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1 – 10 of over 74000Abdel‐Aziz M. Mohamed, Mahmood A. Qureshi and Ali R. Behnezhad
The reliability of accounting internal control systems (AICS) is often viewed as a primary concern of auditors. Over the past three decades, several reliability models have been…
Abstract
The reliability of accounting internal control systems (AICS) is often viewed as a primary concern of auditors. Over the past three decades, several reliability models have been proposed for internal control. The main goal of these models is to provide an objective approach to evaluate the reliability of internal control systems. In addition, the models seek to assess the degree of audit reliance that can be placed on internal controls. This paper has a two‐fold objective: (1) to present an overview of the descriptive and prescriptive reliability models developed for the design and evaluation of internal control systems, and (2) to discuss the effects of various factors on the reliability assessment. Furthermore, two methods to estimate process reliabilities are presented and several numerical examples are provided to show the detailed calculations of the reliability and economic efficiency of accounting internal control systems.
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Ahmed H. Al-Dmour, Masam Abood and Hani H. Al-Dmour
This study aims at investigating the extent of SysTrust’s framework (principles and criteria) as an internal control approach for assuring the reliability of accounting…
Abstract
Purpose
This study aims at investigating the extent of SysTrust’s framework (principles and criteria) as an internal control approach for assuring the reliability of accounting information system (AIS) were being implemented in Jordanian business organizations.
Design/methodology/approach
The study is based on primary data collected through a structured questionnaire from 239 out of 328 shareholdings companies. The survey units were the shareholding companies in Jordan, and the single key respondents approach was adopted. The extents of SysTrust principles were also measured. Previously validated instruments were used where required. The data were analysed using t-test and ANOVA.
Findings
The results indicated that the extent of SysTrust being implemented could be considered to be moderate at this stage. This implies that there are some variations among business organizations in terms of their level of implementing of SysTrust principles and criteria. The results also showed that the extent of SysTrust principles being implemented was varied among business organizations based on their business sector. However, there were not found varied due to their size of business and a length of time in business (experience).
Research limitations/implications
This study is only conducted in Jordan as a developing country. Although Jordan is a valid indicator of prevalent factors in the wider MENA region and developing countries, the lack of external validity of this research means that any generalization of the research findings should be made with caution. Future research can be orientated to other national and cultural settings and compared with the results of this study.
Practical implications
The study provides evidence of the need for management to recognize the importance of the implementation of SysTrust principles and criteria as an internal control for assuring the reliability of AIS within their organizations and be aware which of these principles are appropriate to their size and industry sector.
Originality/value
The findings would be valuable for academic researchers, managers and professional accounting to acquire a better undemanding of the current status of the implementation of the SysTrust principles (i.e., availability, security, integrity processing, confidentiality, and privacy) as an internal control method for assuring the reliability of AIS by testing the phenomenon in Jordan as a developing country.
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This paper aims to analyse the character and strength of the claims made in an emerging literature offering a sociology of financial reporting principles.
Abstract
Purpose
This paper aims to analyse the character and strength of the claims made in an emerging literature offering a sociology of financial reporting principles.
Design/methodology/approach
The analysis evaluates exemplary works in the literature against the characteristics of the paranoid style first identified by Richard Hofstadter: overheated claims of a far-reaching, malign and collusive machinery of influence; a reductive, rationalistic and dualistic reading of events; weak empirics; and weak theorisation.
Findings
A significant stream within the literature is coming to be constructed in the paranoid style. Paranoid stylistics, used as a diagnostic tool, alerts us here to distorted judgement.
Research limitations/implications
Alternative ways of avoiding the dangers of paranoid-style readings are suggested, ranging from resisting the temptations towards such readings to a radical re-working of the epistemics of “socio-accounting”.
Practical implications
The danger of allowing the conclusions advanced in the literature to go unchallenged is that they may influence society’s attitude to accounting, public policy-making and scholars’ willingness to contribute to the crafting of reporting principles and standards.
Originality/value
Although paranoid style analysis has been widely used to examine narratives in other academic fields, to the best of the author’s knowledge, this is the first study to apply it to scholarly accounting.
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Walid Siam and Modar Abdullatif
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…
Abstract
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.
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The purpose of this paper is to investigate the role of accounting measurement and disclosure of social capital (AMDSC) in improving financial performance (FP) in industrial…
Abstract
Purpose
The purpose of this paper is to investigate the role of accounting measurement and disclosure of social capital (AMDSC) in improving financial performance (FP) in industrial companies in the Kurdistan Region of Iraq (KRG) and Sulaimani city. The research also examines the mediating role of reliability of financial information (RFI) between AMDSC and FP.
