Reliability Of Financial Information Research Articles

Discount rate behaviour in fair value reporting

Despite the importance of reliable financial information to financial professionals, little is known in the behavioural finance literature about the opportunistic behaviour in discount rate selection for fair value measurement, and its adverse impact on the reliability of financial information. This short communication contributes to the literature on discount rate behaviour by revealing the potential opportunistic behaviour in the selection of discount rates. Using biological assets where the market price is usually not available, I show that a wide range of discount rates are applied for estimating fair values, but the range of rates used does not seem to be related to economic factors. Further, firms that report both larger fair value gains and larger fair value losses use higher discount rates suggesting that the discretion available to managers is used opportunistically in some cases. To gain more insights into behavioural aspects of discount rate selection, I also suggest a set of research questions pertaining to discount rate behaviour. This helps to form the agenda for future research in this area.

Change Management Over Financial Information: A Multi-Criteria Evaluation of System Change Controls Using Desirability Functions

The increasing complexity of information technology, attacks on confidential information, and the passing of new laws and regulations have shifted the focus around internal controls in organizations. Particularly, general information technology controls related to change management (i.e., system change controls) are critical in ensuring the integrity, completeness, and reliability of financial information. The literature points to various evaluation methods for these controls to determine which ones to implement. However, these methods do not necessarily consider relevant organization constraints, preventing the inclusion of required controls or the exclusion of unnecessary controls. This paper proposes a novel approach, using Desirability Functions, for evaluating system change controls providing management with a measurement that is representative of the overall quality of each control based solely on organizational goals and objectives. Through a case assessment, the approach is proven successful in providing a way for measuring the quality of system change controls in organizations.

Impact Of Computerized Accounting Information System On Small And Medium Enterprises In Mogadishu, Somalia: The Balance Scorecard Perspectives

Information, communication and technology (ICT) adoption has increased dramatically over time irrespective of organizations, be public or private, profit or not for profit organizations around the world. No doubt that ICT investment will spur economic growth as studied done by many countries. The African Union Agenda 2063 has acknowledged the importance of digital inclusivity for African countries to be on par with the rest of the world as an information society. African nation and Somalia particularly have still some challenges to deploy ICT on the concern of availability, accessibility and affordability. Nevertheless, in a business environment where businesses compete in the highly fragile market, ICT modernization in all business processes including accounting is a crucial tool for continuous improvement towards competitive services offered to customers. The implementation and adaption computerized accounting systems (CAIS) for any organization such as SMEs will enable the management and owners to improve decision making, internal controls and financial information, as well as enable financial reporting to be designed and processed on a standardized format and timely. It was reported that the use of inefficient information to support financial decision making and poor quality and reliability of financial information were part of the major SMEs challenges. Therefore, this study attempts to understand the usage of CAIS and its impact on the performance of SMEs in Somalia. The survey questionnaire is designed and distributed to selected SMEs in the capital city of Mogadishu, Somalia. The results of CAIS’s impact are discussed from four components of balanced scorecard namely financial, customer, internal processes and learning & growth perspectives. The results of this study may provide knowledge about the impact of usage CAIS for SMEs performance in Somalia

System Change Controls: A Prioritization Approach Using Analytic Hierarchy Process

Information attacks are a constant threat to every organization. To protect their sensitive information, organizations implement general information technology controls. An example of such controls includes system change controls (or change management controls), which are critical in ensuring the integrity, completeness, and reliability of financial information. The literature points to various evaluation methods of these controls to determine which ones to implement. The literature further shows how traditional assessment methods do not necessarily promote an effective evaluation, prioritization, and, therefore, implementation of system change controls in organizations. Alarming facts within the literature trigger analyses and identification of additional methods to assist organizations in protecting their sensitive and critical information. This research proposes a quantitative approach to assist management in evaluating system change controls using the Analytic Hierarchy Process. Through a case study, the approach is proven successful in providing a way for measuring the quality of system change controls in organizations.

Are Audits of Financial Statements Born Unequal?

Audit is getting more and more importance in assuring the reliability of financial information including financial statements for all parties. Commonly, quality of an audit is viewed as probability that financial reports are free from material irregularities. In the previous literature, there is a positive relationship between size of audit firm and audit quality that has long been understood. This has resulted in many publications to gather evidence of differential audit quality relating to audit firm size. In consequence, the conclusion has been focused that bigger audit firms produce higher audit quality than smaller ones. However, the collapse of many big international audit firms, typically Arthur Andersen has reduced the statement that large audit firms have higher audit quality than small ones. Therefore, this study looks into audit quality basing on the extent of compliance with disclosure requirements pertaining to goodwill impairment of large listed firms in Hong Kong context in the second year transition to IFRS. We found that audit firm identity appears to be a substantial variation, in which compliance levels changed significantly among auditors in the context of Hong Kong.

