Users Of Financial Information Research Articles

Creative Accounting Effect through Discretionary Accruals on Likelihood of Economic Unit Being Exposed to Financial Distress Risks

Many major international companies were subjected to financial faltering and then bankruptcy and collapse as a result of their managements misusing this flexibility in accounting principles and policies, which led to most economic units losing public confidence and increasing doubt about the efficiency and integrity of their management in the extent of adherence to accounting policies and standards. This type of practice is called creative accounting, which means taking advantage of the flexibility that exists in the use of accounting principles and policies, or the lack of consistency in their use from year to year, with the intention of influencing the numbers appearing in the financial statements and thus influencing the outcome of the activity and the financial position of the economic unit to achieve its goals and motives of maximizing profits. current and future financial situation or improve through manipulation to deceive shareholders and users of financial information. Hence the importance of the research through knowing the impact of creative accounting through optional entitlements on the possibility of economic units being exposed to financial default, as the concept of creative accounting will be exposed, the reasons for economic units resorting to it, its types and objectives, the concept of optional entitlements and the types of those entitlements, as well as the concept of financial default and its types. Its causes and stages, Then the applied aspect of the research will be presented by displaying the results of the questionnaire that were distributed to the research sample represented by a group of chartered accountants and containing a set of questions in three axes. The results of those answers were presented through the (SPSS) program and through the use of simple linear regression for the purpose of achieving the hypothesis. The research is based on (there is a statistically significant effect of creative accounting through optional entitlements on the exposure of the economic unit to financial distress), and then the most important results reached by the researcher and the most important recommendations were presented.

IRS Audit Detection Risk and Firm Tax Behavior: Can Tax Fraud Be Deterred by Increasing IRS Budgets?

ABSTRACT This paper examines whether tax fraud and aggressive tax positions at firms are affected by changes in the IRS budget. Changes in a firm’s risk profile affect many users of financial information including the IRS, forensic accountants, and investors among others. We find that concurrent IRS resources are related to firms’ tax aggression and tax fraud likelihood and that they explain incrementally more of these tax decisions at a firm than historical information often used in prior literature. Taken together, our results suggest that firms increase their tax risk profile thus more tax aggression and higher likelihood of tax fraud when they believe IRS scrutiny will be lower.

Communication of Key Audit Points in the Independent Auditor's Report: An Analysis of Determinants to Users of Financial Information in Cameroon

Communication of Key Audit Points in the Independent Auditor's Report: An Analysis of Determinants to Users of Financial Information in Cameroon

DETERMINANTS OF THE TIMELINESS OF PUBLISHING FINANCIAL REPORTS: NON-FINANCIAL COMPANIES IN INDONESIA

<p><strong>Background</strong>: The timeliness of publishing financial reports is very important for companies and users of financial information. Delays in publishing financial reports can impose sanctions on the company concerned, hinder economic decisions, and even create a bad reputation for the company among investors.</p><p><strong>Purpose</strong>: This research aims to examine the influence of company size, profitability, leverage, number of subsidiaries, board independence, board ownership, audit quality, and composite corporate governance index (CG-Index) on the timeliness of publishing financial reports.</p><p><strong>Research method</strong>: The data analysis method used in this research is panel regression analysis with a total of 439 company analysis units over 5 years.</p><p><strong>Research result</strong>: Panel regression test results show that the variables profitability and board independence have a significant negative effect on the timeliness of publishing financial reports. Audit quality and the CG-Index have a significant positive relationship with the timeliness of publishing financial reports.</p><p><strong>Originality/Novelty</strong>: The research uses the CG-Index to measure the effectiveness of corporate governance in reducing the potential for audit delays in developing countries.</p>

Are credit rating agencies users of government accounting information? Evidence from the sovereign rating process

IMPACT Sovereign governments are regularly evaluated by credit rating agencies (CRAs) that perform an analysis of creditworthiness based on mostly public data. This article shows that the data used by CRAs is mainly drawn from economic and statistical accounts rather than government financial statements. Thus, CRAs cannot be considered users of financial accounting information, at least at the sovereign government level. The evidence also suggests that governmental accounting information is neglected because it lacks the fundamental quality of comparability that CRAs require, given that ratings are ordinal measure of creditworthiness. Unless governments begin producing harmonized financial statements, it is unlikely that CRAs will ever become users of accounting information. Meanwhile, CRAs ground their sovereign rating process on harmonized economic and statistical accounts that are lacking important information on government payables, receivables, contingent liabilities and assets.

