Users Of Financial Statements Research Articles

ВІДМІННІСТЬ ВІДОБРАЖЕННЯ НЕМАТЕРІАЛЬНИХ АКТИВІВ У ФІНАНСОВІЙ ЗВІТНОСТІ ЗА ФОРМАМИ МСФЗ ТА НП(С)БО НА ПРИКЛАДІ АГРАРНИХ ФОРМУВАНЬ

Introduction. Over the past ten years, significant changes and improvements have taken place in accounting and auditing, both in legislation and requirements for accounting and auditing. In particular, large enterprises should keep records under International Financial Reporting Standards (IFRS) and ideally reflect their performance in financial statements under IFRS forms. On the Balance Sheet of agricultural formations, one of the main assets is land, but since most enterprises rent it, there is a right to use land plots, which is an intangible asset. It is important for users of financial statements, who are interested in information in the field of land relations, to correctly understand the reflected names of articles and financial indicators in reporting. Problem Statement. Intangible assets are divided into different types and groups, but in the financial statements according to NAS for them there is only one article with the general title “Intangible assets.” In accordance with the requirements of IFRS, an entity has the possibility to divide types or groups of intangible assets into separate items. However, in Ukraine there is a problem of imperfection of financial reporting forms under IFRS, which requires in-depth study and wider disclosure of financial reporting items, including intangible assets. The purpose of the article is to distinguish differences between the reflection of financial indicators on intangible assets in the reporting forms under NAS and IFRS in agricultural formations and outline for users of financial statements advantages and disadvantages. Methods. General scientific methods of cognition and the study of phenomena and processes were used; statistical and economic methods of analysis - when summarizing and presenting information on financial indicators of intangible assets in reporting; comparison - when intangible assets are reflected in the financial statements under NAS and IFRS. Results. The article reflects the stages of formation of IFRS in Ukraine, focuses on the reflection of financial indicators in the NAS and IFRS reporting forms on the example of agricultural formations, their advantages and disadvantages, and characterizes the types of intangible assets. Conclusions. In the process of the research , the opinion was formed that the reflection of intangible assets under IFRS reporting is more detailed and informative than under NAS reporting.

Determinants of financial statement fraud: the perspective of pentagon fraud theory (evidence on Islamic banking companies in Indonesia)

Purpose The purpose of this study was to determine the determinants of financial statement fraud: the perspective of pentagon fraud theory. Design/methodology/approach This study used quantitative methods with an explanatory research design by applying secondary data on Islamic banking companies listed on the Indonesia Stock Exchange (IDX). Findings External pressure affects financial statement fraud, ineffective monitoring affects financial statement fraud, external auditor quality affects financial statement fraud, change in auditor affects financial statement fraud, frequent number of CEO’s picture affects financial statement fraud, external pressure affects firm size, ineffective monitoring affects firm size, external auditor quality affects firm size, change in auditor affects firm size, frequent number of CEO’s picture affects firm size, firm size affects financial statement fraud, firm size mediates the relationship between external pressure on financial statement fraud, firm size mediates the relationship between ineffective monitoring on financial statement fraud, firm size mediates the relationship between external auditor quality and financial statement fraud, firm size mediates the relationship between change in auditor and financial statement fraud, firm size mediates the relationship between frequent number of CEO’s picture and financial statement fraud. Research limitations/implications The limitations of this research were found during the research process and can be used as input for further research and related parties in conducting the research to obtain better research results. The limitations of this study are as follows: this study only focused on Islamic banking, so it cannot be generalized to other sectors. Besides, this study only tested five independent variables, one dependent variable and one mediating variable. Practical implications For external auditors, financial statement fraud by management might be caused by many factors and is a social as well as an economic problem that must be addressed immediately. Therefore, in carrying out the duties and roles as an external auditor, they must have an attitude of independence (not taking sides) in the mental attitude that must be maintained by the auditor related to the assignment. Auditors must have sufficient technical expertise and training as auditors. In carrying out the audit, the auditor should use their professional skills in responding carefully and thoroughly. Moreover, in carrying out audit work, the auditor must have a plan, must know adequate internal control and obtain sufficiently competent audit evidence. Originality/value To the best of the authors’ knowledge, very few studies in Indonesia have applied the Beneish model. There is only one study that implemented the Beneish model, and the study examined only a few companies listed on the IDX. The findings of the present study have important implications not only for banks but also for users of financial statement accounts in Indonesia, especially for investors, auditors, regulators, taxation and other state authorities.

