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Open Access
Article
Publication date: 31 May 2023

Elina Elisabet Haapamäki and Juha Mäki

The objective of this paper is to extend the debate on audit quality in the less complex entity (LCE) context by analyzing comment letters submitted to the International Auditing…

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Abstract

Purpose

The objective of this paper is to extend the debate on audit quality in the less complex entity (LCE) context by analyzing comment letters submitted to the International Auditing and Assurance Standards Board (IAASB). The IAASB has drafted a new, stand-alone standard for audits of LCEs’ financial statements.

Design/methodology/approach

The Gioia method is utilized to conduct the qualitative analysis. This enables the material to shine and provide a comprehensive picture of the important aspects of the comment letters about the International Standard on Auditing (ISA) for LCEs. A content analysis of the 145 comment letters is conducted to identify the extent of the support for and the arguments against the new, stand-alone draft standard for audits of LCEs’ financial statements. In addition, this study considers how the comment letters describe the respondents’ views on audit quality in relation to the new standard. Finally, the tone of the comment letters and audit quality arguments is investigated.

Findings

The findings provide a useful framework of the most frequently used arguments supporting and opposing the ISA for LCEs. Within the themes identified, a wide variety of issues and concerns are discussed. The results reveal that the arguments in the comment letters are contradictory. For instance, when discussing audit quality, those interest groups that perceived many positive opportunities in the adoption of the ISA for LCEs thought that the audit quality would increase. Conversely, those interest groups that were skeptical about the success of the ISA for LCEs argued that the audit quality could be compromised by the general prejudice that the ISA for LCEs might be perceived as a lower-quality audit with fewer procedures.

Originality/value

This paper is, to the best of the authors’ knowledge, the first to examine the content of comment letters in the context of a new, stand-alone standard for audits of LCEs. The international audience can utilize the results in the context of the widely discussed issue of reducing LCEs’ auditing obligations. This study aims to contribute to the two streams of accounting literature concerning audit quality and political lobbying.

Details

Journal of Accounting Literature, vol. 46 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 8 August 2019

Iain Clacher, Alan Duboisée de Ricquebourg and Amy May

While recently introduced EU regulation on the statutory audit of public interest entities (PIEs) aims to improve audit competition and quality, its success and impact depends on…

Abstract

Purpose

While recently introduced EU regulation on the statutory audit of public interest entities (PIEs) aims to improve audit competition and quality, its success and impact depends on the definition of a PIE applied across the various EU Member States. In the UK, even though little is known about their auditing choices, these changes will not apply to most private companies despite their importance to the wider economy. The purpose of this paper is to provide an in-depth analysis of the private company audit market and examine the lobbying behaviour of the accounting profession around the definition of a PIE in the UK.

Design/methodology/approach

Using a large panel of independent private company audits in the UK and a textual analysis of submitted comment letters to a government consultation on the new regulation, this paper presents a comprehensive analysis of the audit market for private companies by measuring supplier concentration using four different measures of market share, and of the lobbying behaviour of the accounting profession.

Findings

There are two main findings. First, the private company audit market is characterised by low auditor switching rates along with a tight oligopoly of the largest independent private company audits maintained by the Big Four audit firms. Second, the lobbying behaviour of accounting and audit firms sought, and succeeded, to limit the scope of the definition of a PIE in the UK, consistent with the theoretical predictions of monopoly capitalism and the theory of professions.

Originality/value

The paper shows that the definition and scope of a PIE needs revisiting both within the UK and across all EU Member States, with a view to including more of these economically important private companies and highlights the policy challenge of increasing competition and choice in a concentrated audit market.

Details

Accounting, Auditing & Accountability Journal, vol. 32 no. 5
Type: Research Article
ISSN: 0951-3574

Keywords

Book part
Publication date: 20 March 2023

Natalia Aversano and Johan Christiaens

Heritage assets (HAs) are important goods or properties that define a country’s culture, history, and identity. Public sector entities are the primary custodians of a nation’s…

Abstract

Heritage assets (HAs) are important goods or properties that define a country’s culture, history, and identity. Public sector entities are the primary custodians of a nation’s heritage properties; however, many local museums and historic houses are managed by private not-for-profit (NFP) organisations that essentially act to conserve these heritage places.

Through a documentary analysis, this chapter aims to investigate the points of convergence and the differences between accounting policies for governmental heritage and private NFP organisations.