Impression management in a crisis: A conceptual framework of listed firms during the COVID-19 pandemic

This study develops a conceptual framework for impression management for listed companies, targeting various financial information users during the COVID-19 pandemic. During the pandemic, many listed firms faced financial distress and limited in-person communication. Our framework is based on various communication categories and types, providing insights for managers to adjust impression management tactics, which affect emotions and induce cognitive biases in their targets that may impact their decision-making processes. Our research not only contributes to the existing literature pertaining to corporate impression management and crisis communication but also holds implications for future studies.

External Debt Financing and Real Earnings Management: Evidence from Malaysian Family Group Affiliation

The role of external debt in an emerging country with highly concentrated ownership is expected to raise the expropriation risk by the controlling shareholders as wider separation between cash flow and control rights might increase borrowing cost. This study investigates external debt financing role in exacerbating real earnings management (REM) in family group affiliation firms with complex pyramidal structure. A sample of 1,170 firm-year observations was collected covering 2006 until 2015. The Hausman test was used to determine the estimation method of fixed and random effects regression of each REM activity of the suspected firms towards short-term debt (STD) and long-term debt (LTD). We found a significant positive relationship between STD and REM. STD might motivate stringent monitoring by lenders and encourage family firms to manipulate earnings, possibly to avoid violating debt covenants and to portray healthy financial conditions to mask their entrenchment behavior. We have also found less manipulation of REM with LTD, as lack of tight monitoring by lenders might less likely trigger earnings manipulation. This study provides additional input to users of financial information in making informed decisions. This study, however, only documents the results in family group affiliation firms. Hence, causality of debt in non-family group affiliation firms also requires further theoretical and empirical examination. We argue that this is the first study to examine external debt financing effect on REM in family group affiliation firms in Malaysia.

Vulnerabilities of Financial Auditing and its Adaptation to the Current Needs of the Users

Abstract Starting from the premise that the great economic crises of the last decades were based on the great financial scandals that shook the world economy, I found that auditing in general, and the process of auditing financial statements, has started to be questioned. Thus, I believe that it is necessary and obligatory to analyze whether financial audit, as it is now, is still suitable for modern society, i.e. whether its construction and methodology still meets the requirements of a constantly evolving market economy. Because of this, I considered it appropriate to carry out an analysis, aimed to identify new perspectives for the development of financial auditing in line with the requirements of a constantly changing market economy. I started my scientific approach from the identification and presentation of possible vulnerabilities in the work carried out by financial auditors, which may occur when formulating the audit opinion. My aim was to analyze the main elements that generate or enhance these vulnerabilities and to identify possible ways of combating and eliminating these effects in order to improve and increase the confidence of users of financial accounting information in their work.

Role of Accounting in Human Resources Management: A Co Authorship Network Study

Accounting for human resources is a relatively recent field. The organization may gain a direct or indirect advantage from the accountant's labor. In order to give users of financial information the ability to make rational, global decisions, accounting is the process of recognizing, quantifying, classifying, and reporting financial data. A company's HRA demonstrates the commitment it makes to its employees and the evolution of their values throughout time. Accounting for human resources gives management accounting more significance and aids in determining the capital worth of human resources and management development. About the value of a human asset, HRA offers quantifiable information. The current study's goals are to outline the function of accounting in HRM and identify coauthors whose works have received more than 500 citations in the field. The goal of the current study is to look up studies on the function of accounting in human resource management in the literature database. Research articles and their co-authors have been chosen based on inclusion and exclusion criteria in order to meet the research purpose. Lastly, VosViewer has been used to present the chosen research publications authored by coauthors that received more than 500 citations.

THE INFLUENCE OF INDEPENDENT COMMISSIONERS, AUDIT QUALITY, AND FINANCIAL DISTRESS ON EARNINGS MANAGEMENT

Earnings management is a series of actions taken by company management to increase reported earnings in a certain accounting period, without corresponding growth in the company's long-term earnings. This is done by managers to satisfy personal interests or boost the market value of the company so that it will look profitable for users of financial information. This study aims to empirically examine the effect partially and simultaneously between the independent variables of independent commissioners, audit quality, and financial distress with the dependent variable of earnings management. The population of this study are manufacturing companies listed on the Indonesia Stock Exchange for the period 2021-2022. The sampling technique used is simple random sampling method with the final sample being 100 sample companies with a total of 200 observational data. The data analysis technique in this study used multiple linear regression analysis and the data was processed with the help of the SPSS Version 25 program. The results of this study indicate that independent commissioners partially had a significant negative effect on earnings management, audit quality partially had no effect on earnings management, and financial distress partially had a significant positive effect on earnings management. The results of research by independent commissioners, audit quality, and financial distress simultaneously have an influence on earnings management.

