...Proposal The Quality of financial Reporting after the passage of Sarbanes-Oxley Act Dr. Hassan Ahmed Assistant Professor at Cameron University Abstract The complexity of business environment necessitates a set of required disclosures in a timely fashion. The full disclosure principle under U.S. GAAP is based on a vague definition that cannot be clearly implemented. The cost of disclosures can be significantly large and can have a negative impact on companies’ future earnings (small businesses). The purpose of this article is to examine the disclosure establishment of pre and post Enron, the effect of those disclosures on both corporations and on potential investors and to examine whether financial reporting quality improved with the passage of SOX. A total of 360 audited annual financial statements of the 500 fortune companies were selected. The paper will specifically concentrate disclosures on financial statements, Notes, supplementary (required or voluntary), and other expanded disclosures required by the SEC. The findings will shed light on our understanding about the intended and unintended consequence of SOX. 1.0 Introduction/Literature Review The purpose of SOX Act is to increase corporate transparency and accountability (Friedman, The Business Forum). Though SOX did not address the full disclosure required by the FASB, it simply expanded disclosures by establishing responsibilities. The company’s Chief Executive Officer (CEO) and Chief Financial Officer...
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...79C FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE Cristina Gonçalves Góis Senior Lecture Instituto Superior de Contabilidade e Administração de Coimbra Instituto Politécnico de Coimbra Área temática: C) Dirección y Organización Palabras clave: gobierno corporativo; la calidad contable; información financiera; 1 FINANCIAL REPORTING QUALITY AND CORPORATE GOVERNANCE: THE PORTUGUESE COMPANIES EVIDENCE. ABSTRACT The main objective of this paper is to analyze the relationship between the composition and characteristics of corporate governance on the financial reporting quality of Portuguese companies. The major reference case studies on the relationship between corporate governance and the financial reporting quality are not validated by the results obtained. The results show that the board composition changes and its degree of independence do not produce any influence on the quality of the accounting information. Our study shows that although the main international guidelines relating to the rules of good governance have been followed closely by Portuguese institutions, the actual implementation of these rules did not occur. 2 1. INTRODUCTION The aim of this paper is to contribute to the study of the influence of the type of corporate governance on the financial reporting quality in countries with a tradition of continental accounting. Despite the profuse literature about this topic, adapted to Anglo-Saxon...
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...Target Financial Reporting Quality and M&A Deals that Go Bust* HOLLIS A. SKAIFE, University of Wisconsin–Madison DANIEL D. WANGERIN, Michigan State University 1. Introduction This study investigates whether target firms’ financial reporting quality affects the likelihood that merger and acquisition (M&A) deals will ultimately be terminated. Managers looking to increase their market share, enter new markets, or diversify their operations will consider acquiring another company based on the company’s performance, geographic locations, and lines of business, respectively. If the potential target is a U.S. publicly traded company, an acquirer’s initial assessment of the expected benefits associated with the acquisition of the company is based on publicly available information. Generally, the acquirer obtains limited private information from the target prior to the signing of the acquisition agreement. Although an acquisition agreement creates a binding contractual obligation for both entities to go forward with the deal, it does not guarantee completion of the deal. The acquisition agreement typically contains a warranty by the target that its financial statements are prepared in accordance with generally accepted accounting principles (GAAP). If this warranty is breached, the deal can be terminated. We hypothesize that low-quality financial reporting by target firms prior to the announcement of a deal increases the likelihood that a target firm’s U.S. GAAP warranties stated in the acquisition...
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...Inspection only from customer. 3. Currency exchange conflict. (Western Europe and United States) 4. Sales more in cheaper and smaller type of boat. 5. Excessive debt and loan for production. 6. Not fully utilize capacity (94%) 7. High cost of information technology (IT). 8. Too much reliance of sales agent. | Opportunities 1. Produce more ranges of new model boats. 2. Produce boat not only when the order and payment is placed. 3. Open sales office worldwide. 4. Increase marketing strategy. 5. Increase market share 6. Attract more investors. 7. Empower sales staff. | Threats 1. Supplier (Marinatron) also supply to other competitors. 2. Risk of leak information to Merbatty’s rivalry (by sales agent). 3. Quality of the product in Surania will not be the same as in Western Europe and United States of America (USA). 4. High cost of transportation. (From facility to customers around the world) | 2.0 Prioritisation The six major issues involving Merbatty are listed in order of importance as below: 1. Late delivery of a hull from Topcrest: The organisation depends on their customers therefore they must able to meet their expectation. Their service reputation will be...
