Accounting Principles Compliance – the True and Fair View Recipe. A Theoretical Perspective on the Contribution of Accounting Principles to the Financial Reporting Objective Achievement

ABSTRACT While undergraduate financial reporting courses focus primarily on the application of generally accepted accounting principles and the mechanics of accounting treatments, graduate-level courses should motivate students to explore standard-setting's theoretical perspective and to develop a more rigorous understanding of accounting issues not necessarily discussed in textbooks, but included, implicitly or explicitly, in the authoritative guidance. Anecdotal evidence suggests that accounting students face difficulties transitioning from the undergraduate setting to the higher expectations common in graduate accounting programs and the workplace. This hypothetical case provides an interesting scenario on goodwill impairment to facilitate the development of students' understanding of accounting theory and its connection to professional research skills. While students are accustomed to computing goodwill impairment losses from knowledge acquired in undergraduate financial accounting courses, this topic contains interesting theoretical and practical issues and serves as a salient example of the analysis of interesting accounting issues possible at the graduate level.

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Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk?

The Accounting Review ◽

10.2308/accr-50836 ◽

2014 ◽

Vol 89 (6) ◽

pp. 2115-2149 ◽

Cited By ~ 54

Author(s):

Keith Czerney ◽

Jaime J. Schmidt ◽

Anne M. Thompson

Keyword(s):

Financial Reporting ◽

Reporting Quality ◽

Positive Association ◽

Financial Statements ◽

Financial Statement ◽

Financial Reporting Quality ◽

Accounting Principles ◽

Client Relationship ◽

Financial Misstatement ◽

Audit Reports

ABSTRACT According to auditing standards, explanatory language added at the auditor's discretion to unqualified audit reports should not indicate increased financial misstatement risk. However, an auditor is unlikely to add language that would strain the auditor-client relationship absent concerns about the client's financial statements. Using a sample of 30,825 financial statements issued with unqualified audit opinions during 2000–2009, we find that financial statements with audit reports containing explanatory language are significantly more likely to be subsequently restated than financial statements without such language. We find that this positive association is driven by language that references the division of responsibility for performance of the audit, adoption of new accounting principles, and previous restatements. In addition, we find that (1) “emphasis of matter” language that discusses mergers, related-party transactions, and management's use of estimates predicts restatements related to these matters, and that (2) the financial statement accounts noted in the explanatory language typically correspond to the accounts subsequently restated. In sum, our results suggest that present-day audit reports communicate some information about financial reporting quality.

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EARNINGS MANAGEMENT AS A MANIPULATIVE FORM OF FINANCIAL REPORTING

Knowledge International Journal ◽

10.35120/kij34051323m ◽

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.

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Impact of Changes in Accounting Standards on Earnings Management

Koya University Journal of Humanities and Social Sciences ◽

10.14500/kujhss.v2n2y2019.pp166-175 ◽

2020 ◽

Vol 2 (2) ◽

pp. 166-175

Author(s):

Kawa W. Muhamad ◽

Subhi M. Saleh ◽

Kees van Paridon

Keyword(s):

Earnings Management ◽

Financial Reporting ◽

Accounting Standards ◽

Reporting Quality ◽

Quality Standards ◽

Financial Reporting Quality ◽

High Quality ◽

Generally Accepted Accounting Principles ◽

Financial Reporting Standards ◽

Accounting Principles

This study considers the question whether the changes in Accounting Standards has led to companies making less use of earnings management. The paper is an attempt to investigate whether the application of high quality standards like International Financial Reporting Standards (IFRS) is related to high financial reporting quality. This study addresses this issue empirically. Furthermore, this research examines whether German companies that have applied IFRS have less earnings management compared to German companies that report according to the German Generally Accepted Accounting Principles (GGAAP). The sample, consisting of two equally large listed companies in Germany (Südzucker Group and Henkel Group) from 2003-2014. The study suggests that IFRS-adopters show different earnings management performance compared to companies reporting under German GAAP. This finding contributes to the discussion on whether high quality standards are appropriate and operational in countries with weak investor protection rights. The result shows that adopters of IFRS in Germany can be related with less use of earnings management as a result of changes in accounting standards. This result is contradictory with previous research that was done by Van Tendeloo and Vanstraelen, (2005), and consistent with the previous research conducted by Ball et al. (2003).

