Users Of Financial Statements Research Articles

The Impact of Working Capital Management on Investment Efficiency: Evidence from Emerging Countries

This article aims to investigate the impact of the firm’s working capital management policies and practices on the efficiency of their investments. The sample consists of 6016 non-financial firms and the data have been collected for the period from 2009 to 2021. We conducted pooled ordinary least squares (OLS) regression, and panel regression and employed the generalized method of moments to explore the dynamic nature of the relationship. The results revealed that, in static models, pooled OLS regression showed a positive relationship between CCC and investment efficiency, whereas panel regression reported a negative relationship. A similar case is confirmed by the dynamic models. The non-linear models which include the square of CCC confirmed an inverted U-shape relationship, implying an optimal level of CCC. The findings of the study are expected to have implications for corporate managers, the users of financial statements, as well as policymakers and regulatory bodies. To the best of our knowledge, this is the first empirical study investigating the impact of working capital on investment efficiency. It makes an original contribution to the literature by presenting novel empirical evidence on the topic from emerging countries in a multi-country and multi-industry context.

Evolution of the fair value concept in accounting and its impact on the theory and practice of financial reporting

Subject. This article examines the evolution of the concept of Fair Value in accounting and its impact on the theory and practice of financial reporting. Objectives. The article aims to study the historical development of the concept of Fair Value in international and national accounting practices, and assess the impact of its application on the reliability and relevance of financial statements. Methods. For the study, I used the methods of theoretical analysis and synthesis, as well as comparative analysis. Results. The article finds that the transition from historical value to fair value is due to the need to provide more relevant, objective and significant information to users of financial statements. The evolution of this concept has led to changes in approaches to the valuation of assets and liabilities, improved transparency and comparability of reporting. The article reveals the problems of applying fair value associated with the subjectivity of assessments, the complexity of their application and the need to improve the skills of specialists. Conclusions. The article concludes that the essential role of fair value in modern accounting is recognized, and there is the need for its correct application. Improving the methodological and regulatory framework, harmonizing national standards with international standards will help improve the quality of financial reporting, meet the information needs of stakeholders, as well as improve the comparability of data at the international level.

Accounting Standard for Private Entities: are They Truly Useful? (Survey among Accounting Stakeholders in West Java, Indonesia)

This study examines the usefulness of new accounting standards for Indonesian private entities namely the Indonesian Private Entity Financial Accounting Standard (SAK EP), which will come into effect in 2025, in preparing private entities’ financial statements, from the perspective of various stakeholders: accounting students, accounting educators, financial statement preparers, and financial statement users. It is a simplified accounting framework that is tailored to smaller entities without public accountability and less complexity in reporting financial information while retaining essential information in meeting stakeholders’ need. This study uses two independent variables from accounting decision usefulness theory: (1) accounting stakeholders' level of understanding of the SAK EP and (2) accounting stakeholders' perceptions of the accounting profession. This study collected data from 515 accounting stakeholders in West Java Province, Indonesia, through an online survey. A quantitative research method is employed, and the data is analysed using two key statistical techniques: (1) one-way ANOVA to assess whether there are statistically significant differences in the mean scores of accounting stakeholders, and (2) multiple regression analysis to examine the relationship between the dependent variable (usefulness) and two independent variables (level of understanding of the SAK EP and perception of the accounting profession). The findings showed that: (1) the level of understanding of SAK EP varies among accounting stakeholders; (2) the perception of accounting stakeholders toward the accounting profession is generally high ; (3) the usefulness of SAK EP in preparing high-quality financial statements is highly perceived and (4) high understanding of the SAK EP and better perception of the accounting profession increase the usefulness of the SAK EP standard in the preparation of financial statements among private entities. This study suggests that the implementation of SAK EP in Indonesia is quite challenging, especially in improving the understanding of SAK EP and meeting high expectations of accounting stakeholders.