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...The Institute of Chartered Accountants in Australia GAAP-based financial reporting: measurement of business performance charteredaccountants.com.au Professor Stephen Taylor, The University of New South Wales, Sydney, Australia The Institute of Chartered Accountants in Australia The Institute of Chartered Accountants in Australia (the Institute) is the professional body representing Chartered Accountants in Australia. Our reach extends to more than 53,000 of today and tomorrow’s business leaders, representing some 43,000 Chartered Accountants and 10,000 of Australia’s best accounting graduates who are currently enrolled in our world-class post-graduate program. Our members work in diverse roles across commerce and industry, academia, government, and public practice throughout Australia and in 107 countries around the world. We aim to lead the profession by delivering visionary thought leadership projects, setting the benchmark for the highest ethical, professional and educational standards and enhancing and promoting the Chartered Accountant brand. We also represent the interests of members to government, industry, academia and the general public by actively engaging our membership and local and international bodies on public policy, government legislation and regulatory issues. The Institute can leverage advantages for its members as a founding member of the Global Accounting Alliance (GAA), an international accounting coalition formed by the world’s premier accounting...
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...1. Introduction Accounting practices have been argued to reflect information quality of the firm in the market. Recently, there has been renewed interest in the relation between information asymmetry and conservative financial reporting practices. Many theorists have critiqued this aspect of information asymmetry, which has garnered significant interest in the accounting arena in the world today. This paper is set out to analyze the literature on conservative financial reporting, dissecting Akerlof’s article surrounding information asymmetry. Following this, possible motivations by firms to undertake these accounting measures will be meted out, coupled with an examination of the empirical evidence in reflection of the measurement of conservatism, with a final conclusion pertaining the relationship of information quality and financial reporting choices being ascertained. 2. Conservative Financial Reporting Conservatism is the differential verifiability required for the recognition of accounting gains versus losses that generates an understatement of net assets. (Basu, 1997) There has been evidence strongly suggesting that U.S companies had used conservative financial reporting practices since the last five decades. (Watts, 2003) It is argued that conservatism of financial reporting arises because of information asymmetry between firm managers and shareholders. While information asymmetry refers to a situation where one party has more or superior information compared to another...
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...How to measure the quality of voluntary disclosure in annual reports The goal of voluntary disclosure is to give more information than required of reporting standards. This to create more disclosure (Scott, 2009, p.109). Although voluntary disclosure provides more information than required, the earnings quality can be questionable. Earnings quality can be defined as the extent to which reported earnings faithfully represent Hicksian income (Schipper and Vincent, 2000). The Hicksian income corresponds to the amount that can be pay out as dividend without damaging the firm (Hicks, 1939, p.176) and the definition of faithfulness means “correspondence or agreement between a measure or description and the phenomenon that it purports to present” (FASB Concepts Statement, No. 2, para. 63). The quality of the financial reporting are interesting for investment decision making. Low-quality earnings provide an incomplete allocation of resources. Also contracting of decisions based on low-quality will induce unintended wealth transfers (Schipper and Vincent, 2000). Schipper and Vincent (2000) consider four earnings quality constructs: - Time-series properties of earnings - Relations among income, accruals, and cash - Selected qualitative characteristics in the FASB’s conceptual framework - Implementation decisions Time-series properties of earnings Time-series properties of earnings include persistence, predictive...
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...higher costs to one that promotes high-quality care at reduced costs led to the idea of pay for performance and public-reporting quality initiatives. (Calikoglu 2012) Studies have shown patient benefits resulting from pay for performance initiatives to be varied, and one of the key determinants in that variation is the healthcare setting itself. Another key determinant is the design of the pay for performance incentive, such as what aspect of performance is awarded, as well as the size of the reward. Studies have also shown that public reporting initiatives, or requiring hospitals and physicians to provide data on their own performance, have been effective in reducing preventable injuries in the hospital setting. (Leake 2010) There are two types of pay-for-performance initiatives that have been implemented in recent years: processed-based performance measures and outcome-based performance measures. Processed-based performance measures indicate whether protocols were followed in specific situations. For instance, whether or not patients with acute myocardial infarction received aspirin upon arrival to the emergency department is a process-based measure. Outcome-based performance, however, is measured based on patient outcomes, mortality rates, for example. Studies have shown that patients gain the most value from pay-for-performance initiatives in the hospital setting. The two main studies corroborating this claim are Maryland’s Quality-Based Reimbursement Program (QBRP) and...
