Accounting in Asia: Volume 11

Purpose – This paper introduces the special issue on accounting in Asia. It summarises and reflects on themes and findings emerging from the papers in this volume.

Design/Methodology/Approach – The findings reported in the paper are based on desk research and review of the papers contained in the volume.

Findings – The papers evidence that corporate governance and financial reporting quality are interlinked. Accounting in Asia is preoccupied with the corporate governance–financial reporting quality nexus in the face of convergence with International Financial Reporting Standards (IFRS).

Research limitations/Implications – Policy makers in Asian countries need to develop appropriate regulatory mechanisms to address cultural issues, namely, attitudes towards secrecy and fraud, to ensure effective implementation of IFRS. This entails sound grounding in ethics and integrity within the financial reporting stakeholder community. Additionally, unintended consequences of fair value application need to be examined in the Asian context.

Originality/Value of paper – This paper is a summary of seven studies in Asia. The studies highlight critical issues emerging from Asia's experience with corporate governance reforms and the move to IFRS convergence, and set the agenda for future research in accounting in Asia, specifically, and emerging economies, generally.

Purpose – This study aims at presenting an overview, development, and process of current corporate governance practices in Bangladesh.

Design/Methodology/Approach – Based on New Institutional Sociology (NIS) as a theoretical framework and by using archival data, this study highlights the roles of key institutional forces in reinforcing the existing corporate governance practices in Bangladesh.

Findings – This study notes that corporate governance practices in Bangladesh are still at infancy. While Bangladesh is trying to adopt many international corporate governance best practices for institutional legitimacy, the weak institutional enforcement regime, along with the absence of an effective check and balance, poses serious challenges to the firm-level good corporate governance practices in Bangladesh. The absence of isomorphic pressures to regulate the firms leads to many incidences of noncompliance.

Practical implications – This study takes part in the following global debate: whether corporate governance in an emerging economy is a reality or an illusion.

Originality/Value – This study seeks to contribute to the increasing literature by recognizing the interest of readers, academics, practitioners, and regulators to gain more insight and understanding of corporate governance practices in an emerging economy, such as Bangladesh.

Purpose – The paper presents a content analysis of the 2009 Exposure Draft of Code of Ethics for Professional Accountants in China. It aims to investigate how equivalently the Chinese Institute of Certified Public Accountants (CICPA) adopts the International Federation of Accountants (IFAC) Code with certain adjustments due to specific national circumstances. The investigation is intended to highlight the principles-based conceptual framework approach to settlement of ethical standards and regulation for professional conduct.

Design/Methodology/Approach – Regarding the codes of ethics for professional accountants as a genre of discourse text, this paper applies a content analysis method to the investigation of how the newly revised Code of Ethics for Professional Accountants in China adopts the IFAC Code of the same type. Both semantic content and presentation format are considered in the content analysis.

Findings – This study puts forward the argument that even though CICPA claims to have equivalently adopted the principles-based conceptual framework of the IFAC ethical codification, the rigid legalistic presentation format might, however, deviate from the newly revised codification of CICPA from ethical principles to regulatory rules. Our findings prove a practical and nation-specific form of combining direct import and legal enhancement at a time when the Chinese accounting profession is on its way to converging with the IFAC Code of Ethics.

Research limitations/Implications – One limitation of the current study is the lack of information about the motivation of CICPA in adopting the principles-based conceptual framework approach to ethical codification, besides the pragmatic needs of global economic and business environments. Also, the current study focuses its comparison on IFAC and CICPA, without limited consideration of differences in cultural traits.

Practical implications – Content analysis results and conclusions of the study might render pragmatic the implications for future adoptions of the IFAC Code by various national or regional professional bodies.

Originality/Value – This paper proposes a content analysis, in terms of semantic units and legislative formats in ethical codification documents, to identify the principles-based conceptual framework approach in the IFAC and CICPA codes of ethics.

Purpose – This study investigates the nature, types, and methods of fraudulent financial reporting committed by Chinese listed companies with a view to understanding corporate behavior relating to management fraud in China. Such an understanding is important for preventing frauds and achieving better financial reporting compliance.

Design/Methodology/Approach – This study adopts a descriptive research approach using the data based on 182 punishment bulletins issued by the China Securities Regulatory Commission from 2002 to 2006. The study considers three categories of frauds (i.e., false income statements, false balance sheets, and insufficient or false disclosure) and uses these categories to describe and analyze the fraud cases.

Research findings/Insights – Based on the sample of 83 cases over the 5-year period from 2002 to 2006, this study finds that all the frauds in the sample involved the manipulation, alteration, and falsification of reported financial information. Fraud schemes often contained more than one technique to misstate financial statements, typically through overstating revenues and assets, and understating liabilities and expenses. Most of the sample companies committed several frauds simultaneously. This study also reveals that most of the frauds committed by Chinese listed companies lasted more than 2 years, with the longest being 9 years, and common intervals between the initial fraud year and the announcement year of punishment were more than 3 years, with the longest being 11 years.

Theoretical/Academic implications – This study provides an empirical analysis of fraudulent financial reporting cases committed by Chinese listed companies. These cases were rarely studied in the Western literature. This study contributes to the extant literature by providing an insight into management fraud in China. Research into fraudulent financial reporting in the largest developing economy is certainly of interest as prior research into this area is mostly based on developed economies.