The study demonstrates that even private NFP entities present the same characteristics as public sector ones in the accounting of heritage goods and that there are certain accounting standards being equally applicable; therefore, the accounting policies for governmental heritage are in accordance with the accounting policies for NFP organisations such as museums, art galleries, charities, churches, for their heritage goods.

Details

Measurement in Public Sector Financial Reporting: Theoretical Basis and Empirical Evidence
Type: Book
ISBN: 978-1-80117-162-5

Keywords

Article
Publication date: 24 August 2020

Francesca Manes-Rossi, Giuseppe Nicolò, Adriana Tiron Tudor and Gianluca Zanellato

This paper aims to explore the emerging phenomenon of integrated reporting (IR) in the context of state-owned enterprises (SOEs) and proposes a longitudinal analysis of the level…

1168

Abstract

Purpose

This paper aims to explore the emerging phenomenon of integrated reporting (IR) in the context of state-owned enterprises (SOEs) and proposes a longitudinal analysis of the level of IR disclosure (IRD) provided by a sample of European SOEs for the period 2013–2017, in accordance with IR framework requirements. The study also proposes an analysis of the possible explanatory factors driving the level of IRD. Specific attention is devoted to examine the influence exerted by the public ownership on the level of IRD provided by SOEs.

Design/methodology/approach

The IRs published by a balanced sample of 18 European SOEs between 2013 and 2017 were examined through a manual content analysis. Several analyzes were performed to assess the relationship between the level of IRD provided by SOEs and some possible determinants.

Findings

Results show an increasing level of disclosure during the observed period, confirming the relevance of IR as a tool for transparency and accountability within the context of SOEs. Statistical analyzes show that government ownership, external assurance, investor protection and global reporting initiative guidelines adoption positively affect the level of IRD, while SOE size exerts a negative influence.

Originality/value

As this paper examines a context which has been under-investigated, it presents fresh knowledge about the evolution of IR adoption by European SOEs. Furthermore, this paper identifies some of the explanatory factors that drive the preparation of IR, thus providing international integrated reporting council, policymakers and standard-setters with the relevant information for inclusion in specific guidelines for IR by SOEs.

Details

Meditari Accountancy Research, vol. 29 no. 3
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 20 November 2023

Minga Negash and Seid Hassan

This paper aims to fill gap in the literature and explore policy options for resolving the problems of accountability by framing three research questions. The research questions…

Abstract

Purpose

This paper aims to fill gap in the literature and explore policy options for resolving the problems of accountability by framing three research questions. The research questions are (i) whether certain elements of Scott’s (2014) institutional pillars attenuate (accentuate) corporate and public accountability; (ii) whether the presence of ruling party-affiliated enterprises (RPAEs) create an increase (decrease) in the degree of corporate (public) accountability; and (iii) whether there is a particular form of ownership change that transforms RPAEs into public investment companies.

Design/methodology/approach

Using a qualitative research methodology that involves term frequency and thematic analysis of publicly available textual information, the paper examines Mechkova et al.’s (2019 forms of government accountability. The paper analyzes the gaps between the de jure and de facto accountability using the institutional pillars framework.

Findings

The findings of the paper are three. First, there are gaps between de jure and de facto in all three (vertical, horizontal and diagonal) forms of government (public) accountability. Second, the study finds that more than three fourth of the parties that contested the June 2021 election did have regional focus. They did not advocate for accountability. Third, Ethiopia’s RPAEs are unique. They have regional focus and are characterized by severe forms of agency and information asymmetry problems.

Research limitations/implications

The main limitation of the paper is its exploratory nature. Extending this research by using cross-country data could provide a more complete picture of the link between corporate (public) accountability and a country’s institutional pillars.

Practical implications

Academic research documents that instilling modern corporate (public) governance standards in the Sub Sahara Africa (SSA) region has shown mixed results. The analysis made in this paper is likely to inform researchers and policymakers about the type of change that leads to better corporate (and public) accountability outcomes.

Social implications

The institutional change proposed in the paper is likely to advance the public interest by mitigating agency and information asymmetry problems and enhancing government accountability. The changes make the enterprises investable, save scarce jobs, enhance diversity and put the assets in RPAEs to better use.

