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Article
Publication date: 20 August 2020

Lan Anh Nguyen, Gillian Vesty, Michael Kend, Quan Nguyen and Brendan O'Connell

The purpose of this paper is to understand the institutionally driven changes impacting organizational accounting manipulation in Vietnam’s emerging transitional economy…

Abstract

Purpose

The purpose of this paper is to understand the institutionally driven changes impacting organizational accounting manipulation in Vietnam’s emerging transitional economy. Specifically, this study explore how Vietnamese accountants and regulators explain questionable accounting transactions and their rationalization for those practices, especially during the period of accounting system transition from Vietnamese accounting standards to International Financial Reporting Standards (IFRS).

Design/methodology/approach

The study uses interview-based methods involving 22 Vietnamese accountants, financial managers, audit partners and regulators.

Findings

This study have found dysfunctional approaches to revenue and expense recognition underpinned by institutional theory. At play is a combination of opportunities relating to weak accounting standards and organizational controls; management pressure; and a desire to avoid unwanted scrutiny from Vietnamese regulators.

Research limitations/implications

This study does not include the views of non-financial managers or other accounting users. Future research could focus more on the perceptions of these other stakeholder groups.

Practical implications

Accounting manipulation can be collusive, therefore, regulators should have a stricter view and broader examination in the monitoring process.

Originality/value

This study examine accounting manipulation through the lens of New Institutional Sociology and also share the views of the accountants and regulators. This study argue that weak accounting standards are not the only factors contributing to accounting manipulation. When evaluating the existence of accounting manipulation, this paper find a combination of factors including: opportunities for manipulation, pressure from management and the rationale behind the conduct. These factors should be interpreted in context.

Details

Pacific Accounting Review, vol. 32 no. 4
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 3 January 2017

Phuong Thi Nguyen and Michael Kend

Over the past 20 years, external auditing activities and practices in Vietnam have developed quickly. An important milestone is the first Law on External Audit No…

Abstract

Purpose

Over the past 20 years, external auditing activities and practices in Vietnam have developed quickly. An important milestone is the first Law on External Audit No. 67/2011/QH12 which has been passed by the National Assembly of Vietnam on 29 March 2011. The purpose of this paper is to understand the perceived motivations in regard to the introduction of the Law on External Audit, through the eyes of various key stakeholders. There has been genuine public interest concerns regarding audit quality in Vietnam as prior academic research has indicated, and this is the first study to examine whether the new audit reforms where introduced specifically to deal with those concerns.

Design/methodology/approach

Face-to-face semi-structured interviews were conducted with 45 key stakeholders during 2014 in both Ha Noi and Ho Chi Minh City, Vietnam.

Findings

The study finds that the Law on External Audit was introduced because it holds the highest form of regulatory authority in Vietnam, and the lower level Decrees that existed before the law did not even detail the audit firms’ responsibilities resulting in low audit quality. Also, the new Law was introduced to add more credibility and trust in the external audit function in Vietnam, and to reduce unfair price competition. However, some of our findings indicate that the Governments’ motivations were not all purely public interest related. A theoretical framework is developed to evaluate whether these reforms are substantive enough in nature to effect public confidence in reported financial data and audits.

Originality/value

External auditing plays a crucial role in any market-based economy. In a developing economy, audit quality is often perceived to be lower than in a developed economy. Therefore, it is not uncommon to observe governments in developing economies producing tighter regulations for the auditing and assurance market to help attract more foreign investment and to establish credibility and more trust. In Vietnamese context, the current study conveys that the new audit reforms not only were introduced with genuine public interest concerns but also were a mechanism to protect the government’s interests.

Details

Managerial Auditing Journal, vol. 32 no. 1
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 17 May 2021

Lan Anh Nguyen and Michael Kend

The purpose of this study is to understand how the new reforms related to key audit matters (KAM) disclosures in Australia may have impacted audit quality by eliciting the…

Abstract

Purpose

The purpose of this study is to understand how the new reforms related to key audit matters (KAM) disclosures in Australia may have impacted audit quality by eliciting the perceptions of key stakeholders in the audit and assurance services market.