Financial Analysis of Listed Companies of Biological Vaccine Companies

Financial analysis is an important tool for enterprises to improve management and optimize economic decisions. The analysis of corporate financial reports can provide directions and clues for improving management and provide decision support for users of financial report information. In this paper, we will take D Bio as an example and analyze its financial indicators to assess its solvency, operating capacity, profitability and growth capacity. The problems of the company's financial situation are pointed out and recommendations are given in a targeted manner to improve the company's competitiveness.

The Impact of the Qualitative Peculiarities of Accounting Information Based on the Financial Reports of Commercial Banks

An accounting information system is a vital component of any organizations decision-making process, as it contains the necessary elements to perform its duties, such as people, data, and software. Its rapid development and continuous improvement are some of the factors that have contributed to its efficiency and effectiveness. The level at which the information systems of the accounting profession have been studied is a major factor that sets this study apart from others. The goal of this study is to analyze the various characteristics of an accounting information system that affect the quality of reports that banks produce. It was conducted through a qualitative assessment of the various characteristics of accounting information. These characteristics included relevance, timeliness, understandability, and faithful representation. The concept of relevance refers to the importance of having information that can provide useful information to users when making economic decisions. Informations relevance is affected by its materiality and nature. A financial report must include all of the data that is relevant to a particular entity. The concept of faithful representation is the representation of financial data in a way that accurately depicts the things that it claims to show. This ensures that the information is complete and free from error. Comparability refers to the consistency in the application of accounting standards and policies across multiple periods. This helps financial information users gain a deeper comprehension of a companys operations. Another important aspect of this concept is that it allows investors and other market participants to easily compare financial statements of various companies. Having the necessary accounting characteristics helps management and investors make informed decisions regarding a companys operations.

SME owners and accountants' perceptions of financial information in small- and medium-sized entities: a Sri Lanka case study

PurposeThis paper aims to examine the perceptions of owners and accountants of small- and medium-sized entities (SMEs) on the users and their financial information needs of SME financial reporting.Design/methodology/approachPostal questionnaire surveys with owners and accountants of SMEs were used to identify users and their financial information needs. In total, 1,498 questionnaires were sent to SME owners and accountants. A total of 358 questionnaires were returned, generating 323 useable questionnaires. The management branch of stakeholder theory is used for the study which asserts that company management is expected to meet the expectations of those stakeholders who are more powerful than others.FindingsThe users of Sri Lanka SME financial information were limited to owners, banks and Department of Inland Revenue. Users and financial information needs of owners varied in relation to the size of the SME. Financial information are useful for making capital investment and planning decisions for owners regardless of the size of the SME. By sharing information with outside parties, disclosures can diminish information asymmetries between the firms and its stakeholders. The top three reasons for which owners use SME financial information are for planning purposes, estimating income tax liabilities, and taking marketing and pricing decisions.Research limitations/implicationsSince the study focuses only on the views of owner-managers and accountants of SMEs, the holistic understanding of uses of SME financial information by other user groups cannot be achieved.Practical implicationsThe results of this study provide international and local standard setters with an indication of future direction for SME financial reporting.Social implicationsThis paper extends existing knowledge on users and their financial information needs of SMEs in developing countries. Consequently, the findings of this paper make a valuable contribution to the work of practitioners such as local and international standards-setters and regulators who may be considering developing/revising financial reporting framework for SMEs either worldwide or in developing countries.Originality/valueAlthough SME financial reporting has attracted enormous attention in the recent accounting literature, academic research into SME financial reporting is scant. This paper extends existing knowledge on users and their financial information needs of SMEs in developing countries. The general purpose financial reporting model and the accounting standard IFRS for SMEs in particular would not be applicable to Sri Lankan SMEs unless it modifies to reflect the financial information needs of users of Sri Lankan SME financial information.

AUDIT FEES AND COMPANIES’ ACCESS TO FINANCE

This paper aims to study the impact of audit fees on companies' ability to access finance by reducing their capital constraints. This study employs a dataset of listed non-financial Indonesian companies from 2016 to 2020. Unlike previous studies, which mostly examined this phenomenon in developed economies, this paper focuses on a country with a two-tier corporate governance model where the capital market is not a major source of financing and the disclosure of audit fees is still voluntary. In such a setting, the decision to disclose audit fees is in the hand of the companies' management, and various motivations behind the decision will differently impact different users of financial information. This paper focuses on whether the information related to audit fees is a good signal for capital providers. Following the limited attention theory, this study argues that capital providers will consider the information about audit fees as a more reliable proxy for audit efforts that subsequently affect their investment decision. The hypothesis is that audit fees are negatively associated with companies' financial constraints. The findings indicate that capital providers see higher audit fees as signals of high-quality audits that enhance the credibility of financial statements and positively impact companies' access to finance. 
 