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Articulating accounting principles

Journal of Applied Accounting Research ◽

10.1108/jaar-01-2014-0017 ◽

2016 ◽

Vol 17 (2) ◽

pp. 118-135 ◽

Cited By ~ 6

Author(s):

Brian A. Rutherford

Keyword(s):

Financial Reporting ◽

Standard Setting ◽

Financial Accounting ◽

Accounting Standard ◽

Content Type ◽

Accounting Research ◽

Accounting Principles ◽

Accounting Theory ◽

Social Scientific ◽

Accounting Standard Setting

Purpose – The purpose of this paper is to provide a soundly based epistemological underpinning for the kind of theorisation in which many classical financial accounting researchers engaged and thus to support a renewal of this programme. Design/methodology/approach – The paper draws on pragmatist philosophy and, in particular, on Jules Coleman’s theory of “explanation by embodiment”. The applicability of this theory to the world of financial reporting is discussed. Various theorists and schools within classical accounting theory are examined from the perspective of Coleman’s ideas, focusing particularly on A.C. Littleton’s Structure of Accounting Theory. Findings – The paper finds that classical accounting research works such as Structure of Accounting Theory can be interpreted as the search for Colemanian explanation by embodiment and that this provides them with a soundly based pragmatist underpinning for their theorisation. Research limitations/implications – This paper supports the resumption by academics, qua academics, of work to contribute to accounting standard-setting by offering argumentation that addresses accounting principles and methods directly, rather than only via the social scientific investigation of behaviour in the accounting arena. Practical implications – Such a resumption would contribute positively to future standard-setting. Originality/value – This paper contributes to the defence of classical financial accounting research from the charge of lacking theoretical rigour.

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The Effect of the Change in the Balance Sheet Law in 2014-2018 on Management of Companies in Poland

Research in World Economy ◽

10.5430/rwe.v10n4p14 ◽

2019 ◽

Vol 10 (4) ◽

pp. 14

Author(s):

Jolanta Chluska

Keyword(s):

Decision Making ◽

Financial Reporting ◽

Balance Sheet ◽

Accounting System ◽

Accounting Systems ◽

Economic Decisions ◽

Accounting Principles ◽

Decision Making Processes ◽

Business Entities ◽

Internal Accounting

Polish business entities operate based on accounting principles in accordance with the Accounting Act and the accounting policy established by the directors of the entities. Changes in the balance sheet law have a significant effect on the internal accounting principles applied in companies. In the last three years, Polish accounting regulations have been adapted to the solutions used in the European Union.The aim of the paper is to analyse information aspects of accounting, including financial reporting in Poland in the decision-making processes of internal recipients, taking into account the changes in legal regulations.The research method was the analysis of the literature and legal acts, and a practical example.Changes in legislation influence the accounting policies defined by the managers of business entities. Companies can simplify their accounting principles including those concerning reporting. However, the simplifications should not adversely affect the economic decisions of the entity's manager and the recipients of the financial statements.The lack of accurate financial data from the accounting system may adversely affect the decision-making of the unit's manager in management processes. As it results from the analysis of the literature of the subject and the accounting systems of small enterprises, financial information from accounting is necessary for effective business management. Therefore, managers apply simplifications in accounting quite carefully.