Design/methodology/approach

The study uses a qualitative approach and New Institutional Sociology (NIS) to explain how auditors have responded to the KAM reforms. Interviews were conducted with 20 individuals representing identified groups of stakeholders in the market for audit and assurance services in Australia.

Findings

The study finds there is little consensus between some stakeholder groups on whether the KAM reforms may have improved audit quality, based on the perceptions shared. The findings conveyed that the auditors and regulators, standard setters acknowledge that KAM disclosures are either costly and/or time-consuming to implement. The Big Four auditors indicate these reforms led to changes mainly around internal consultations and independent reviews, whereas the non-Big Four auditors highlighted increased interactions with audit clients.

Originality/value

This is one of the first studies to examine the perceived post-implementation impacts on audit quality of the KAM reforms (ISA 701) after the initial two years of implementation and how auditors have responded, explored through the lens of institutional logic.

Details

Managerial Auditing Journal, vol. 36 no. 3
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 10 February 2021

Lan Anh Nguyen, Brendan O'Connell, Michael Kend, Van Anh Thi Pham and Gillian Vesty

The study explores accountants' views of the likelihood of widespread accounting manipulation in the emerging economy, Vietnam. Applying the fraud triangle framework, we…

Abstract

Purpose

The study explores accountants' views of the likelihood of widespread accounting manipulation in the emerging economy, Vietnam. Applying the fraud triangle framework, we examine accountants' responses to management pressure, manipulation opportunities and perceptions of how they rationalize their decisions.

Design/methodology/approach

The study uses an experimental methodology involving 592 Vietnamese accountants as participants. Post-experiment field interviews were conducted with eight highly experienced accountants.

Findings

Our findings indicate that accounting manipulation is perceived to be common in Vietnam. The findings reveal that there is no differentiation between manipulation of accounting transactions with or without management pressure and no differentiation between collective gain or individual gain.

Research limitations/implications

While the study focused on accountants' perceptions of accounting manipulation, these views may change over time. The impact of law reforms and the potential for prosecution under the force of law provisions could alter these perceptions.

Practical implications

The study findings alert regulators, government authorities and auditors of the perceptions and views in relation to accounting manipulation and the potential for fraud in Vietnam. Auditors could use help from forensic specialists to uncover unethical behaviors identified in this study.

Originality/value

The fraud triangle framework is used to shed light on fraud through the examination of accounting manipulation in Vietnam. We contribute to the relevant accounting literature with insights into accountants' motivations toward conducting questionable accounting transactions. The contributions we make draw attention to preconceptions of Asian societies; in particular, accounting actions to motivate collectivist gains. While we shed further light on fraudulent accounting, we conclude that the fraud triangle framework does not necessarily articulate fraud well in relation to accounting manipulation in emerging economies.

Details

Journal of Accounting in Emerging Economies, vol. 11 no. 2
Type: Research Article
ISSN: 2042-1168

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Article
Publication date: 6 February 2017

Jacqueline Birt, Mahesh Joshi and Michael Kend

The purpose of this paper is to investigate the value relevance of segment information for both public and private sector banks in India. In doing so, this paper examines…

Abstract

Purpose

The purpose of this paper is to investigate the value relevance of segment information for both public and private sector banks in India. In doing so, this paper examines a rapidly developing economy and perhaps its most critical sector during this period of strong economic growth.

Design/methodology/approach

In this study uses the simplified Ohlson model, for a sample of 136 private sector and public sector banks for the period 2007-2010 in India.

Findings

The paper finds that public sector banks have higher share prices, higher earnings and more equity compared with private sector banks. Segment earnings data is highly value relevant for both sectors; however, segment equity data is only marginally value relevant for Indian banks. The number of segments is also value relevant and associated with higher share prices.

Originality/value

The results of this study contribute additional evidence to the literature on segment reporting by studying the effect of adoption of segment reporting in an emerging market. Findings from the paper are particularly relevant as India is currently in the process of changing its segment reporting requirements and moving to an IFRS-based segment standard.