 Key Words: Audit Fees, Capital Constraint, Access to Finance, Audit Quality, Limited Attention Theory

International standards of audit: update of implementation practice in Ukraine

Methods. The methodological basis of the study was the work of domestic and foreign scientists and international audit standards. The results were obtained through the application of methods of analysis and synthesis to generalize the directions of development and existing shortcomings in the activities of audit subjects, to develop the forms of the auditor's working documents; historical and logical when establishing audit quality as a strategic direction of its development; general and special when determining specific steps in response to overcoming current shortcomings and future challenges; system approach for summarizing statements considered by the auditor when identifying risks of material misstatement. Results. The article summarizes the scientific and methodological approaches to determining the quality of audit services as a strategic direction of audit development in Ukraine and the world. Current vectors of audit development and its weaknesses at the organizational and practical levels, in particular, the shortcomings of auditors' activities in assessing the risks of material distortion, are analyzed. The specific steps that should be implemented by the subjects of audit activity within the framework of harmonization with the EU requirements have been determined. Examples of audit procedures (execution of actions in response to assessed risks) in the format of the auditor's working documents are offered. The categories of assertions considered by the auditor when identifying risks of material misstatement are systematized. Novelty. The strategic, scientific-methodical, and organizational-practical foundations of improving the quality of audit activity in the conditions of the European integration of the Ukrainian economy and the implementation of European legislation are summarized. Practical value. The results of the research are of an applied nature since they allow the implementation of relevant strategic directions and scientific and methodological developments, eliminate organizational shortcomings of auditing activities, and form a modern approach to improving the quality of auditing firms in Ukraine, which ensures the confidence of users of financial information.

Are State-Owned Enterprises Equally Reliable Information Suppliers? An Examination of the Impacts of State Ownership on Earnings Management Strategies of Chinese Enterprises

Earnings management refers to a company’s use of either accounting techniques (accrual-based earnings management) or real economic activities (real earnings management) to manipulate reported earnings and mislead users of financial information. It often indicates serious ethical issues in a company’s management, which will affect the reliability and sustainability of a firm’s services in the supply chain. Using A-share listed Chinese firms on the Shanghai and Shenzhen Stock Exchanges, we investigated the impacts of state ownership on management’s decision to select real or accrual-based earnings management strategies. We found that state-owned enterprises (SOEs) tend to favor real earnings management over accrual-based earnings management more than non-SOEs. Furthermore, those SOEs that are controlled by the central government engage in real earnings management more often than those controlled by local governments. We also examined whether media attention and litigation interact with state ownership to affect earnings management. We found that SOEs, especially central SOEs, with a high level of media attention or an incidence of litigation, are more likely to use real earnings management. Our research can assist firms in making better decisions in selecting business partners and service suppliers in an emerging market through the assessment of management integrity.

The evaluation of mandatory audit firm and auditor rotation: literature review

Purpose- The purpose of this study it to evaluate the impacts of mandatory audit firm and auditor rotation on audit quality and auditor independence by literature review. Methodology- This study empoys a literature review on the auditor rotations in the auditing firms. Findings- In the first stage of literature review, it is determined that there are positive sides of mandatory audit firm and auditor rotation reflected on audit quality and auditor independence. Among them such facts are observed; a client’s be audited by the same audit firm and auditor for a long time can increase intimacy and therefore, professional skepticism can be declined. Furthermore, mandatory rotation can prevent poor audit procedures. Besides, it is also emphasized that financial information users’ perception regarding auditors’ independence is positively effected and with a new point of view, rotation decreases the risk of misevaluation caused by repetitional tasks and risk of making mistakes. It is also observed that a positive competition in the audit sector would be created and therefore, there would be an era for the firms other that the big four. On the other hand, negative sides of rotation draw the attention in the literature review, as well. It is underlined that it could take long time period to determine the firm’s organization structure, its operations, exposed risks, due to new auditor’s inexperience and this could lead to cost increases. Furthermore, following the rotation, long-term-based audit information could disappear and efficiency and productivity of audit process could decline. Besides these, by the approach of the planned rotation date, it is observed that especially in the last year careless behaviours could be seen and therefore, mandatory audit quality could be affected negatively. Limited number of nonaudit firms on behalf of clients, new auditors high confidence in existing audit reports and therefore, their incapability of making tiny distinctions, are the other findings of the study. Conclusion- Literature review indicates that there are mixed findings regarding mandatory rotations’ impacts on independence and quality other than positive and negative results. Hence, it is seen that there is no consensus on mandatory rotation in terms of rotation period and its impact on independence and quality. Field researches especially by considering qualitative methods are important to explain the results obtained by quantitative researches. In-depth interviews with experienced international audit sector representatives are important to explain the rotation impact levels of international audit network (Big Four and other international firms) and national audit firms and their comparisons, ex-audit firm turning back ratios and its reasons. In this way, it could be supportive to decide whether existing legislation is capable of creating independence and quality in audit and by new amendments it could be possible to develop confidence in audit firms, audited clients and capital markets. Keywords: Mandatory auditor rotation, mandatory audit firm rotation, quality in independent audit, auditor independence JEL Codes: M42, M48