Originality/value

To the best of the authors’ knowledge, this is the first paper that uses the institutional pillars analytical framework to examine an SSA country's corporate (public) accountability problem. It demonstrates that accountability is a domestic and a (novel) traveling theory. The paper identifies the complexity of resolving the interlock between political institutions and business enterprises. It theorizes that it is impossible to instill modern corporate (public) accountability standards without changing regulatory, normative and cultural cognitive pillars of institutions. The paper contributes to the change management and public interest literature.

Details

Management Research Review, vol. 47 no. 4
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 15 August 2022

Erekle Pirveli

This study aims to examine the timing of corporate disclosure in the context of Georgia, an emerging market where a recent reform of corporate financial transparency mandated…

Abstract

Purpose

This study aims to examine the timing of corporate disclosure in the context of Georgia, an emerging market where a recent reform of corporate financial transparency mandated about 80,000 private sector entities to publicly disclose their annual financial statements.

Design/methodology/approach

The main analysis covers more than 4,000 large, medium, small and micro private sector entities, for which the data is obtained from the Ministry of Finance of Georgia. This paper builds an empirical model of logit/probit regression, with industry fixed and random effects to investigate the drivers of the corporate disclosure timing.

Findings

Findings suggest that the mean reporting time lag is 279 days after the fiscal year-end, that is nine days after the statutory deadline. Almost one-third (30%) of the entities miss the nine-month statutory deadline, while the timely filers almost unexceptionally file immediately before the deadline. Multivariate tests reveal that voluntarily filing entities completed the process significantly faster than those mandated to do so; audited financial statements take more time to be filed, whereas those with unqualified audit opinion or audited by large/international audit firms are filed faster than their counterparts. The author concludes that despite the overall high filing rates, the timing of corporate disclosure is not (yet) efficiently enforced in practice (but is progressing over time), whereas regulatory incentives prevail over market incentives among the timely filers.

Originality/value

To the best of the author’s knowledge, this is the first study that explores corporate disclosure timing incentives in the context of Georgia. This study extends prior literature on the timing of financial information from an emerging country’s private sector perspective, with juxtaposed market and regulatory incentives.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Open Access
Article
Publication date: 7 January 2022

Edit Lippai-Makra, Zsuzsanna Ilona Kovács and Gábor Dávid Kiss

This paper aims to investigate the non-financial reporting (NFR) practices of Hungarian listed public interest entities for 2016–2018 in terms of the required disclosure content…

1794

Abstract

Purpose

This paper aims to investigate the non-financial reporting (NFR) practices of Hungarian listed public interest entities for 2016–2018 in terms of the required disclosure content based on the 2014/95/EU Directive (ED).

Design/methodology/approach

The authors apply content analysis methodology on Hungarian firms subject to mandatory reporting under the ED. The target variable in the multivariate model is the reporting quality (Qi) measured by a combined index.

Findings

The authors find that the ED had a moderate impact on Hungary's reporting quality because the overall disclosure of the sample only increased from low to medium level. The authors found that the value of intangible assets is a determinant of the reporting quality before and after the implementation of the ED. The findings support the effect of coercive isomorphism on Hungarian NFR practices.

Research limitations/implications

The limitation of the research is the number of firms examined. However, the authors covered the entire (non-bank) community of the Hungarian firms subject to the ED.

Practical implications

The authors suggest that reporting entities build upon the synergy between intellectual capital disclosure and NFR when elaborating their reporting strategies. The authors recommend the integration of ethical matters into corporate strategies and policies. Policymakers may consider the revision of the Hungarian regulations. The authors suggest academics embrace these topics in teaching.

Originality/value

To the best of the authors’ knowledge, this is the first study that investigates the impact of ED in the context of Hungary. The authors contribute to the existing literature by adding the results of the ridge regression model, highlighting the importance of intangible assets.

Details

Journal of Applied Accounting Research, vol. 23 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Book part
Publication date: 2 December 2013

Lehte Alver, Jaan Alver and Liis Talpas

The chapter shows how globalization and the IFRSs have affected the development of financial accounting and reporting in Estonia. This is interpreted through institutional theory.

Abstract

Purpose

The chapter shows how globalization and the IFRSs have affected the development of financial accounting and reporting in Estonia. This is interpreted through institutional theory.

Design/methodology/approach

The theoretical framework takes into account the prior papers published using institutional theory for defining pressures affecting the development of financial reporting model. The discussion part is presented in three sub-sections. Coercive institutional pressure is analyzed using Estonian accounting legislation from 1990–2012 and normative pressure by focusing on the impact of Big 4 audit companies in the Estonian context. The authors also give an overview of mimetic institutional pressures. As a methodological technique literature review and document analysis are used.

