Share This Article:

Transparency and Reliability in Financial Statement: Do They Exist? Evidence from Malaysia

Abstract Full-Text HTML XML Download Download as PDF (Size:368KB) PP. 29-43
DOI: 10.4236/ojacct.2015.44004    4,613 Downloads   6,185 Views   Citations

ABSTRACT

Purpose: The purpose of this research is to investigate the existence of reliability and transparency in the financial statement, for the benefit of investors and analysts. The scope of the study is to find the relationship of accounting standards, corporate governance, external controls, internal controls, and ethical practices with the financial statements, based on the auditors and management views in Malaysia. Methodology: 52 out of 60 questionnaires were taken from audit firms and management firms to test the visibility of transparency and reliability in financial statements. The qualitative data were also analyzed to understand the financial statements further. Findings: According to the data, the existence of transparency and reliability in financial statements was related with accounting standards, ethical practices, internal controls, external controls, and corporate governance. This finding was supported by many tests through SPSS statistic software. Research Limitations/Implications: The implication that first occurred was the intention of auditors and management in hiding the truths behind transparency and reliability of financial statements. Commonly, audit fees and audit sizes are the main truths that are hidden by the auditors. Practical Limitations: The implications of this were the value of transparency and reliability of financial statements hidden from the investors and its capabilities in restoring those into the financial statement. Originality/Value: The results were put through a quantitative approach. Also, additional qualitative analysis was gathered to attain extra knowledge in the transparency. While the rest of the paper is original, previous authors were also discussed for their theories and hypotheses.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

Abdullah, Z. , Almsafir, M. and Al-Smadi, A. (2015) Transparency and Reliability in Financial Statement: Do They Exist? Evidence from Malaysia. Open Journal of Accounting, 4, 29-43. doi: 10.4236/ojacct.2015.44004.