Details

Asian Review of Accounting, vol. 25 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 28 June 2011

Keith A. Houghton, Christine Jubb and Michael Kend

This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are…

Abstract

Purpose

This paper seeks to focus on the issue of materiality judgements and the need for public disclosure of materiality levels. Insights about the concept of materiality are drawn from the words of users of audited financial reports, auditee managements, suppliers to the market for audit services and auditing standard setters and regulators.

Design/methodology/approach

This paper reports findings arising from face‐to‐face office interviews with individuals representing identified groups of stakeholders in the market for audit services about the issue of “materiality” as this concept is applied in auditing. The interviews canvassed many issues related to audit as part of a larger project entitled “The future of audit”.

Findings

In general, stakeholders perceive that the concepts involved in audit materiality are not well understood and they point to the difficulty in providing educative materiality about it, especially in relation to qualitative materiality, to retail investors in particular. There are mixed views as to whether the actual level of tolerable error, as per one of the meanings of materiality in the audit space, should be disclosed, with some feeling that it might be detrimental or dangerous.

Practical implications

If incremental information about materiality is to be disclosed, the issue of where, what to whom, by whom and when arise. Various suggestions are made by stakeholders in respect of these questions.

Originality/value

The paper concludes by drawing from the insights gained by the authors through the comments of participant stakeholders to make recommendations that deal with the issue of audit materiality.

Details

Managerial Auditing Journal, vol. 26 no. 6
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 14 June 2013

Michael Kend and Dean Katselas

The purpose of this exploratory study is to gain a better understanding of the motivations behind private equity (PE) activities in Australia.

Abstract

Purpose

The purpose of this exploratory study is to gain a better understanding of the motivations behind private equity (PE) activities in Australia.

Design/methodology/approach

This paper reports findings arising from face‐to‐face semi‐structured interviews with individuals representing stakeholders in the market for private equity; namely, PE partners and finance professionals. Interviews were conducted in two stages, during the pre‐Global Financial Crisis (GFC) period (2007‐2008) and the post‐GFC period (2012).

Findings

In general, the stakeholders interviewed perceive that the motivations behind PE bids are not well understood, and they highlight the need for more education. They state that PE enables a company's management to make decisions more promptly; capture opportunities more effectively; reduce paperwork for executives; provide no accountability to a broad investor base; and most importantly create value for a business, as the ownership is more closely involved with the management in the day‐to‐day operations of the business. According to the interviewees, since the GFC, PE firm reputation and track record are considered to be even more crucial than before the GFC, as debt providers in particular have become more wary when lending.

Originality/value

The findings have implications for the agency relationship model. The principals' role might appear to be more tightly aligned with that of the agent, and so are their motivations, thus reducing monitoring costs, but post‐GFC interview responses indicate that this might not necessarily be the case. Concerns over empire building and gains through transaction costs were raised. The paper concludes by drawing from the insights gained by the authors from the interview data. Although it is only a small part of the economy's Gross Domestic Product, PE activity has helped Australia become a more competitive business economy.

Details

Qualitative Research in Accounting & Management, vol. 10 no. 2
Type: Research Article
ISSN: 1176-6093

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Article
Publication date: 2 March 2015

Michael Kend

The purpose of this study is to consider three distinct bodies of literature and uses stakeholder theory as the premise of this study. The first deals with corporate…

Abstract

Purpose

The purpose of this study is to consider three distinct bodies of literature and uses stakeholder theory as the premise of this study. The first deals with corporate sustainability reporting and voluntary disclosure behaviour, and corporate governance at the firm level, the second deals with the decision to utilize assurance services (voluntary adoption) and the third relates to the choice of auditor/assurance provider.

Design/methodology/approach

This study investigates these issues using archival data from some of the Top 200 listed companies in 2010 from the countries Australia and the UK. The final matched-pair sample consists of 220 listed companies.

Findings

The study finds that audit client size and the strength of corporate governance structures are significant in explaining the decision to produce a standalone sustainability report. Whereas few of these variables provide any explanatory value on the voluntary decision to assure the sustainability report, the existence of an active and diligent audit committee does have positive significance. Finally, the existence of an active and diligent sustainability committee is significant in explaining the choice of assurance provider where a member of the auditing profession was selected by the firm’s management.