Ensuring the performance of external communications: An informal classification of target groups

The increasing influence of the investment community on business sustainability highlights the need for a compre hensive understanding and accurate segmentation of this audience. The research aims to identify consistent criteria for intra group differentiation in the perception of financial reporting information among members of various stakeholder groups in or der to improve the performance of external communications management. Methodologically, the study rests upon stakeholder theory, which is supported by expert assessments, structural-logical analysis, and multidimensional discriminant analysis. The study draws on authentic data of a survey on the quality of corporate reporting information conducted in the fourth quarter of 2020 among 52 representatives of the Russian business. The research identifies motivationally-rooted statistically significant discrepancies in the probability of correlating some survey participants with their functional group formed on a formal basis. We discuss the relevant criteria for an informal division of respondents into groups based on subjective judgments about qualitative characteristics of corporate financial reports. These criteria include variations in estimates of complexity of reporting standards and functionality of cost indicators based on the concept of fair market value. The revealed criteria for motivational and func tional identification within stable subgroups of financial statement users formed within functional groups represents the scien tific novelty of this study. The results contribute to a deeper understanding of the relevant criteria for the group structure of the investment community, which constitutes the target audience for corporate reporting. These findings can be utilized to refine the formal classification of users of reporting information, as well as to adjust other components of corporate management systems with the aim of enhancing the effectiveness of external communications.

The Effect of Audit Quality and Financial Performance on Audit Delay (Empirical Study on LQ45 Companies in 2021-2023)

The financial report is an information medium that is very useful for stakeholders. The financial statements owned by the company can be used for stakeholders to make decisions. Financial statements presented by companies must be audited because audited financial statements can increase the confidence of financial statement users. One of the important factors in financial statements is timeliness. Financial statements can be very useful if financial statements are presented on time, therefore the financial statements presented must be timely so that decision-making can also be taken appropriately. The purpose of this study is to see what factors can affect audit delays. Audit delay is the time difference between the closing date of the book and the date of signing the auditor's report. The sample in this study is companies with the LQ45 index, because LQ45 index companies are companies that have a healthy financial condition. Data will be taken from the Indonesia Stock Exchange website for 3 years. Data analysis will be carried out using SPSS by performing the Classical Assumption Test and the Multiple Linear Regression Test. The targeted output is journal publication in accredited national journals. Keywords: Audit Delay, Profitability, Leverage, Audit Quality

The Implementation of the KAM Reforms in Saudi Arabia: Stakeholder Perspectives on the Audit Expectations Gap

ABSTRACTThis exploratory study investigates the implementation of key audit matters (KAM) in audit reports under ISA701 to better understand how KAM disclosures may help narrow the audit expectations gap. The study draws on findings from semi‐structured interviews with 28 professional stakeholders from the Kingdom of Saudi Arabia (KSA). The study's aim was to explore the relationship between KAM disclosures and the audit expectations gap considering audit quality concerns. Our findings reveal that (i) financial statement users report that they better understand what the auditor does, which enhanced their confidence in the audit process; and (ii) at least some financial statement users report that KAM disclosures provide new information about companies' risks that management was not already providing. We further report that many interviewees (particularly Big Four external auditors) indicated that the KAM reforms did not enhance audit quality in KSA. Interestingly, a small number of non‐Big Four auditors believed that KAM disclosures have enhanced audit quality. The key message is that the KAM reforms did not necessarily improve audit quality but that they are perceived to have played a role in further narrowing the audit expectations gap and reducing the need for communication, thus creating market efficiencies.

Mapping the influence: Institutional blockholder coordination and climate change risk disclosure

This study investigates the relationship between institutional blockholder coordination, proxied by geographic proximity, and climate change risk disclosure. Using a sample of 2,887 firm-year observations for S&P 500 companies from 2010 to 2022, we reveal that a firm's climate change risk disclosure decreases when its institutional blockholders are more coordinated. In addition, we find that the negative relationship between institutional blockholder coordination and climate change risk disclosure manifests more in firms with less diversified institutional blockholders, a smaller number of institutional blockholders, a prominent position to their blockholders, and more dedicated institutional blockholder ownership. Moreover, we find that the negative association between institutional blockholder coordination and climate change risk disclosure is more pronounced in firms with corporate general counsels, a non-concentrated customer base, higher asset tangibility, and those that are environmentally sensitive. Our main conclusion still holds after using an alternative measure for climate change risk disclosure as well as a battery of endogeneity tests. Finally, we propose that institutional blockholder coordination lessens climate change risk disclosure through the channel of increased performance-induced CEO dismissal. Collectively, this study provides insightful implications for academics, financial statement users, regulators, and policymakers.