Controlling Function of Corporate Governance to The Relevance of Accounting Earnings Information

The relevance of accounting earnings information is needed to help users of financial statements to make a decision. This research intends to expand previous empirical studies by examining more comprehensive corporate governance variables, which are the proportion of audit committees and commissioners, the role of financial accounting experts in the audit committee, and ownership structure to increase the relevance of accounting earnings information. The aim of this research is to examine whether controlling function held by the company in order to perform good corporate governance can affect to the informativeness of accounting earnings in Indonesia. This research method uses Pooled Least Square (PLS) with total sample 327 firm-year observations of Indonesian public companies from 2017 to 2019. The result shows that the existence of effective controling function by multiple large shareholder, accounting expert, audit committee, and board size can increase the relevance of earnings information that rely on financial statement. This research findings could be as an additional literature in financial accounting and corporate governance area, and also for practitioners in manufacturing company in Indonesia that if a firm has good controlling function, it can provide relevant information about earnings to shareholders.

Audit expectation gap: Evidence from Morocco

Global scandals and the collapse of major entities without any prior warning have undermined stakeholder confidence in the auditing profession and have shown that users of financial statements may have different opinions on the auditors’ responsibilities, highlighting the audit expectation gap. The present study aims to identify the existence of an audit expectation gap and its components in an emerging country, namely Morocco. For this purpose, a structured questionnaire based on a five-point Likert scale was randomly administered to 152 respondents, including auditors, investors, managers, bankers, and academics. The study explores the audit expectation gap under several components, such as the auditor’s general responsibilities, auditor’s independence, his/her responsibility to prevent and detect fraud, his/her responsibility in assessing internal control, his/her responsibility in assessing the going concern assumption and audit report. The results of this paper show evidence of the audit expectation gap in Morocco in the studied components, except the audit report. The results of the study encourage public decision-makers and professional audit bodies in Morocco to adopt an expanded audit report containing more information on the audit mission and auditors’ and management’s responsibilities. On the other hand, training and education sessions on the nature and functions of auditing should be provided on an ongoing basis to the various users of audit reports.

The Effect of Leverage, Profitability, Liquidity, and Firm Size on Earnings Quality (Empirical Study on the Hotel Sub-Sector Service Company, Restaurant & Tourism on the Indonesia Stock Exchange for the period 2016-2020)

Earnings quality reflects how much the company's profits are presented in accordance with the company's circumstances in that year. The better disclosure is done by the company would affect greater quality of profits owned by the company. This caused by the concept of transparency. Segment information is needed by users of financial statements to see the economic characteristics of each segment within the company. The dependent variable in this study is earnings quality, the independent variables are leverage, profitability, liquidity, and company’s size. This research is a type of quantitative research using companies’ financial statements. Total samples collected are 70 financial statements comes from 14 company. The sampling method is purposive sampling method. The results of this study indicate that leverage, profitability, and firm size partially affect earnings quality. Meanwhile, liquidity has no effect on earnings quality. The leverage, profitability, liquidity, and company size simultaneously affect the earnings quality in the hotel, restaurant and tourism sub-sectors listed on the IDX for the 2016-2020 period.

