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This paper aims to use coordinated financial statements' system properties that include exogenous and endogenous variables to answer important questions. These questions include the following: What is the financial condition of the firm? What if there is a change in the firm's exogenous variable(s) – how will the financial condition of the firm change? And, how much of a change in the firm's exogenous variable(s) is required for the firm to reach its financial goal(s)?

This paper uses coordinated financial statements to construct solvency, profitability, efficiency, liquidity and leverage (SPELL) ratios to answer the question: what is the financial condition of the firm? It answers what-if questions by changing an exogenous variable(s) and recalculating SPELL ratios. It answers how-much questions by using Excel's Goal Seek algorithm to find the required change in an exogenous variable to reach a firm's goal.

The authors find that coordinated financial statements' system properties can be used to answer important what-is, what-if and how-much questions about the firm.

The usefulness of coordinated financial statements' system properties to answer what-is, what-if and how-much questions about the firm depends – mostly on the accuracy of exogenous data used to represent the firm's external financial environment. Furthermore, the usefulness of what-if and how-much analysis depends on how appropriate the changes are in exogenous variables used to represent alternative scenarios.

Using coordinated financial statements' system properties to answer what-is, what-if and how-much questions provides the firm's financial manager the tools to not only asses the firm's current financial condition but also to assess its ability to respond to opportunities and threats posed by future scenarios.

The ability to assess the financial condition of a firm and to assess its strengths and weaknesses in key to making sound financial decisions. In addition, the consistency imposed on coordinated financial statements makes it an effective tool for discovering errors in its data.

The authors know of no similar work.

The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the preferences and ideology of the FTC’s leaders, developments in the field of economics, and the tenor of the times. The over-riding current role is to provide well considered, unbiased economic advice regarding antitrust and consumer protection law enforcement cases to the legal staff and the Commission. The second role, which long ago was primary, is to provide reports on investigations of various industries to the public and public officials. This role was more recently called research or “policy R&D”. A third role is to advocate for competition and markets both domestically and internationally. As a practical matter, the provision of economic advice to the FTC and to the legal staff has required that the economists wear “two hats,” helping the legal staff investigate cases and provide evidence to support law enforcement cases while also providing advice to the legal bureaus and to the Commission on which cases to pursue (thus providing “a second set of eyes” to evaluate cases). There is sometimes a tension in those functions because building a case is not the same as evaluating a case. Economists and the Bureau of Economics have provided such services to the FTC for over 100 years proving that a sub-organization can survive while playing roles that sometimes conflict. Such a life is not, however, always easy or fun.

This paper studies the usability of LG financial statements as perceived by local councillors. By drawing on a comparative view of two countries with different periods of accrual accounting use in the public sector, the authors investigate how local councillors assess the usability of LG financial statements in order to question accounting reform success. Determinants that influence the usability assessment are explored.

Exploratory design: data were collected from questionnaires with 24 local councillors from five Finnish local governments (LGs) and 30 local councillors from six German LGs. An adjusted variant of the system usability scale was analysed with descriptive statistics and non-parametric group comparisons.

In both countries, the usability assessment of financial statements seems to be positive, indicating a successful reform process. In Finland, where the accrual government accounting reform has had a longer time to settle in, councillors seem to assess usability only partially better than German councillors. Several determinants of the usability assessment were detected, such as size and debt level of the LG as well as local councillors' gender, political orientation and education. Generally, councillors need more assistance and training in using financial statements.

The study is the first to conduct a quantitative assessment of the usability of LG financial statements as perceived by councillors. The system usability scale was adjusted to a public sector reporting context. The paper adopts a transnational comparative approach.

The public trust in auditors’ judgments and reputation plays an important role in substantiating audit functions as value‐added services, which lend credibility to published financial reports. Recent numerous financial restatements by high profile companies coupled with bankruptcies of major companies caused by reported financial statement fraud have eroded public confidence in financial reports and related audit functions. Restoring the public confidence requires considerable efforts by legislators, regulators, standard‐setting bodies, the business community, and the accounting profession. This article suggests 12 ways that the accounting profession can rebuild public trust in financial reports and related audit functions.