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...[pic] SOUND FINANCIAL REPORTING IS A GOOD THING FOR BRINGING CONFIDENCE BACK TO THE CORPORATE WORLD Submitted By: Ahmed Shafiul Huq 801414063 Principle of Accounting (EIB505) Section: B Executive Master of Business Administration Submitted To: Mr. Mohammad Rakib Uddin Bhuiyan Assistant Professor Department of International Business Faculty of Business Studies EXECUTIVE SUMMARY A company’s financial reporting amalgamates important documents to create an effective spreadsheet to simplify the financial data of an organization. It captures much of the information that organizations prepare, publish, and use. Financial reporting plays an integral role in the capital markets and economic stability and growth, and efforts to enhance its quality are vital. A Sound Financial Reporting provides us relevant, meaningful, reliable, accurate and comprehensive reporting of management stewardship whether in the form of numbers or other operating data. It is increasingly important for businesses to be financially transparent and for governments to establish a sound regulatory environment for corporate financial reporting. Sound financial reporting can benefit business by some ways just like valuing business, easy to identify...
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...International Financial Reporting Standards (IFRS): Pros and Cons for Investors by Ray Ball* Sidney Davidson Professor of Accounting Graduate School of Business University of Chicago 5807 S. Woodlawn Ave Chicago, IL 60637 Tel. (773) 834 5941 ray.ball@gsb.uchicago.edu Acknowledgments This paper is based on the PD Leake Lecture delivered on 8 September 2005 at the Institute of Chartered Accountants in England and Wales, which can be accessed at http://www.icaew.co.uk/cbp/index.cfm. It draws extensively on the framework in Ball (1995) and benefited from comments by Steve Zeff. Financial support from the PD Leake Trust and the Graduate School of Business at the University of Chicago is gratefully acknowledged. 1 Abstract Accounting in shaped by economic and political forces. It follows that increased worldwide integration of both markets and politics (driven by reductions in communications and information processing costs) makes increased integration of financial reporting standards and practice almost inevitable. But most market and political forces will remain local for the foreseeable future, so it is unclear how much convergence in actual financial reporting practice will (or should) occur. Furthermore, there is little settled theory or evidence on which to build an assessment of the advantages and disadvantages of uniform accounting rules within a country, let alone internationally. The pros and cons of IFRS therefore are somewhat conjectural, the unbridled enthusiasm...
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...Corporate Governance Attributes and Financial Reporting Quality: Empirical Evidence from Iran Pari Chalaki Department of Accounting Urmia University Iran Hamzeh Didar Department of Accounting Urmia University Iran Mohadeseh Riahinezhad M.A. student in Accounting Urmia University Iran Abstract The aim of this study is to investigate the effect of corporate governance attributes on financial reporting quality in firms listed in Tehran Stock Exchange (TSE) during the period of 2003 to 2011. In this study McNichols (2002) and Collins and Kothari (1989) are used for financial reporting quality measurement purpose, and institutional ownership, ownership concentration, board independence and board size is considered as corporate governance attributes. The results of the study show that there is no relationship between corporate governance attributes including board size, board independence, ownership concentration, institutional ownership and financial reporting quality. In addition, no evidence is found to support significant relationship between control variables (audit size, firm size and firm age) and financial reporting quality. Keywords: Corporate governance attributes, financial reporting quality Introduction Financial reporting quality is a major concern for all current and potential investors. According to Biddle et al. (2009) financial reporting quality is defined as the precision with which financial reporting conveys information about the firm’s...