Compliance with International Education Standards of Accounting in European Union Countries, the Case of Albania as An Official Cand idate for Accession to The EU

The accountancy profession is based on standards, rests on their adoption and successful implementation, and is governed by the overarching principle of serving the public interest. These are complex sets of variables made even more difficult with sovereign interests and multiple stakeholders playing out on a global stage. The Evaluation of the status of accountancy education with its components of qualification, education and training in selected countries and Ballcan compared with the requirements of the IES. Nevertheless, the capital markets, in the aftermath of the 2008 financial crisis, are demanding a single set of high quality internationally accepted accountancy standards where transparency, comparability and reliability of financial information is paramount. The importance of adoption and implementation of IES and the use of benchmarking in identifying country accomplishments and gaps from these standards. To enhance comparability a distinction is made between the four competency sub-pillars of accountancy education: personal development, professional accountancy education, professional development, and competence requirements for auditors. Together the sub-pillars cover all IES in a comprehensive approach that strengthens the statistical analysis of the results. Country overviews contain information about the adoption and implementation of International Education Standards (IES). The discussion of the regions includes country information, regional characteristics, adoption and implementation of IES, and recognition of qualifications.

Evaluación comparativa del sistema de control interno del sector comercial y del sector público del Cantón Morona

El desarrollo de la economía y la tecnología en una sociedad, provoca que en las entidades públicas y privadas se convierta en un desafío la mitigación de los riesgos que puedan afectar la consecución de los objetivos en la organización. Un sistema de Control interno, constituye un proceso integral diseñado y efectuado por la máxima autoridad y todos los miembros de la organización, con el objetivo de: confiabilidad de la información financiera; dar cumplimiento a leyes y obligaciones; y la salvaguarda de los recursos o activos. Los Sistemas de Control Interno son diseñados de acuerdo a la naturaleza y operaciones de la entidad, sin embargo, existen modelos universales de Control Interno, siendo uno de estos el Sistema de Control COSO I. La investigación consistió en evaluar de forma comparativa a los Sistemas de Control Interno en el Sector Privado y en el Sector Público, del cantón Morona, aplicando como herramienta de evaluación el cuestionario según el modelo COSO I. Los resultados demuestran que en ambos sectores presentan un alto compromiso con la organización yhacia los objetivos que lideran su desarrollo, observándose que en el sector público los procedimientos se encuentran en función a bases legales, mientras que en el sector privado existe ausencia de formalismo al implementar estas prácticas.

Sustainable development and corporate social responsibility: linking goals to standards

Corporate social responsibility (CSR) is the core of sustainable development of companies. On one hand, the corporate social responsibility of companies is a prerequisite for sustainable business, on the other - sustainable development sets specific requirements for the development of businesses in the context of increasing requirements to the degree of quality and reliability of financial information. In recent years, sustainable development has become a strategic issue for companies and this trend applies to Bulgarian companies too. Development of non-financial reporting is a very dynamic process, whose peak is the establishment of an integrated system of accountability. Current paper makes analyses of advantages of CSR linking it to the implementation of sustainable development goals through the integrated reporting following the requirements of the standards of the Global Reporting Initiative (GRI).

Comparability and Reliability of Financial Information in the Sector of Czech SMES (ten years of IFRS as a part of Czech accounting context)