Practitioner/Policy implications – The implications drawn from this study could be useful for a better understanding of the management behavior of companies in developing and transitional economies. This study has a potential to assist regulators and accounting professional bodies to set guidelines facilitating corporate compliance of regulated financial reporting.

Purpose – The purpose of this paper is to survey views of bankers in Jordan about the usefulness of fair value accounting and major obstacles facing its implementation in practice.

Methodology/Approach – A structured questionnaire was administered to individuals holding high positions in Jordanian banks. The questionnaire covered the respondents' views about the appropriateness of using fair value accounting, the usefulness of fair value figures in terms of their relevance for decision making and the obstacles facing the application of fair value accounting in practice.

Findings – Results of the survey showed that while there was general approval of the use of fair values in financial reporting, there were some reservations about their relevance in terms of predictive value and, more importantly, feedback value. Major obstacles facing the usefulness of fair values in financial reporting included, according to respondents, (1) the possibility of fraud in fair value reporting, (2) the ambiguity of accounting standards on fair value application and (3) the reliability of figures measured using fair value accounting, as opposed to those measured using historical cost accounting.

Social implications – The paper discusses the positive and negative aspects of application of fair value financial reporting in accounting. It discusses how fair value financial reporting may be useful for decision making of users of financial statements and what obstacles may limit this usefulness. The paper also discusses the implications of the findings for Jordan and other emerging economies, including suggested ways to reduce the possible negative effects of fair value accounting.

Originality/Value of paper – Fair value accounting practice is relatively new to Jordan, and the Jordanian context, as a less-developed country with a low-efficiency stock market, is significantly different to the environments in which fair value accounting practices were established. The effects of applying fair value accounting in Jordanian financial reporting practices are under-researched, so this study yields views on the reliability and relevance of fair value measures and the ease of their application in practice that could be specific to the Jordanian environment and differ significantly from results from developed countries. The findings generally support this argument.

Purpose – The purpose of this study is to examine the impact of corporate governance characteristics on audit report timeliness in Malaysia. The corporate governance characteristics examined are board independence, audit committee size, audit committee meetings and audit committee members' qualifications.

Design/Methodology/Approach – The sample comprises of 703 Malaysian listed companies from Bursa Malaysia, for the year 2009. It excludes companies from the finance-related sector as they operate under a highly regulated regime under supervision by the Central Bank of Malaysia. Further, regression analysis was performed to examine the audit report timeliness determinants.

Findings – Results show that audit report timeliness is influenced by audit committee size, auditor type, audit opinion and firm profitability. However, no association was found between board independence, audit committee meetings, audit committee members' qualifications and audit report timeliness.

Research limitations/Implications – It is a cross-sectional study of the year 2009. Practical implications for policy makers are consideration of the minimum submission period for audit reports Regulators' support for firms to have larger audit committee sizes is also discussed.

Originality/Value – The study investigates the impact of corporate governance on audit timeliness in light of the recent amendments to the Malaysian Code of Corporate Governance made in 2007.

Purpose – Audit quality is traditionally defined as the joint probability that an existing problem is discovered and reported by the auditor. This study examines whether and how audit quality is associated with related-party transactions and CEO duality. The first part (i.e., the ability to discover) is related to professional judgment, and the second part (i.e., report truthfully) is related to independence.

Methodology/Approach – Regression methods was used on archival data.

Findings – Our results reveal that for publicly held companies in environments with stronger capital market discipline, which causes greater reputation concerns and litigation risks, a CEO who is also the board chair does not hinder auditor independence. For privately held companies, however, such a CEO hinders auditor independence due to a lack of capital market discipline. The findings on related-party financing, on the other hand, are reversed. That is, in terms of information for an auditor, since the conflicts of interests are more severe in publicly held companies than in privately held companies, the relevance of related-party financing to a decision whether to issue a going-concern opinion is greater in publicly held companies.

Social implications – The empirical results of publicly held companies are useful for countries with better corporate governance, while those of privately held companies are helpful for countries with relatively weak corporate governance.

Originality/Value of paper – Because auditors performing audit services face different litigation risks and reputation concerns, the differences in our results between the two types of clients can have implications about the suitability of these types of companies in emerging markets.

Purpose – The aim of this paper is to examine the relationship of the efficient management of shareholder value as the main objective of corporate governance systems with stakeholder theory.

Design/Methodology – The study uses data from 29 emerging market economies from 1997 to 2006. In order to control possible endogeneity issue, generalized two-stage least squares (G2SLS) and generalized method of moments (GMM) estimation techniques were conducted using country-level panel data.

Findings – The results provide evidence that the efficient management of shareholder value is strongly associated with managers' credibility, social responsibility, employment, and customer satisfaction, suggesting that emerging market economies should consider the interests of stakeholders for the efficient management of shareholder value.

Originality/Value – This is the first study of its kind that attempts to explore the association of the efficient management of shareholder value with country-level determinants of stakeholder theory.

Research Limitations/Implications – The lack of sufficient data is a major problem in international studies. This study also has some limitations in this respect as some emerging economies have not been included in the sample.