Impression management strategy — The relationship between accounting narrative thematic bias and financial graph distortion

Prior literature has examined 10-K narrative thematic bias and financial graph distortion as two independent outcomes that might arise from managements' efforts at impression management. Largely unexplored is an analysis of narrative thematic bias and financial graph distortion as joint and interrelated outcomes that would arise if management coordinates both in the same 10-K report as part of an impression management strategy. We fill this void in the literature by using a simultaneous equation system to examine the joint relationship between narrative thematic bias and graph distortion in the 10-K filings of S&P 500 firms from 2014 to 2018. We draw upon Paivio's (1986) dual coding theory to predict a positive association between narrative thematic bias and financial graph distortion based on the insight that graph distortion helps reinforce the effects of thematic bias, and vice versa. Consistently, we find a simultaneous and positive relationship between thematic bias and graph distortion. Further, we find that this complementary relationship is more pronounced in firms with weak corporate governance and weak external monitoring. Our findings suggest that management may exploit the reinforcing effects of thematic bias and graph distortion to leave financial statement users with a more favorable impression of firm performance.

The Effect of Pure Audit Firms, Nonprovision of Nonaudit Services to Audit Clients, and a Statutory Fee Schedule on Audit Quality Perceptions

ABSTRACT An ongoing debate revolves around instruments for enhancing the audit quality perceptions of financial statements users. Therefore, we investigate two measures that lack empirical evidence, but could theoretically improve perceived audit quality. These are a nonprovision of NAS (either by pure audit firms, or a nonprovision of NAS to audit clients) and a statutory fee schedule. We conduct an experiment with German bankers and nonprofessional investors. The results indicate that a nonprovision of NAS to audit and to all clients (i.e., pure audit case) increases perceived audit quality only if the audit firm sets audit fees internally. Moreover, a statutory fee schedule only increases perceptions of audit quality in the case of a simultaneous provision of audit services and NAS. Consequently, instead of full-banning NAS, an alternative approach would be to introduce a statutory fee schedule that would still permit the provision of NAS while adhering to existing caps. JEL Classifications: M42; M48.

Elements Influencing Going Concern Audit Opinion on Manufacturing Corporations in Indonesia

This A going concern audit opinion is an audit opinion issued by an auditor to ensure whether the corporation can preserve its vicapability. Providing a going concern opinion is something that is not expected by the corporation because it can damage public trust and can even indicate bankruptcy. Meanwhile, for users of financial statements, going concern audit opinions are used as an initial warning to avoid errors in decision making. This watchfulness aims to re-verify empirically the clout of Profitability, liquidity, leverage and financial distress on going concern audit opinion. Purposive sampling method for sampling secondary data from the annual statements of 37 manufacturing corporations in the basic materials field listed on the Indonesia Stock Exchange for the watchfulness term 2020 - 2022. The data was analyzed executing binary logistic regression which was carried out in statistical analysis software. The outputs of this watchfulness denote that Profitability, liquidity, leverage and financial distress simultaneously clout going concern audit opinion. Then, leverage and financial distress have a positive clout on going concern audit opinion, while Profitability and liquidity have no clout on going concern audit opinion

DETERMINASI FAKTOR-FAKTOR ARROGANCE SEBAGAI PERSPEKTIF FRAUD PENTAGON TERHADAP KECURANGAN LAPORAN KEUANGAN

Financial statement fraud is the misstatement or omission of amounts or deliberate disclosure with the intent of deceiving users of financial statements. Pentagon fraud is the factors that cause fraud through five elements: pressure, opportunity, rationalization, competence and arrogance. Arrogance is an attitude of arrogance that exists in a human being so that he considers that he is capable of cheating. This study was conducted to identify whether arrogance factors namely CEO Compensation, CEO Exposure and CEO Power have an effect on financial statement fraud. This research uses secondary data on the annual financial statements of manufacturing sector companies listed on the Indonesia Stock Exchange for 2017-2021. This research is quantitative with data collection techniques using purposive sampling with a total sample of 77 companies. The logistic regression research method is processed with Eviews 12 software. The results of this study show that CEO Power proxied with duality and CEO Exposure proxied with Photograph in Annual Report negatively affect financial statement fraud in manufacturing sector companies listed on the Indonesia Stock Exchange in 2017-2021.