Design/methodology/approach
This research uses SmartPLS to analyze the questionnaire that was sent to 10 industrial companies operating in the iron sector during 2021.
Findings
The findings reveal that AMDSC has a significant effect on improving the FP of the industrial companies in KRG. The results also confirm that the RFI mediates between AMDSC and FP. Thus, this suggests that social capital (SC) needs to be considered in the companies’ strategy to secure future financing in this area.
Research limitations/implications
This paper is limited to the iron sector of KRG/Sulaimani city. Future studies could address other sectors, such as sugar, cement, clothes, automobiles and medicines.
Originality/value
This paper focuses on improving FP in industrial companies in KRG and Sulaimani city through considering SC in their companies’ strategies, as there was no concern for SC in KRG before.
Lili-Anne Kihn and Eeva-Mari Ihantola
This paper aims to address the reporting of validation and evaluation criteria in qualitative management accounting studies, which is a topic of critical debate in qualitative…
Abstract
Purpose
This paper aims to address the reporting of validation and evaluation criteria in qualitative management accounting studies, which is a topic of critical debate in qualitative social science research. The objective of this study is to investigate the ways researchers have reported the use of evaluation criteria in qualitative management accounting studies and whether they are associated with certain paradigmatic affiliations.
Design/methodology/approach
Building on the work of Eriksson and Kovalainen [Eriksson and Kovalainen (2008) Qualitative Methods in Business Research. London, Sage], the following three approaches are examined: the adoption of classic concepts of validity and reliability, the use of alternative concepts and the abandonment of general evaluation criteria. Content analysis of 212 case and field studies published during 2006 to February 2015 was conducted to be able to offer an analysis of the most recent frontiers of knowledge.
Findings
The key empirical results of this study provide partial support for the theoretical expectations. They specify and refine Eriksson and Kovalainen’s (2008) classification system, first, by identifying a new approach to evaluation and validation and, second, by showing mixed results on the paradigmatic consistency in the use of evaluation criteria.
Research limitations/implications
This paper is not necessarily exhaustive or representative of all the evaluation criteria developed; the authors focused on the explicit reporting of criteria only and the findings cannot be generalized. Somewhat different results might have been obtained if other journals, other fields of research or a longer period were considered.
Practical implications
The findings of this study enhance the knowledge of alternative approaches and criteria to validation and evaluation. The findings can aid both in the evaluation of management accounting research and in the selection of appropriate evaluation approaches and criteria.
Originality/value
This paper presents a synthesis of the literature (Table I) and new empirical findings that are potentially useful for both academic scholars and practitioners.
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The purpose of this paper is to describe and analyze the accounting standards reforms that have moved the accounting profession away from rules‐based towards principles‐based…
Abstract
Purpose
The purpose of this paper is to describe and analyze the accounting standards reforms that have moved the accounting profession away from rules‐based towards principles‐based accounting practice and financial reporting, and to explore the implications for boards of directors of fair value estimates of the unknowable contaminating financial statements with financial misstatements.
Design/methodology/approach
The paper critically reviews the internationally accepted accounting, auditing and financial reporting standards with respect to fair value accounting and relates them to directors' fiduciary duties – the duties of care, of oversight, and of obedience.
Findings
The search for relevance in financial accounting raises daunting challenges for boards of directors tasked with fairly presenting the financial condition of a reporting business entity.
Research limitations/implications
The accounting profession has long been epistemologically conservative, judging reliability to be more important than relevance in the compiling of financial statements. With the fair value reforms, relevance has achieved ascendency over reliability. This necessitates an increase in the need for more research in the epistemology and ethics of accounting.
Practical implications
Boards of directors need to be well‐informed about, and fully engaged with, the assessment of the level of risk of material misstatement associated with the fair value accounting estimates, and with the adequacy of the related mandatory explanatory disclosures.
Originality/value
This paper's originality is grounded in its exploration of the epistemology of accounting in the light of the adoption of fair value conventions in the internationally accepted accounting, auditing and financial reporting standards and its drawing out of the implications this has for corporate governance.
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Ning Du, John E. McEnroe and Kevin Stevens
The purpose of this paper was to examine whether a less precise (or imprecise) estimate may increase investors’ confidence and improve investors’ perceptions of fair value…
Abstract
Purpose
The purpose of this paper was to examine whether a less precise (or imprecise) estimate may increase investors’ confidence and improve investors’ perceptions of fair value reliability. The main criticism of fair value accounting has been its lack of reliability perceived by investors.