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Pelatihan Akuntansi Keuangan Bagi Siswa SMK Kartini Surabaya

Jurnal PADMA: Pengabdian Dharma Masyarakat ◽

10.32493/jpdm.v1i4.13484 ◽

2021 ◽

Vol 1 (4) ◽

Author(s):

Soemaryono Soemaryono ◽

Rudi Pratono ◽

Ismangil Ismangil

Keyword(s):

Community Service ◽

Financial Reporting ◽

Basic Concept ◽

Accounting Standards ◽

Financial Statements ◽

Financial Accounting ◽

Service Companies ◽

Accounting Principles ◽

Service Activity ◽

Accounting Principle

Tujuan dari kegiatan pengabdian masyarakat ini adalah untuk meningkatkan keterampilan sumber daya manusia, dengan memberikan pembinaan pengetahuan dan keterampilan dalam laporan keuangan dengan standar akuntansi. Sasaran pengabdian masyarakat adalah siswa SMK Kartini Surabaya yang berdomisili di wilayah Surabaya. Diharapkan mahasiswa setelah mengikuti kegiatan pengabdian masyarakat dapat memahami konsep dasar akuntansi, prinsip akuntansi, persamaan akuntansi dan mampu Menyusun laporan keuangan dengan pernyataan standar akuntansi keuangan (PSAK). Metode pengabdian masyarakat dengan memberikan materi pengetahuan teoritis dan praktik. Hasil kegiatan pengabdian masyarakat adalah siswa dapat memahami konsep dasar akuntansi, prinsip akuntansi, persamaan akuntansi dan mampu Menyusun laporan keuangan dengan pernyataan standar akuntansi keuangan. Laporan keuangan perusahaan jasa, perusahaan dagang, dan perusahaan manufaktur.Kata Kunci: Konsep, Laporan Keuangan Persamaan Akuntansi, Prinsip AkuntansiThe purpose of this community service is to improve human resource skills, by providing knowledge and skills development in financial reporting with accounting standards. The target are students of SMK Kartini Surabaya who are domiciled in Surabaya area. It’s expected the students after participating in this community service activity can be understand the basic concept of accounting, accounting principles, accounting equations and able to prepare financial statements with the statement of financial accounting standards (PSAK). The methods of community service by providing knowledge material theoretical and practical. The results by students service activities are they can understand the basic concept of accounting, accounting principles, accounting equations and able to prepare financial statements with the statement of financial accounting standards. The Financial statements of service companies, trading companies, and manufacture companies.Keywords: Accounting Equations, Accounting Principle, Concept, Financial Statements

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Research on the accounting quality of public listed companies at the Budapest Stock Exchange

Zeszyty Teoretyczne Rachunkowości ◽

10.5604/01.3001.0012.2940 ◽

2018 ◽

Vol 2018 (99 (155)) ◽

pp. 165-186

Author(s):

Gábor Tóth ◽

Zsuzsanna Széles

Keyword(s):

Financial Reporting ◽

Stock Exchange ◽

Evaluation Model ◽

Evaluation Process ◽

Financial Statements ◽

Listed Companies ◽

Accounting Quality ◽

Consolidated Financial Statements ◽

Private Companies ◽

Accounting Principles

The operation of a financial reporting system is very expensive. In all areas where costs arise, it is important to examine whether the benefits exceed the costs or not. The objectives of financial reporting in Hungary are specified by Act C of 2000 on Accounting (HLA). In this paper, we will show these objectives and the defined accounting principles, as well. With the help of previous research, we have reviewed how accounting quality is measured. The aim of this research is to examine the difference in accounting quality between the publicly listed and private companies in Hungary and develop an evaluation process that takes due account of the complexity of the topic. To this end, we studied the separate (non-consolidated) financial statements of 63 Hungarian com- panies during the period of 1998-2016. Forty-seven percent of the statements were disclosed by public companies and fifty-three percent were disclosed by private companies. The examined financial statements were prepared in accordance with the HLA. To evaluate the data, we examined accruals, timely loss recognition, the vola- tility of earnings, cash flow and earnings management towards target. To summarize the results, we developed an evaluation model which is based on the basic accounting principles and the above-mentioned methods. We found that publicly listed companies have higher accounting quality compared to private companies.

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