References

[1] Wood, F. and Sangster, A. (2008) What Is Accounting? In: Wood, F., Ed., Business Accounting 1, Prentice Hall, Italy, 3.
[2] Wood, F. and Sangster, A. (2008) Accounting Policies. Prentice Hall, Italy.
[3] Bessire, D. (2005) Transparency: A Two-Way Mirror? International Journal of Social Economics, 32, 424-438. http://dx.doi.org/10.1108/03068290510591272
[4] IAS 8 (2005) Accounting Policies, Changes in Accounting Estimates and Errors. http://www.iasplus.com/en/standards/ias/ias8
[5] MASB (2006) Financial Reporting Standard 108. http://www.masb.org.my/index.php?option=com_content&view=article&id=79:frs108-pg4&catid=6:masb-exclude-private
[6] Damodaran, A. (2007) Information Transparency and Valuation: Can You Value What You Cannot See? Managerial Finance, 33, 877-892. http://dx.doi.org/10.1108/03074350710823836
[7] Berggren, E. and Bernshteyn, R. (2007) Organizational Transparency Drives Company Performance. Journal of Management Development, 26, 411-417. http://dx.doi.org/10.1108/02621710710748248
[8] Crumpton, M.A. (2011) The Value of Transparency. The Bottom Line: Managing Library Finances, 24, 125-128. http://dx.doi.org/10.1108/08880451111169188
[9] Jamshidinavid, B., Chavoshani, M. and Maroofi, F. (2012) The Investigation of Web-Based Accounting and Its Effects on Financial Report. Journal of Advanced Social Research, 2, 24-36.
[10] Hunton, J., Libby, R. and Mazza, C. (2004) Financial Reporting Transparency and Earnings Management. 1-36. http://dx.doi.org/10.2139/ssrn.501547
[11] Vrentzou, E. (2011) The Effects of International Financial Reporting Standards on the Notes of Auditors. Managerial Finance, 37, 334-346. http://dx.doi.org/10.1108/03074351111115296
[12] Abdolmohammadi, M.J. (2005) Intellectual Capital Disclosure and Market Capitalization. Journal of Intellectual Capital, 6, 397-416. http://dx.doi.org/10.1108/14691930510611139
[13] Liguori, M. and Steccolini, I. (2011) Accounting Change: Explaining the Outcomes, Interpreting. Accounting, Auditing & Accountability Journal, 25, 27-70. http://dx.doi.org/10.1108/09513571211191743
[14] Weetman, P. (2001) Controlling the Standard-Setting Agenda: The Role of FRS 3. Accounting, Auditing & Accountability Journal, 14, 85-109. http://dx.doi.org/10.1108/09513570110381088
[15] Sevin, S., Schroeder, R. and Bhamornsiri, S. (2007) Transparent Financial Disclosure and SFAS No. 142. Managerial Auditing Journal, 22, 674-687. http://dx.doi.org/10.1108/02686900710772582
[16] Cho, C.H., Freedman, M. and Patten, D.M. (2012) Corporate Disclosure of Environmental Capital Expenditures: A Test of Alternative Theories. Accounting, Auditing & Accountability Journal, 25, 486-507. http://dx.doi.org/10.1108/09513571211209617
[17] Yakhou, M. and Dorweiler, V.P. (2004) Dual Reforms: Accounting and Corporate Governance. Managerial Auditing Journal, 19, 361-377. http://dx.doi.org/10.1108/02686900410524373
[18] Rezaee, Z. (2004) Restoring Public Trust in the Accounting Profession by Developing Anti-Fraud Education, Programs, and Auditing. Managerial Auditing Journal, 19, 134-148.
[19] Skaifea, H.A., Collins, D.W. and LaFond, R. (2006) The Effects of Corporate Governance on Firms’ Credit Ratings. Journal of Accounting & Economics, 42, 203-243. http://dx.doi.org/10.1016/j.jacceco.2006.02.003
[20] Atkinson, A.S. (2002) Ethics in Financial Reporting and the Corporate Communication Professional. Corporate Communications: An International Journal, 7, 212-218. http://dx.doi.org/10.1108/13563280210449796
[21] Adams, C.A. (2004) The Ethical, Social and Environmental Reporting-Performance Portrayal Gap. Accounting, Auditing & Accountability Journal, 17, 731-757. http://dx.doi.org/10.1108/09513570410567791
[22] Stone, G. (2011) Let’s Talk: Adapting Accountants’ Communications to Small Business Managers’ Objectives and Preferences. Accounting, Auditing & Accountability Journal, 24, 781-809. http://dx.doi.org/10.1108/09513571111155546
[23] Brennan, N.M. and Solomon, J. (2008) Corporate Governance, Accountability and Mechanisms of Accountability: An Overview. Accounting, Auditing & Accountability Journal, 21, 885-906. http://dx.doi.org/10.1108/09513570810907401
[24] Grant, G.H. (2003) The Evolution of Corporate Governance and Its Impact on Modern Corporate America. Management Decision, 41, 923-934. http://dx.doi.org/10.1108/00251740310495045
[25] Rezaee, Z., Olibe, K.O. and Minmi, G. (2003) Improving Corporate Governance: The Role of Audit Committee Disclosures. Managerial Auditing Journal, 18, 530-537. http://dx.doi.org/10.1108/02686900310482669
[26] Spira, L.F. and Page, M. (2003) Risk Management: The Reinvention of Internal Control and the Changing Role of Internal Audit. Accounting, Auditing & Accountability Journal, 16, 640-661. http://dx.doi.org/10.1108/09513570310492335
[27] Liou, F.-M. (2008) Fraudulent Financial Reporting Detection and Business Failure Prediction Models: A Comparison. Managerial Auditing Journal, 23, 650-662. http://dx.doi.org/10.1108/02686900810890625
[28] Kaminski, K.A., Wetzel, T.S. and Guan, L. (2004) Can Financial Ratios Detect Fraudulent Financial Reporting? Managerial Auditing Journal, 19, 15-28. http://dx.doi.org/10.1108/02686900410509802
[29] Hyland, M.M. and Verreault, D.A. (2003) Developing a Strategic Internal Audit-Human Resource Management Relationship: A Model and Survey. Managerial Auditing Journal, 18, 465-477. http://dx.doi.org/10.1108/02686900310482614
[30] Morrill, C. and Morrill, J. (2003) Internal Auditors and the External Audit: A Transaction Cost Perspective. Managerial Auditing Journal, 18, 490-504. http://dx.doi.org/10.1108/02686900310482632
[31] Braiotta Jr., L. and Zhou, J. (2006) An Exploratory Study of the Effects of the Sarbanes-Oxley Act, the SEC and United States Stock Exchange(s) Rules on Audit Committee Alignment. Managerial Auditing Journal, 21, 166-190. http://dx.doi.org/10.1108/02686900610639301
[32] Al-Ajmi, J. (2009) Audit Firm, Corporate Governance, and Audit Quality: Evidence from Bahrain. Advances in Accounting, Incorporating Advances in International Accounting, 25, 64-74. http://dx.doi.org/10.1016/j.adiac.2009.02.005
[33] Ortiz, E., Martínez, I. and Clavel, J.G. (2003) Ranking of Handicaps in International Financial Analysing. European Business Review, 15, 170-180. http://dx.doi.org/10.1108/09555340310474677
[34] Bierstaker, J.L. (2003) Auditor Recall and Evaluation of Internal Control Information: Does Task-Specific Knowledge Mitigate Part-List Interference? Managerial Auditing Journal, 18, 90-99. http://dx.doi.org/10.1108/02686900310455074
[35] Suwaidan, M.S. and Qasim, A. (2010) External Auditors’ Reliance on Internal Auditors and Its Impact on Audit Fees: An Empirical Investigation. Managerial Auditing Journal, 25, 509-525. http://dx.doi.org/10.1108/02686901011054845
[36] Haron, H., Chambers, A., Ramsi, R. and Ismail, I. (2004) The Reliance of External Auditors on Internal Auditors. Managerial Auditing Journal, 19, 1148-1159. http://dx.doi.org/10.1108/02686900410562795
[37] Thurasingam, A.S. and Sivanandan, P. (2012) Generation Y’s Perception towards Law and Ethics. Journal of Advanced Social Research, 2, 52-66.
[38] Makkawi, B. and Schick, A. (2003) Are Auditors Sensitive Enough to Fraud? Managerial Auditing Journal, 18, 591- 598. http://dx.doi.org/10.1108/02686900310482722
[39] Jackson, A. and Lapsley, I. (2003) The Diffusion of Accounting Practices in the New “Managerial” Public Sector. International Journal of Public Sector Management, 16, 359-372. http://dx.doi.org/10.1108/09513550310489304
[40] Shapeero, M., Koh, H.C. and Killough, L.N. (2003) Underreporting and Premature Sign-Off in Public Accounting. Managerial Auditing Journal, 18, 478-489. http://dx.doi.org/10.1108/02686900310482623

  
comments powered by Disqus

Copyright © 2019 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.