Design/methodology/approach
A 2 × 3 randomized experiment was used where management incentive and information precision are manipulated.
Findings
The results from this study indicate that perceived reliability is jointly affected by management’s incentives and information precision. Reliability rating is the highest for fair value stated as a point estimate with a specified confidence level attached to it. Further analysis indicates that higher perceived reliability is related to its representational faithfulness because participants perceive that a point estimate with a specified confidence level better matches uncertainty in measuring future cash flows.
Originality/value
This is the first study to examine whether a less precise (or imprecise) estimate may increase investors’ confidence and improve investors’ perceptions of fair value reliability. Because of the subjectivity and uncertainty in fair value estimates, less precise fair value estimates may not be viewed as less reliable. In fact, using a precise format to represent fair value estimates may not be appropriate (neither reliable nor credible), because a precise point estimate fails to capture its underlying uncertainty in future cash flows. A less precise format could represent a credible choice for fair value because it reflects uncertainty and subjectivity and effectively communicates management’s assessments of variability in future cash flows.
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Michel Magnan, Haiping Wang and Yaqi Shi
This study aims to examine the association between fair value accounting and the cost of corporate bonds, proxied by bond yield spread. In addition, this study explores the…
Abstract
Purpose
This study aims to examine the association between fair value accounting and the cost of corporate bonds, proxied by bond yield spread. In addition, this study explores the moderating role of auditor industry expertise at both the national and the city levels.
Design/methodology/approach
This study first examines the effect of the use of fair value on yield spread by estimating firm-level regression model, where fair value is the testing variable and yield spread is the dependent variable. To test the differential impact of the three levels of fair value inputs, this paper divides the fair value measures based on the three-level hierarchy, Level 1, Level 2 and Level 3, and replace them as the test variables in the regression model.
Findings
This study finds that the application of fair value accounting is generally associated with a higher bond yield spread, primarily driven by Level 3 estimates. The results also show that national-level auditor industry expertise is associated with lower bond yield spreads for Level 1 and Level 3 fair value inputs, whereas the impact of city-level auditor industry expertise on bondholders is mainly on Level 3 fair value inputs.
Research limitations/implications
The paper innovates by exploring the impact of fair value accounting in a setting that extends beyond financial institutions, the traditional area of focus. Moreover, most prior research considers private debt, whereas this study examines public bonds, for which investors are more likely to rely on financial reporting for their information about a firm. Finally, the study differentiates between city- and national-level industry expertise in examining the role of auditors.
Practical implications
This research has several practical implications. First, firms seeking to raise debt capital should consider involving auditors, with either industry expertise or fair value expertise, due to the roles that auditors play in safeguarding the reliability of fair value measures, particularly for Level 3 measurements. Second, from standard-setting and regulatory perspectives, the study’s findings that fair value accounting is associated with higher bond yield spread cast further doubt on the net benefits of applying a full fair value accounting regime. Third, PCAOB may consider enhancing guidance to auditors on Level 2 fair value inputs, to further enhance audit quality. Finally, creditors can be more cautious in interpretating accounting information based on fair value while viewing the employment of auditor experts as a positive signal.
Originality/value
First, the paper extends research on the role of accounting information in public debt contracting. Second, this study adds to the auditing literature about the impact of industry expertise. Finally, and more generally, this study adds to the ongoing controversy on the application of fair value accounting.
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This paper aims to discuss fair value accounting and its usefulness to financial statement users. The European Commission has recently endorsed IFRS 13 on fair value measurement…
Abstract
Purpose
This paper aims to discuss fair value accounting and its usefulness to financial statement users. The European Commission has recently endorsed IFRS 13 on fair value measurement and is considering the endorsement of IFRS 9, which extends the use of fair value for financial instruments. Furthermore, fair value accounting has been under deep scrutiny because of its alleged role in the financial crisis. Therefore, the usefulness of fair value accounting is a key issue for standard setting purposes.
Design/Methodology/Approach
This paper delineates the theoretical background for fair value accounting, it provides empirical evidence on its usefulness, it highlights some controversial issues and makes some proposals for standard setting discussion.
Findings
Empirical research raises some doubts on fair value reliability. Furthermore, fair value accounting alone cannot provide information useful to evaluate stewardship. Historical cost is also needed. A dual measurement and financial reporting system could therefore deliver more complete and useful information to financial statement users.
Practical implications
This paper provides the reader with a comprehensive picture of the main issues related to fair value accounting and contributes to the standard setting debate on the optimal measurement system.
Originality/value
This paper reframes the debate on historical versus fair value accounting by explaining the reason why a dual measurement and reporting model should be implemented.
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