1. Introduction Since 2005 the firms listed on the regulated capital markets in the EU are required to prepare their financial statements in accordance with the IFRS. The main intent of IFRS adoption were (1) to ensure greater comparability and transparency of financial reporting, (2) to reduce information asymmetry and (3) to improve the quality of information for users of accounting information. On the macroeconomic level there were expectations of increase of the volume of trading on capital markets, boost of foreign direct investments and intensification of the international exchange of goods and services. Mandatory IFRS adoption resulted in changes affecting broader pool of companies, not only those that have a direct obligation to use IFRS, but it influenced the entire accounting system in many countries around the world (Heil et al, 2009; Daske et al., 2008; Leuz, & Wysock(2008). The Czech economy is an open economy, dependent, to a large extent, on exports of goods and services. It belongs to a group of transitioning economies that transformed from a centrally planned to a market economy and it has created new accounting regulations fitting the new conditions. The transformation of the accounting system was performed at the same time as the transformation of the whole economy which was an important part of this process. Generally, the process of accounting harmonization resulted in the mandatory adoption of IFRS for preparation of Financial Statements on EU capital markets. IFRS became a tool, which supported the new concept of financial reporting. Despite of positive predictions, the implementation of IFRS into Czech the accounting system has been very low and slow. The causes of this delayed implementation can be seen on many levels. The aim of this article is to analyse the form and extent of IFRS implementation to the Czech accounting system and the main reasons of the lack of interest in IFRS adoption with a special attention to the segment of Czech SMEs. This analysis is based on two methods (1) qualitative assessment of present accounting legislation and (2) on the results of questionnaire survey of a set of 260 Czech companies including majority of SMEs. 2. Literature review 2.1. IFRS adoption effects in various national conditions The ten years during which the companies were obliged to compile accounting statements in accordance with the IFRS enabled researchers to assemble sufficient amount evidence and experience of the use of IFRS in national conditions to enable subsequent analysis that can become a source of improvement of IFRS rules. It can also serve as a source for improvement of accounting regulations and enable coordination of IFRS adoption in different national contexts. The accounting harmonization was aimed to decrease the differences in accounting information stemming from different national economic backgrounds. More accurately, it aimed to set the boundaries to the degree of variations in accounting rules and procedures (Zarova et al., 2014). Furthermore, in transitional economies, the harmonization in stock and capital markets was an opportunity that enabled them to reconstruct their accounting system in such a way that it could comply with conditions of market economy (Thalassinos, Maditinos & Paschalidis, 2012). The majority of extant studies relieved that the value relevance of accounting data and comparability of financial reporting is enhanced following the adoption of the IFRS. However, mixed evidence exists regarding the effects of IFRS adoption on earnings management, timely loss recognition, costs of equity and other aspects of accounting quality, e. g. (Tsalavoutas, & Dionysiou, 2014; Alsaqqa, & Sawan, 2013; Andre, Filip, & Paugam, 2015; Cordazzo, 2013, Liapis et cd. 2013). Many studies point out, that international accounting standards cannot fulfil the goal of harmonization on their own. …

Цели финансовой отчетности и аудита: методологические проблемы определения критериев и обоснования классификации искажений финансовой отчетности

The article deals with the problem of methodological inconsistencies criteria for the preparation and presentation of financial statements usefulness of the concept of financial
 information and the doctrines of the financial statements and, therefore, uncertainty criteria for audits of financial statements. The substantiation of the need to define criteria for the
 audit of financial statements on the basis of the modern concept of the usefulness of financial information, certain conceptual principles of IFRS (2010), in the context of the
 established doctrines of accounting; the criteria of fairness and reliability of financial information, as well as the substantiation of the classification misstatement of the financial
 statements based on the established criteria of the audit.

The detection and prevention of manipulations in the balance sheet and the cash flow statement

Financial statements which consist of objective, real and reliable information represent the key basis for making many business decisions. If, when writing financial statements, certain manipulation techniques are used for displaying the best possible results of transactions, the quality of financial reports will be endangered. Many financial frauds have led to a great mistrust in the system of financial reporting and the profession of accounting and auditing, which are often accused of the emergence of fraud and losing trust in the reliability of financial information by many users and economic decision makers. These are the reasons why the paper discusses the techniques of manipulation in financial statements, especially in balance sheets and cash flow statements, since these forms of manipulation are harder to detect and prevent when compared to manipulations of revenues and expenses in the income statement.

Intelligent investigations: the use and misuse of intelligence – a personal perspective

PurposeThis paper aims to address in a comparative context the role of intelligence in law enforcement and in particular the significance of intelligence‐led policing.Design/methodology/approachThe discussion is based on the experience of the author over the last 40 years in working in and with law enforcement authorities in a number of countries in establishing specialised agencies and units to address serious and complex criminal activity. The paper was presented as a key note address at an inter‐governmental meeting in Buenos Aires in July 2012 of prosecutor generals and senior prosecutorial officials in South America.FindingsThe role of intelligence is seen as of critical importance to the efficacy of such initiatives. Drawing on his experience, the author poses some serious questions as to whether what is normally understood by the concept of intelligence‐led policing is correct.Research limitations/implicationsThe personal observations of the author will hopefully contribute to the discussion of an important aspect of law enforcement upon which very little has been written from the perspective of the intelligence community.Practical implicationsThe author looks in particular at the difficulties that have arisen as a result of the interaction of different aspects of the legal system, for the flow and reliability of financial information. In particular, he addresses a number of recent cases before the English courts on the liability of those who handle other people's wealth.Originality/valueThe paper, based on the author's experience over the last 40 years, should contribute to the discussion of an important aspect of law enforcement upon which very little has been written from the perspective of the intelligence community.

