existing relationships between audit fees and financial institutions’ governance structure.

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