The effect of fair market value to innovative decision-making (An applied study in a sample of banks listed in the Iraq Stock Exchange)

Economic conditions are characterized by dynamic, ever-changing and fluctuating movement, and the purchasing power of the monetary unit changes with the change of these conditions in different cases. Therefore, the financial statements according to the historical cost became insufficient to show the financial situation, business results, cash flows, and a description of the economic facts of the economic unit, which almost lost this the data is important, given that the financial information in it is not based on economic data related to financial instruments (financial assets). As a result, it was necessary for accounting to search for a better alternative that fits and changes these conditions. From here, the fair market value appeared that helps economic decision-makers in evaluating the financial position. And actions carried out by economic units, and the importance of disclosure has increased as a result of the issuance of legislation to guarantee the rights of current and prospective investors. Therefore, disclosure should be sufficient for the fair market value so that it is appropriate for current and prospective investors, as there are several methods of disclosure, and the method of notes and attached tables will be chosen. And users of financial information ask about the extent to which they can rely and trust this information, as many of them have become aware that financial information is based on concepts and principles that may be tainted by many defects and estimates, which make it less reliable, so they have tended to use the fair market value.

A Futuristic View of Using XBRL Technology in Non-Financial Sustainability Reporting: The Case of the FDIC

The rapid use and development of information and communication technology capabilities in the public sector has revolutionized the mechanism that government agencies use to collect, process, and disseminate data. Electronic government is one of the strategic initiatives that many government agencies have considered adopting to offer efficient web-based services and operations. Although there have been efforts to examine the implementation process of technological innovations in financial and business reporting, many government agencies are about to face a bigger challenge in developing or adopting current technologies to assess their usefulness for non-financial sustainability reporting. The Extensible Business Reporting Language, XBRL, has been adopted by the U.S. Federal Deposit Insurance Corporation (FDIC) to process financial data in the quarterly call reports filed by banks. Using Rogers’ well-established theory of innovation adoption process, this paper discusses the FDIC’s XBRL implementation process and investigates the roles and experiences of the agency’s stakeholders. A case study research methodology, supported by semi-structured interviews, is used to explore each phase of the implementation process. The findings reveal that the process was facilitated by stakeholder engagement, technical support, and the agency’s strategic decision-making process. This paper contributes to the literature by examining the applications, benefits, and challenges of using XBRL technology to process non-financial sustainability data, which is still an under-researched area. Therefore, the implications for using the technology in non-financial reporting will be insightful for future regulatory adopters and their stakeholders including filer banks, software vendors, and various users of financial and non-financial information.

The Effect of Good Corporate Governance on Profit Management (Case Study: Transportation Companies Listed on the IDX)

Financial statements have the objective of presenting information related to financial condition and position, performance and changes in financial position that provide benefits to a large number of users of financial information, particularly profits that have been obtained. Finance is information that shows the company's achievement in generating profits. Earnings information is a part / component of the company's financial statements that aims to inform management performance, helping to estimate representative earnings capacity in the long term. This study aims to determine the effect of Independent Commissioners, Audit Committee, Institutional Ownership, Auditor Quality and Profitability on earnings management in transportation companies listed on the Indonesia Stock Exchange. This type of research is a causal quantitative research located on the Indonesia Stock Exchange (IDX) which is accessed through www.idx.co.id with a sample size of 5 companies during the 2015-2019 period using panel data linear regression analysis. The results showed that through the Chow and Hausman tests the fixed effects model (FEM) was used. The results of the t test show that partially the Independent Commissioner, Audit Committee, Institutional Ownership, Auditor Quality have an effect on Earning Management. Simultaneously the Independent Commissioner, Audit Committee, Institutional Ownership, Auditor Quality have an effect on Earnings Management.