Corporate ownership characteristics and timeliness of remediation of internal control weaknesses

Purpose – The purpose of the paper is to examine the association between the corporate ownership characteristics and the timely remediation of internal control weaknesses over financial reporting under Section 404 of the Sarbanes‐Oxley Act (SOX) of 2002.Design/methodology/approach – The paper employs both ordered and binary logistic regression models for a sample of 695 US firms who reported internal control weaknesses for the first time, pursuant to SOX Section 404, and evaluates the impact of the stock ownership characteristics on the timeliness in remediation of their control weaknesses.Findings – The test results show that the corporate ownership characteristics, as a part of governance mechanism, play an incrementally critical role to influence firms' decisions to promptly remediate their internal control problems and improve the reliability of financial information. In addition, it was also found that a corporate board independent of its CEO is effective in monitoring timely remediation of control p...

Director Compensation and the Reliability of Accounting Information

AbstractThis paper studies the effect of incentive‐based compensation on directors' monitoring of management. Using total accruals to measure the level of earnings management, I find that director stock option compensation is associated with higher levels of total accruals. I interpret this result to suggest that director stock options are more likely to align interests of directors with those of managers and that this convergence of interest manifests in lower transparency and reliability of financial information. The results suggest that director stock option compensation provides incentive for directors to compromise their task in the financial reporting process.

Time-series coefficient variation in value-relevance regressions: a discussion of Core, Guay, and Van Buskirk and new evidence

Many claim that GAAP financial information has become largely irrelevant to explaining valuations. Core et al. compare financial information's value relevance for the New Economy stocks with other stocks. We supplement their analysis with new evidence on the economic determinants of the time-series variation in the coefficients mapping financial information into prices. We document significant variation in the coefficients related to proxies for changing market growth expectations and discount rates and additional variation consistent with time-varying correlated omitted variables. Such findings make it difficult to draw unambiguous inferences about the relevance and reliability of financial information from value-relevance regressions.

Research Opportunities in Internal Control Quality and Quality Assurance

INTRODUCTION In a sense, I began developing this presentation in 1993 when I first taught auditing and internal control for M.B.A.s at INSEAD (European Institute of Administration). In designing the course, I envisioned myself as the CEO of a multinational corporation (as many M.B.A.s view themselves), and asked how would I know whether I was getting the right information for decision making, that my assets were being protected, and that my people were complying with laws, regulations, and company policy--all on a worldwide basis? As I pondered these questions, it came to me that an answer to all of them is internal control. This revelation changed my thinking about internal control, changed the tone of the M.B.A. course, and also changed my teaching for majors,(1) I now believe that knowledge about internal control is an essential element that affects the welfare of management, corporate directors, shareholders, trading partners of an entity, auditors, and society at large--yet it is relatively unexplored by researchers. All major research methods are applicable, we have conceptual documents to guide our inquiries, and internal control quality is regulated directly or indirectly in many countries. In short, there is an outstanding opportunity for research in internal control for and auditing professors, and for Ph.D. students. There are substantial barriers, of course, and we must all work to overcome them. The rest of this paper explores research opportunities in internal control quality assurance beginning with a definition of internal control and the demand for internal control quality and quality assurance. This is followed by a discussion of barriers to research, and concludes with research questions and trends for the future. DEMAND FOR INTERNAL CONTROL QUALITY AND QUALITY ASSURANCE Because I am most familiar with them and because other groups around the world have conceptually similar definitions, I will use the Committee of Sponsoring Organizations of the Treadway Commission definition of internal control (COSO 1992) supplemented by that of Criteria of Control (CoCo, CICA 1995).(2) COSO defines internal control as: a process, effected by an entity's board of directors, management and other personnel designed to provide reasonable assurance regarding the achievement of objectives in the following categories: * effectiveness and efficiency of operations * reliability of financial information * compliance with the applicable laws and regulations (COSO 1992) (emphasis added) The COSO definition implicitly assumes a constant external environment. The Canadians' CoCo adds the risk of failure to maintain the organization's capacity to identify and exploit opportunities, and resilience or capacity to respond or adapt to unexpected risks and opportunities. Thus, CoCo assumes the external environment may change, and defines good internal control to include adaptability of the process to a changing external environment. The COSO/CoCo definitions have three distinguishing features. First, they are broad, much broader than traditional definitions of internal accounting control that are limited to reliability of data and protection of tangible assets. By including the efficiency and effectiveness of operations, compliance with laws and regulations, and responsiveness to external changes, the COSO/CoCo definitions can be interpreted to cover all of management's functions except choosing objectives, strategies to achieve objectives, and follow up of surprises identified. Second, the COSO/ CoCo definitions are about process, rather than about a static state. This means that internal control cannot be directly observed or verified. Third, internal control is about risk, or threats that an entity will not achieve its objectives. All decision makers want to optimize their risk/expected reward trade-off, thus leading to demand for internal control quality and quality assurance. …