IRS Enforcement and Voluntary Tax Disclosure

ABSTRACT Although voluntary tax disclosures can improve firms’ information environments and reduce financial statement users’ costs of processing complex tax information, they can also inform tax authorities about tax avoidance strategies. This study explores the content of voluntary tax disclosures during quarterly earnings announcements and conference calls to examine the effect of IRS enforcement on managers’ voluntary tax disclosure decisions. We estimate a negative relation between IRS enforcement and voluntary tax disclosures that is concentrated in the subset of firms with high levels of tax avoidance. These results are consistent with managers having concerns about the potential costs of voluntary disclosures to tax authorities. In supplemental analysis, we find results consistent with voluntary tax disclosures benefiting analysts, but at the cost of increasing IRS attention. Collectively, our results suggest an unintended negative effect of IRS enforcement on the information environment. Data Availability: Data are available from the sources cited in the text. JEL Classifications: H25; M41; M48.

The Effect of Tax Avoidance, Profitability, and Firm Size on Firm Value (Case Study of Pharmaceutical Companies listed on the IDX 2018-2022)

A company is established to earn profits and in the long run to maximize the value of the company. Satisfactory company performance in the market will attract investors and potential investors and will increase company value. This study aims to determine and examine the effect of tax avoidance, profitability and company size on firm value in pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange for the period 2018-2022. Data obtained from www.idx.com, the company's official website, and www.finance.yahoo.com. Sample data based on purposive sampling, using 8 companies listed on the IDX with a total sample of 40 sample data. Hypothesis testing is done with multiple linear regression analysis for panel data. The test results conducted in this study found that tax avoidance has no effect on firm value, profitability affects firm value, and company size has no effect on firm value. This research is expected to add to the literature for users of financial statements and investors and to be able to better utilize their resources and further maximize company profits.

Historical approach to the study of “falsification” and “veiling” procedures in current accounting and financial reporting

Research conducted by Russian and foreign scientists has proven that distortion of financial statements harms not only a wider range of external, but also internal users of financial statements, including employees and management of an economic entity. At the same time, internal users of financial statements suffer both financial and non-financial losses, for example, loss of reputation. In economic theory and accounting practice, falsification and concealment are distinguished as methods of distorting financial statements. Distortion of financial statements as a phenomenon has now taken on a more complex form and has changed in content. It has been determined that the manifestations of distortions in financial statements are largely determined by the features of the process of preparing financial statements, that is, the mechanism of distortion itself, therefore, in order to form the most complete theoretical description of falsification and concealment, it is necessary to analyze the errors identified during inspections of economic entities, to classify them in order to develop methods identifying non-standard business situations, taking into account the historical approach to the study of “falsification” and “veiling” procedures.

Pengaruh Manajemen Laba, Intellectual Capital dan Related Party Transaction terhadap Integritas Laporan Keuangan: Studi pada Perusahaan Sektor Manufaktur yang Terdaftar di Bursa Efek Indonesia Periode 2018-2021

In order for the information obtained by users of financial statements to be accounted for by the firm, financial statements and statements by corporations must be provided honestly, correctly, and without distortion or concealment. Users use financial reports as a decision-making tool since they provide an overview of the performance and growth of the organization. Conservativeness proxies may be used to evaluate the reliability of the financial accounts. To minimize fraud in financial reports and mistakes in decision-making, conservative accounting is the practice of presenting financial statements that are full of caution against important uncertainties and risks to a commercial business's situation. The goal of this research is to assess the financial reporting accuracy of manufacturing sector businesses listed on the Indonesia Stock Exchange (IDX) from 2018 to 2021 in the areas of intellectual property, related party transactions, and earnings management. This study uses the manufacturing sector of the IDX as its sample population for the years 2018 through 2021. Purposive sampling was employed, and data was collected from 408 samples representing 102 different firms over the course of four years. Panel data regression analysis using the Eviews 10 software is used for this in-depth examination of the data, which involves several rounds of testing. Financial statement accuracy was shown to be impacted by the presence of related party transactions, intellectual property, and earnings management. Earnings management reduces financial statement reliability. On the other hand, related party transactions and intellectual property have no bearing on how accurate the financial records are.