Findings

In the context of coercive institutional pressure the development of accounting legislation in Estonia has been mostly influenced by the IFRSs and European Union. In the light of recent events it seems that Estonia has the opportunity to follow its own way deciding which accounting principles should be applied to SMEs. Mimetic institutional pressure affecting Estonian accounting system is International Accounting Standards Board (IASB), which practices Estonian Accounting Standards Board (EASB) copies. Normative institutional pressures influencing the development of the Estonian accounting system are the Big 4 audit firms.

Originality/value

Although using institutional theory to interpret the development of financial reporting framework is not new its application is underexplored in the context of post-Soviet countries such as Estonia. The chapter potentially contributes to the accounting reforms evidence in emerging economies.

Article
Publication date: 8 June 2020

Erekle Pirveli

The purpose of this paper is to provide the first empirical assessment of the persistence and predictability of earnings within the Georgian private sector entities.

Abstract

Purpose

The purpose of this paper is to provide the first empirical assessment of the persistence and predictability of earnings within the Georgian private sector entities.

Design/methodology/approach

The sample comprises of all the Georgian private sector entities who, according to the new Law of Georgia on Accounting, Reporting and Auditing (2016), had to submit their audited financial statements by 1 October 2018. Financial data has been officially withdrawn from the Ministry of Finance of Georgia and the descriptive data has been obtained by the use of Link Klipper and ScrapeStorm tools through the official “Reportal” website. The final sample consists of 450 large Georgian private sector entities. The study uses a simple, one-year-lagged earnings auto-regression to detect the persistence and predictability within the next series of earnings. A weighted least square method has been used as a statistical procedure.

Findings

The results reveal that current earnings persist within the next year’s series of earnings at less than 25%, while the reliance on current year’s earnings enables us to predict the next year’s earnings only with a chance of 20%. Further analysis has witnessed that cash flows from operations persist at less than 40% and are able of predicting the next year’s cash flows at below 35%. Overall, the properties of earnings and cash flows within the private sector of Georgia are of relatively poor quality, with the latter demonstrating higher properties compared to earnings.

Practical implications

The general finding on a relatively low property of earnings raises potential investors and creditors’ awareness on the valuation-usefulness of provided financial information within the private sector of Georgia. The fact that earnings are significantly less persistent and predictable compared to cash flows from operations, hints on accruals’ problematic functioning. The results presented in this paper should be of interest to a local regulator (SARAS), charged with the responsibility of successfully running a currently ongoing accounting reform of Georgia.

Originality/value

This is the first study that examines the persistence and predictability of earnings and cash flows from operations among the private sector entities of Georgia.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 3
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 25 May 2010

Johnathan Magrane and Sue Malthus

The purpose of this paper is to examine the conditions and processes affecting the operation of an audit committee within the context of a New Zealand district health board (DHB).

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Abstract

Purpose

The purpose of this paper is to examine the conditions and processes affecting the operation of an audit committee within the context of a New Zealand district health board (DHB).

Design/methodology/approach

The methodology used in this paper was exploratory and qualitative, including the analysis of secondary data and semi‐structured interviews.

Findings

Using the New Zealand Auditor‐General's best practice guidelines for a public sector audit committee as a benchmark, the paper finds that the DHB rates moderately well in terms of “effectiveness potential”. However, factors are identified concerning the audit committee members' independence, competence, tenure, and remuneration, which impinge upon the overall effectiveness of the audit committee. Despite apparent shortcomings in these areas, the informal networks between audit committee members and management serve to maximise the “realisation” of what potential effectiveness exists. As a result, the audit committee is perceived by its stakeholders (management, auditors, and committee members) as being a valuable tool to assist the DHB board in achieving proper governance.

Practical implications

There are no specific regulatory or legislative requirements for establishing audit committees in the New Zealand public sector. The findings from this paper may be useful to public sector entities that are considering establishing an audit committee and to entities, including the one in this paper, that wish to improve the effectiveness of their existing audit committees.

Originality/value

Most studies of audit committees to date have focuses on corporate sector entities; this is the first qualitative paper of an audit committee of a public sector entity in New Zealand.

Details

Managerial Auditing Journal, vol. 25 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

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