The determinants of voluntary disclosure: Integration of eXtreme gradient boost (XGBoost) and explainable artificial intelligence (XAI) techniques

Financial information transparency is vital for the various users of financial statements. This study employs the Explainable Artificial Intelligence (XAI) approach, utilizing eXtreme Gradient Boost (XGBoost) to explore management's motivations for voluntary disclosure. By transforming financial data into various plots, we introduce a voluntary disclosure model that enhances interpretability through Shapley Additive exPlanations (SHAP) techniques. These XAI methods aim to clarify different results in the voluntary disclosure literature, addressing the ongoing debate within the financial research community regarding voluntary disclosure. This research marks a significant advancement in voluntary disclosure by merging the transparency of XAI with effective voluntary disclosure prediction, offering a more comprehensive understanding of the determinants of voluntary disclosure.

Higher Education Institutions’ Credit Loss Recognition

The current expected credit loss (CECL) accounting guidance represents a forward-looking methodology for determining credit loss provisions by private colleges and universities’ lending activities beginning with fiscal year 2023-2024. The discussion presents information regarding the types and amounts of lending activities private colleges and universities engage in and the rationale of their lending programs. Provisions of the accounting guidance together implementation decisions, processes, and disclosures are part of the review. The study concludes with the accounting guidance’s impact on higher education fiscal decision making, financial reporting, and the ramifications of the guidance to provide useful information to both higher education management and financial statement users.

The Accounting Treatment of Cryptocurrencies: The Perspective of Current Accounting Standards

Cryptocurrencies are digital currencies void of any support from regulatory body that is currently in vogue as a medium of exchange and an investment security. This paper examines the accounting treatment for cryptocurrency from the perspective of IFRS and AAOIFI accounting standards and propose actions to standard setters on the best way to treat the Crypto transactions in accounting reports. A proper accounting treatment will allow for a fair reporting of crypto related transactions and facilitate users of financial statements to make objective assessment of this new invention. A content analysis was conducted to review all major accounting standards issued by accounting standards setting bodies for possible accounting treatment for cryptocurrencies. To better understand the issue in practice, an analysis of accounting treatment of cryptocurrencies by 2 companies also was conducted. This study found that there is no suitable accounting standard that could objectively be applied for cryptocurrencies. For example, from the perspective of the current accounting standards, cryptocurrencies match the definition of inventory if it is used as a commodity for broker-trader and intangible asset for others respectively. It is suggested that there an urgent need for the International Accounting Standards Board (IASB) to comprehensively develop accounting standard for cryptocurrency, specifically to develop a specific category for this type of assets to allow a standard treatment for cryptocurrency and fill the gap in the IFRS.

Faktor-faktor yang mempengaruhi Kinerja Auditor: Profesionalisme, Kompetensi Auditor dan Independensi Auditor

Good audit performance will enable the accounting firm to achieve its objectives and meet the financial reporting needs of stakeholders. Auditors must be skilled to maintain the trust of clients and other users of the audit financial statements. Auditor training improves the auditor's ability to carry out his work during the audit process.The central questions of this article are: (1) Whether auditor ability, auditor professionalism, and auditor independence have an impact on performance. (2) Further review of previous articles, which are still found to be inconsistent. The hope is that this research will contribute new thoughts to the development of audit theory by reviewing aspects of auditor independence, professionalism, and competence in the context of their performance.The purpose of writing this article is to establish hypotheses of influence between variables in further research.The findings of this literature review article are: 1) Auditor competence affects auditor performance; 2) Professionalism has an effect on auditor performance; 3) Auditor independence has an effect on auditor performance.