Back to where it started?—Do expanded auditor's reports become sticky, generic and boilerplate over time?

Although auditing standards instruct auditors to avoid issuing standardised key audit matters (KAMs), standard setters warn and financial statement users worry about expanded auditor's reports becoming sticky, generic and boilerplate over time. Based on textual analysis of expanded auditor's reports from the UK, I provide longitudinal evidence of an increase in various textual similarity measures including year‐over‐year similarity (stickiness), within‐peer group similarity (generality) and boilerplate language over time. Next, I identify a number of crucial drivers of convergence and find that disclosure similarity diminishes the positive capital market effect of precise KAM reporting documented in prior studies. Together, these findings suggest that audit firms have successively developed standard text modules for KAM reporting that undermine the aim of expanded auditor's reports to provide informative value. This paper extends the literature on the relationship between institutional environments and unintended effects of auditor disclosure regulation.

THE EFFECT OF NATURE OF INDUSTRY, FINANCIAL STABILITY, INEFFECTIVE MONITORING, AND CHANGES IN COMPANY DIRECTORS ON INDICATIONS OF FRAUDULENT FINANCIAL STATEMENTS

Fraudulent financial statements are part of corporate management fraud. It is conducted based on the financial condition of the organization for the purpose of misleading users of financial statements by omitting values or amounts in the disclosure of financial statement documents. Therefore, it will mislead the stakeholders who are investing in the company. This study aims to analyze the effect of the nature of the industry, financial stability, ineffective monitoring, and changes in company directors on indications of fraudulent financial statements. The research population is manufacturing sector companies listed on the Indonesia Stock Exchange (IDX) for the 2017–2019 period, which are listed on the website www.idx.co.id. There are as many as 183 companies. The sampling method used is the purposive sampling method. The companies that meet the sampling criteria are 76. The analysis tool uses multiple linear regression tests. The results of this study indicate that the nature of the industry has a positive effect on indications of fraudulent financial statements, financial stability has a positive effect on indications of fraudulent financial statements, and ineffective monitoring has a positive effect on indications of fraudulent financial statements. Meanwhile, the changes in company directors has no effect on indications of fraudulent financial statements.

Sustainability factors consideration: Emerging trends in financial reporting

Subject. This article discusses the requirements for disclosure of sustainability factors in financial statements due to the release of the International Disclosure Standard IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information. Objectives. The article aims to reveal the content of the main provisions set forth in the IFRS S1 Standard issued by the International Sustainability Standards Board (ISSB) (sponsored by the IFRS Foundation), assess the possibility of applying the requirements of the Standard in Russia, and identify possible problems in its implementation and propose ways to solve them. Methods. For the study, we used analysis, synthesis, comparison, generalization, and abstraction. Results. The article defines that the presentation of information on risks and opportunities related to sustainable development should be carried out from the perspective of four aspects, namely governance, strategy, risk management, metrics and goals of the organization in the field of sustainable development. It discloses the content of the main sections of the Standard and formulates the factors and conditions for the applicability of the IFRS S1 Standard in Russia, as well as possible problems associated with its application, and proposals for their solution. Conclusions. The requirements for disclosure of financial information on risks and opportunities related to sustainable development, established by the International Disclosure Standard IFRS S1, are aimed to increase the availability of key users of financial statements to information reflecting the impact of sustainable development factors on the financial position, financial results, and cash flows of the organization. Standardization of disclosure of such information can help reduce the costs of preparers, analysts, auditors and other interested users, and stimulates the current trend of introducing the concept of sustainable development into management practice, including by Russian organizations.