Professional accounting associations in various countries and governmental and other quasi‐official bodies have played an important role not only in the evolution of internal control reporting on a global scale, but also in educating management, investors, financial institutions, accountants, auditors, and other interested parties highlighting the pervasiveness of the effects of a sound internal control structure in corporate reporting as well as other aspects of an organization′s success. These associations include the Institute of Internal Auditors (IIA), the American Institute of Certified Public Accountants (AICPA), the General Accounting Office (GAO), the Securities and Exchange Commission (SEC), the Cadbury Committee, the Institute of Chartered Accountants of England and Wales (ICAEW), the Scottish Institute of Chartered Accountants (SICA), the Canadian Institute of Chartered Accountants (CICA), and others. Business failures, management fraud, corporate misconduct, international bribery, and notorious business scandals in all sectors of business have prompted the US government to take drastic action on internal control reporting to safeguard public interest. Several professional and government committees were formed to study this precarious situation: the Treadway Commission, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, the Packard Commission, the Cohen Commission, the Adams Commission in Canada, the Cadbury Committee in the UK, and others. The principal motivation for the changing dynamics has been growing public pressure for greater corporate accountability. The government′s pressure on the accounting profession and management of public corporations has been pivotal in spearheading internal control reporting. Examines the role of professional associations, governmental agencies, and others in promulgating standards for internal control reporting, and the impact of legislation on this aspect of internal auditing in the USA and worldwide.

Under IAS 24 a related party transaction (RPT) is a “transfer of resources, services or obligations between related parties, regardless of whether a price is charged” (IASB). The purpose of this paper is to consider the interest of the business group and the directing activity of the parent company for the interpretation of the RPT. Considering the interest of the group means to interpret the intra-group transactions not as isolated transactions, as usually done by the empirical studies, but in a wider perspective, that of the group.

This paper builds on explanatory multiple case studies in order to answer the following research questions: why the interest of the business group and the directing activity of the subsidiaries by the parent company are important in the interpretation of RPTs. How RPTs can be interpreted in the light of the directing activity of the holding company.

Dominant shareholder tends to demonstrate that the group it is not managed as a single economic entity and sometimes that subsidiaries are not really controlled. The case studies show that a regulation that imposes the transparency of the directing activity has at least two effects: the controlling shareholder finds it convenient to delegate the decision-making power and to not carry out RPTs among firms that do not present clear economic links. Thus, the transparency of the directing activity seems to be a disincentive to the establishment of a pyramidal group with expropriation purposes.

It is appropriate that the interpretation of the RPT take into account not only the disclosure of the RPT (e.g. type and nature), but also the following disclosure: the reason and the business purpose that lead to RPT; the interest of the company in engaging such transactions; and the procedures for their approval. The independence of subsidiaries directors is necessary to ensure the management autonomy of the boards, and in the case of directing activity they have to protect outsiders in the case of detrimental transactions ordered by the controlling and directing company that are not carried out in the interest of the group.

Unlike what has been done so far by the literature on RPT, this paper considers the interest of the group to interpret the intra-group transactions and the separation between control and direction. It means do not interpret RPT as isolated transactions, as usually done by the empirical studies, but in a wider perspective, that of the group.

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

The purpose of this paper is to better understand how mandatory risk categories are disclosed and to provide a better understanding of the reasons why risk disclosure looks less useful than it ought to be.

We analyze how Italian banks provide risk information, by focusing on its characteristics to find out any differences between the notes to the financial statements and the public report, both prepared in compliance with the instructions of the Bank of Italy. We assess the risk-related reporting practices of 66 Italian banks, based on a content analysis of the two mandatory reports, and verify whether bank-specific factors explain any differences.

Italian banks formally comply with the Bank of Italy’s instructions, but there is discretion to choose the characteristics of the information provided. Despite different risk categories to disclose in each report, disclosure is quite uniform, although banks tend to provide denser information in the notes to the financial statements and the difference in the economic signs between the two reports decreases as the level of risk increases.

The significance of this study goes beyond the debate taking place in the academic arena, as it can be largely relevant for preparers, those responsible for setting international and national accounting standards, the Basel Committee on Banking Supervision and the domestic supervisory authorities, particularly concerning the possible introduction of requirements that are more explicit than the existing ones.

The Italian setting is very relevant because unlike other countries, Italy adopts “interventionist enforcements”, which are regarded as a critical tool for achieving the minimum disclosure requirements. Moreover, the two sets of disclosure required by the Bank of Italy have never been investigated in a single data set.