Application of XBRL in Financial Reporting: Effects On Preparers and Users of Financial Statements

Application of XBRL in Financial Reporting: Effects On Preparers and Users of Financial Statements

Collusion, Arrogance, and Pressure on Fraudulent Financial Statements: The Role of Income Tax Rate (Evidence from Indonesia)

Fraud in financial statements can have an impact on the accuracy and reliability of the use of financial statements, including affecting the amount of tax, fines paid, and the audit process. This study aims to analyze the effect of pressure, arrogance and collusion on financial statement fraud and the role of income tax rates as a moderating variable in non-financial companies listed on the Indonesia Stock Exchange in 2020-2022. The data in this study consisted of 207 research observations determined using purposive sampling method. Data collection was conducted through document analysis, using annual financial reports and annual reports. The analytical technique employed was regression analysis, moderated by Eviews. The study commenced with a descriptive statistical analysis, followed by an examination of the classical assumptions, including multicollinearity and heteroskedasticity. Finally, an analysis of moderated regression was conducted. The results of the regression analysis indicated that pressure, arrogance, and collusion were found to influence financial statement fraud. The moderated regression analysis demonstrated that the income tax rate was capable of moderating the influence of pressure, arrogance, and collusion on financial statement fraud. The theoretical implications of this study offer a novel perspective on the moderating effect of income tax rates on the relationship between pressure, arrogance and collusion and financial statement fraud. This study is of practical value and provides information that can inform decision-making for stakeholders.

Can the Fraud Hexagon Components Detect Fraudulent Financial Reporting?

Accounting information in financial statements is very important for users of financial statements when deciding. Management tries to make these financial statements perform well. Opportunistically, managers can manipulate financial statements to make them look good, which encourages companies to commit fraud on financial statements. This study uses the Fraud Hexagon component to examine the factors that influence financial statement fraud. Fraud hexagon theory is the latest six-dimensional fraud component developed by Vousinas by adding aspects of collusion. Sample selection is based on the purposive sampling method. The analysis method used in this research is panel data logistic regression analysis through the Eviews 10 application. The results showed that opportunity, rationalization, and capability did not affect financial statement fraud. The other three components of the fraud hexagon, namely pressure, arrogance, and conspiracy, significantly affect financial statement fraud.

ОРГАНІЗАЦІЙНО-МЕТОДИЧНЕ ЗАБЕЗПЕЧЕННЯ АУДИТУ БЕЗПЕРЕРВНОСТІ ДІЯЛЬНОСТІ ПІДПРИЄМСТВ

The article is concerned with disclosing the theoretical, organisational foundations and methods of continuity audit based on analytical procedures. The purpose of the study is to substantiate the theoretical, organisational and methodological foundations of the going concern audit of enterprises under conditions of uncertainty. Object of research - organisational and methodological support for the audit of business continuity of enterprises. Methods used in the study: scientific cognition, method of generalisation, comparison, logical and substantive, methods of induction and deduction, analysis. The main hypothesis is the development of organisational and methodological foundations of the going concern audit based on the expansion of analytical procedures to meet the information needs of stakeholders about the status and potential of the financial viability of the enterprise's going concern under conditions of uncertainty. Summary of the main material. Under martial law, the importance of the continuity audit as a tool for protecting the interests of users of financial statements and ensuring that stakeholders are aware of the state of financial solvency and prospects for sustainable development of enterprises increases. Organisational and methodological support of the continuity audit is determined by the objectives of the audit and the needs of stakeholders to obtain reliable information on the assessment of financial viability to ensure continuing operations in the future. The proposed methodology for auditing the going concern of enterprises based on analytical procedures provides a holistic view of the organisation of the audit by the following stages: 1) analysis of liquidity and solvency of enterprises; 2) analysis of profitability potential; 3) analysis of financial stability; 4) analysis of risks of activity; 4) analysis of the potential of continuous activity of the enterprise. Particular attention in the process of a going concern audit is paid to the classification and analysis of business risks. Analytical procedures for assessing business risks, determining reserves to cover losses of economic benefits in relation to the risks of non-payment of receivables and reduction in the value of financial instruments have been substantiated. The methodology for auditing the going concern of enterprises based on the expansion of analytical procedures, the implementation of which provides an opportunity to generate high-quality information to assess the potential of the enterprise's going concern, taking into account the risk and prepare a reasonable audit opinion, is original and of practical importance. Conclusions. The implementation of scientific and methodological recommendations on the organisation and methodology of the continuity audit based on the expansion of analytical procedures will help to obtain sufficient evidence for a realistic assessment of the potential of financial solvency of enterprises, preparation of the audit opinion on compliance with the principle of continuity and improve the quality of the audit.