Labelling in financial reporting: An examination of “other comprehensive income” and non‐professional investors' judgements

AbstractOther comprehensive income (OCI) is often confusing for financial statement users and the International Accounting Standards Board has proposed new labelling to improve its presentation. Using an experimental method, we find that OCI labelling influences non‐professional investors' evaluation and judgements on financial performance. Non‐professional investors place greater weight on OCI information presented with explicit labels when assessing both the current and future performance of a company. Our results indicate that improving the presentation of OCI information enhances their perceived relevance in investors' decision‐making. The results have practical implications for standard setters and financial statement users.

Applying the Z-Score Model to Predict Corporate Financial Distress: An Empirical Research on the Listed Firms in Vietnam Stock Market

Assessing the risk of financial distress is an important component of effective management because it helps companies make right financial decisions, avoid potential risks and improve business operations. This study provides more empirical evidence on the role of the Z-Score model in predicting financial distress of companies in emerging markets like Vietnam. This research paper uses data from 30 companies that delisted on UPCOM due to financial distress and 30 companies with Z-score greater than 4.35 on Ho Chi Minh City Stock Exchange (HoSE) for 5 years from 2018 to 2022, corresponding to 300 observations. The selected companies have enough audited financial statement data during the research period which are collected from websites such as cafef.vn, vietstock.vn, and websites with data on companies’ financial statements. The financial factors are taken from the balance sheet and income statement by the authors to calculate the Z-Score. The authors use the Independent-samples T-test with data collected delisted companies due to financial distress and stably listed firms on the Vietnam Stock Market to test whether there is a difference in Z-score and independent variables in the Z-score model between these two groups of companies. The research results show that, there is a significant difference in the Z-score and the factors in the Z-Score model between the group of listed companies and the group of delisted companies, and between companies with low level of financial distress and those with high level of financial distress. From the findings obtained, the authors have made suggestions and recommendations for relevant parties such as the State Securities Commission of Vietnam, users of financial statements, and companies in order to contribute to preventing and limiting the risk of corporate financial distress in the most effective way.

Analisis Pendekatan Kegunaan Keputusan Untuk Laporan Keuangan Pada Perusahaan (Literature Review)

This paper explores the financial reporting practices within a corporation. The management is capable of overseeing each business development by engaging in the preparation of records, bookkeeping, and reports detailing all ongoing business activities. In correlation with this, there exists an appropriate tool for assessing and monitoring a company's financial performance within a specific timeframe – namely, financial reports utilizing a decision-use approach. To gain a swift comprehension of this concept, it is imperative to delve into other economic and financial theories. As an accountant, it is essential to comprehend how to enhance the usefulness of financial statements and gain insight into the meaning of "usefulness." Additionally, a comprehensive elucidation of the information is required. The theories of decision-making and investment contribute to a better understanding of the principles behind financial reporting information.

IFRS adoption, information asymmetry and stock liquidity: Moderating effects of corporate governance mechanisms

The purpose of this paper is to test the impact of International Financial Reporting Standards (IFRS) adoption on information asymmetry, transaction transparency, and stock market liquidity. Furthermore, this study examined the direct and moderating effect of corporate governance devices on this relationship. We apply ordinary least squares (OLS) regression to examine changes in stock liquidity for French-listed firms between the pre-IFRS and the post-IFRS period. We show that IFRS adoption is well-perceived by financial statement users. Following Boubaker et al. (2019), R. and Firoz (2022), Bansal (2023), and Agrawal and Chakraverty (2023), we found that these standards have a positive impact on stock liquidity and a negative impact on information asymmetry. In addition, audit quality has a decisive role in improving information quality. However, contrary to expectations, the independent members of the board of directors do not exercise their role of control and monitoring efficiently. We conclude that the reporting process is influenced by firm-level characteristics, and we contribute to the literature by enhancing discussion on the debate related to the benefits of IFRS adoption. Our findings can be of interest to regulatory bodies and policymakers by providing a better understanding of the factors that influence stock liquidity and decision-making.