Originality/value

Few studies (if any), have found a link between governance characteristics, sustainability report production, and assurance provider. The current study attempts to address this knowledge gap, and also considers the assurance work by professionals outside the auditing profession, and identifies which governance and firm-level characteristics may explain demand for their assurance services. This current study, assists to understand the low incidence of assurance and what might be necessary to increase demand for this type of assurance.

Details

Sustainability Accounting, Management and Policy Journal, vol. 6 no. 1
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 16 May 2008

M. Kend

The purpose of this paper is to consider the supply of audit firm industry specialisation in the market for statutory audits of publicly traded companies in Australia. The…

Abstract

Purpose

The purpose of this paper is to consider the supply of audit firm industry specialisation in the market for statutory audits of publicly traded companies in Australia. The purpose of this study is to seek to gain a better understanding of the dynamics within the market for industry specialist audit services.

Design/methodology/approach

A structured interview process is used to investigate certain issues with the suppliers of industry specialist audit services (in this case all the then Big 5).

Findings

This paper found that industry specialisation involves the Big 5 audit firms developing a specialised knowledge of what clients do within any given industry and the issues and audit risks they face. The Big 5 have industry “focus” groups that are responsible for providing “leading edge” practices to their clients. According to many of the auditor interview respondents, the large number of Australian Stock Exchange (ASX) classifications has meant that audit firms have sought a more manageable means of partitioning their practices into different industry focus groups. The ASX classifications were described by some of those interviewed as being irrelevant. This raises questions regarding prior auditor industry specialisation research that has relied on these classifications.

Research limitations/implications

The study does suffer from two limitations. First, the research only questioned the Big 5 firms, despite evidence that non‐Big 5 firms can create specialisations. Second, the study's data is relatively dated being collected in the late 1990s, so there is a possibility the findings may now be out of date, particularly given as indicated before, specialisation premiums are not generalisable across time.

Originality/value

The paper demonstrates the criticality of the relationship between audit market participants in developing an underlying framework that can universally explain the interactions that occur in the market for specialised audits.

Details

Pacific Accounting Review, vol. 20 no. 1
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 19 June 2020

Michael Forzeh Fossung, Lazarus Elad Fotoh and Johan Lorentzon

This study aims to identify the determinants of the expectation gap between financial statement users (investors and bankers) and auditors from a developing country…

Abstract

Purpose

This study aims to identify the determinants of the expectation gap between financial statement users (investors and bankers) and auditors from a developing country perspective with Cameroon as the case study.

Design/methodology/approach

This study makes use of the survey instrument to identify the determinants of the expectation gap in Cameroon. The research method and research design used for this study are similar to that adopted in Schelluch, Best et al., Fadzly and Ahmed, Desira and Baldacchino and Dixon et al.

Findings

The results indicate that audits and audited financial statements and auditors’ skills are good predictors of the audit expectation gap (AEG), whereas gender, years of experience and occupation (investors and accountants) do not have any significant influence on the AEG. It follows that the expectation gap is further widened by an increase in the regulation and duties of auditors concerning the reliability and usefulness of audits and audited financial statements and auditors’ skills.

Research limitations/implications

A limitation of this study is the sample size, which is limited in scope, with only 400 potential respondents. In addition, this study adopted a survey method used in countries with different economic views and cultural values from Cameroon.

Practical implications

This study contributes to current knowledge by identifying the determinants of the expectation gap in Cameroon, thus facilitating the adoption of measures aimed at mitigating this gap such as educating the Cameroonian public on the auditors’ duties, especially each time a new audit regulation is adopted. The paper is a critical reference point for future research on the subject in Cameroon.

Originality/value

This study contributes to the expectation gap discourse by uncovering the determinants of the expectation gap from a developing country perspective of Cameroon with a different economic and cultural outlook.

Details

Accounting Research Journal, vol. 33 no. 4/5
Type: Research Article
ISSN: 1030-9616

Keywords

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