MODERASI AUDITOR PROFESSIONAL SCEPTICISMPADA KOMPLEKSITAS TUGAS AUDIT, LOCUS OF CONTROLDAN KUALITAS AUDIT

Audit quality is the result achieved from financial statements that are presented fairly, all material matters or provide a true picture according to the financial reporting framework in order to increase the trust of users of financial statements. The purpose of this study is to investigate whether the complexity of the audit task, and locus of control can affect audit quality and auditor professional scepticism can moderate the effect of audit task complexity, and locus of control on audit quality. Type of research is quantitative research, in this study the data collection method is the distribution of questionnaires via g-form. The data collected in this study are the results of questionnaires distributed to auditors at public accounting firms in Indonesia. The results of this study audit task complexity and locus of control have a positive effect on audit quality, auditor professional scepticism cannot moderate the effect of audit task complexity and locus of control on audit quality.Keyword: Audit Quality, Audit Task Complexity, Locus of Control, and AuditorProfessional Scepticism.

PREDICTORS OF THE TIMELINESS OF CORPORATE FINANCIAL REPORTING

Timeliness of financial reporting is an important indicator in assessing a company because it can provide accurate information for users of financial statements. This phenomenon is influenced by various internal and external factors. This study analyzes the effects of profitability, firm size, and ownership structure on financial reporting timeliness. This quantitative descriptive study was conducted on food and beverage companies listed on the Indonesia Stock Exchange (IDX) in the 2018-2021 period. Twelve companies were sampled and analyzed using multiple linear regression tests. Hypothesis testing uses the R2 (coefficient of determination) test, F test, and t test. The results show that partial profitability and ownership structure have no effect on the timeliness of financial reporting. Firm size only had a significant effect. However, profitability, firm size, and ownership structure simultaneously affected the timeliness of financial reporting (94.2%). Future studies should use other variables as predictors

HOW FRAUD HEXAGON MODEL ON FINANCIAL STATEMENT FRAUD IN ENERGY SECTOR COMPANIES?

Financial statement fraud is a discrepancy between the application of accounting principles and the preparation of financial statements with the aim of deceiving users of financial statements This study aims to analyze the effect of Hexagon Fraud on financial statement fraud. There are 10 variables used, namely financial targets, financial stability, change of directors, monitoring, ideal condition of the company, change of auditor, photo of the CEO, government projects, political connections, managerial ownership. Financial statement fraud is measured using the Beneish M-Score Model. The samples in this study are energy sector companies listed on the Indonesia Stock Exchange (IDX) in 2020-2021 with the number of samples used being 50 companies with 100 units of analysis taken based on the purposive sampling method. Data analysis in this study used panel data regression analysis with the EViews 13 analysis tool. The results of this study show that a company's Financial Target has an influence on the potential for financial statement fraud. Meanwhile, financial stability, change of directors, monitoring, ideal condition of the company, change of auditor, CEO photo, government projects, political connections, managerial ownership have no influence on the potential for financial statement fraud.

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.

THE ABILITY OF GROSS PROFIT, OPERATING PROFIT, NET PROFIT, AND WORKING CAPITAL IN PREDICTING FUTURE CASH FLOWS (Empirical Study of Companies Listed in the Jakarta Islamic Index)

Users of financial statements make forecasts regarding the future situation of the entity in order to anticipate opportunities and identify potential risks. Gross profit, operating profit, net profit, and working capital are important pieces of information for investors because they allow for the prediction of future cash flows. However, for companies listed on the Jakarta Islamic Index, there is instability in gross profit, operating profit, net profit, and working capital, which leads to changes in cash flow. The research is of an associative quantitative nature, with a research population consisting of 50 companies listed on the Jakarta Islamic Index from 2019 to 2022. By using a purposive sampling technique, a sample of 24 companies was obtained, resulting in a total sample size of 96 samples over the span of 4 years. The data used is secondary data, collected through the official IDX website at www.idx.co.id. The analytical method employed is multiple linear regression. The findings of the study indicate that gross profit and working capital have a significant impact on the ability to predict future cash flows. However, operating profit and net profit do not possess the same predictive power. Furthermore, the study reveals that gross profit, operating profit, net profit, and working capital collectively contribute to the prediction of future cash flows with an impressive explanatory power of 89.3%. Keywords: gross profit, operating profit, net profit, working capital, future cash flow