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...ABSTRACT First Adoption of International Financial Reporting Standards sets out the procedures that an entity must follow when it adopts IFRS for the first time as the basis for preparing its general purpose financial statements. An entity may be first adopter if, in the preceding year, it prepared IFRS financial statements for internal management use, as long as those IFRS financial statements were not made available to external parties such as investors or creditors. In Malaysian data, IFRS standards are yet to be implemented. However, the results are of significant benefit for local standard setters as well as for other emerging countries that have similar capital market and institutional characteristics. More research could be conducted in other environments so that the impact of IFRS adoption in different environments can be revealed. Furthermore, additional studies can also consider other attributes of earnings quality such as earnings conservatism, predictability, comparability, persistence and timeliness. INTRODUCTION Mazars is a universal audit, accounting and discussing group employing more than 13,500 professionals in 71 countries through member firms. Mazars is the 11th largest accounting firm in the world. Mazars has a network of equivalent partners and joint ventures in a further 21 countries and is a founding member of the Praxity alliance, a network of independent firms. The Institute of Chartered Accountants in England and Wales (ICAEW)...
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...A critical review of the trade-offs between the concepts of relevance and reliability in financial reporting Theme: Financial Accounting Classification: M41 Author: Prof D Coetsee Affiliation: Department of Accountancy, University of Johannesburg, South Africa Contact address: Department of Accountancy R-Ring 607 University of Johannesburg PO Box 524 Auckland Park Johannesburg South-Africa 2006 Telephone: +27-11-559-3047 Fax: +27-11-559-2777 E-Mail dcoetsee@uj.ac.za A critical review of the trade-offs between the concepts of relevance and reliability in financial reporting |Abstract | |In an information orientated system of financial reporting the move from historical cost to fair value | |accounting has created numerous debates surrounding the trade-offs of the concepts of relevance and | |reliability. This article contributes to the debate by critically reviewing the current developments of | |these trade-offs to determine whether current financial reporting guidelines are appropriate to deal with | |the difficulties and uncertainties of financial reporting. The article found that the proposals of the joint| |framework discussion paper goes a long way in resolving the issues around the trade-offs of relevance and | |reliability. Changing the concept of reliability to faithful representation...
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...Reporting Practices and Ethics Meredith Kruse HCS 405 November 9, 20015 Joseph Shin Reporting Practices and Ethics Healthcare organizations are business entities like any other and the finances require detailed management to ensure that the business operates effectively and efficiently. There are specific elements required to measure the financial success of these companies. When exploring the accepted accounting principles, it is crucial that all involved parties understand the business aspect, including the outside stakeholders. When parties are financially invested, it is also expected that the organizations provide a certain transparency and always act in an ethical manner. There are four elements to effective financial management in any organization. These categories are planning, controlling, organizing/directing, and decision making. By following these steps, plans can be carried out and the organization can ensure financial efficiency. Planning is specifically about identifying objectives and the steps necessary to reach the determined goals. Controlling is a more difficult task as it requires management to enforce the plan and keep employees on track to meet deadlines. Organizing and directing is more of a broken down play-by-play of controlling. This step simply takes controlling to a more manageable level and gives management the opportunity to delegate specific tasks. Decision making takes the three previous steps and allows management to see the whole picture...
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... Published: August 20, 2011 Ethical Compliance by the Accountant on the Quality of Financial Reporting and Performance of Quoted Companies in Nigeria 1 G.N. Ogbonna and 2Appah Ebimobowei Department of Accounting, Faculty of Management Sciences, University of Port-Harcourt, Port-Harcourt, Nigeria 2 Department of Accounting, Bayelsa State College of Education, Okpoama, Brass Island, P.M.B. 74 Yenagoa, Nigeria 1 Abstract: The study investigates the ethical compliance by the accountant on the quality of financial reporting and performance of quoted companies in Nigeria. Five hypotheses guided the study. The sample for the study which was twenty companies from five sectors quoted in the Nigerian Stock Exchange. They were systematically and purposively selected from the number of quoted companies in the exchange. A five point scale questionnaire was used with items on ethical issues on organizational financial reporting and performance. Data was analyzed using descriptive statistical tools and Spearman Rank Order Correlation Coefficient. Findings suggest that the compliance by the accountant positively and significantly affect the quality of financial reports and performance of organizations. The conclusion drawn from the findings is that the compliance by the accountant on professional ethics of integrity, objectivity, honesty, compliance and accountability will improve the quality of financial reports and the performance of organizations. Based on the findings, some recommendations...
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