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Literature Review on Historical Development of Accounting

Author(s): Vlora Berisha,Rrustem Asllanaj / Language(s): English Issue: 6/2017

Accounting as a practice has existed since the earliest times of humanity. The first simple ian, Chaldeans, Assyrians and Sumerians in Mesopotamia. The time of theoretical accounting recognition is considered to be the year 1494, when Venetian mathematician Luca Pacioli published a book titled ―Summary of arithmetic, geometry, proportions and proportionality‖. In addition to mathematical knowledge, Pacioli also wrote about the dual registration method and the accounting process. Despite Paciolli‘s writing, there is still much discussion regarding the issue of dual accounting origin. In reviewing the literature, it is noteworthythat accountancy history is scarcely addressed; there are only a small number of books and works that cover the topic. Therefore, the purpose of this paper is to take a historical look at accounting development from ancient periods to the present. This study, based on historians‖ records and archaeologists like Denise Schmandt-Besserat, has successfully described the origins and development of accounting from 3350 BC until today. Accounting as a practice has existed since the earliest times of humanity. The first simple accounting records are found in the writings of Babylonian, Chaldeans, Assyrians and Sumerians in Mesopotamia. The time of theoretical accounting recognition is considered to be the year 1494, when Venetian mathematician Luca Pacioli published a book titled ―Summary of arithmetic, geometry,proportions and proportionality‖. In addition to mathematical knowledge, Pacioli also wrote about the dual registration method and the accounting process. Despite Paciolli‘s writing, there is still much discussion regarding the issue of dual accounting origin. In reviewing the literature, it is noteworthythat accountancy history is scarcely addressed; there are only a small number of books and works that cover the topic. Therefore, the purpose of this paper is to take a historical look at accounting development from ancient periods to the present. This study, based on historians‖ records and archaeologists like Denise Schmandt-Besserat, has successfully described the origins and development of accounting from 3350 BC until today.

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Sustainability accounting and corporate social responsibility in Turkey and in its region

Author(s): Nalan Akdogan,Seval Kardes Selimoglu,Medine Turkcan / Language(s): English Issue: 1/2020

Research question: As a newly developing area, this paper aims investigate recent developments and applications of social responsibility practices in Turkey and in the neighboring regions in a comparative way. Motivation: The sustainability reporting is relatively a new subject in Turkey both in practice and in academic circles. The introduction of Corporate Social Responsibility as a concept in Turkey does not have a long history. The last five years witnessed a significant change in terms of corporate social responsibility (CSR) applications. Increasing number of companies started to implement sustainability accounting and corporate social responsibility practices. Companies began to adopt corporate social responsibility by considering it as a tool for medium- and long-term success. As a reflection of growing interest in sustainability and CSR, the number of NGO’s and consultancy firms operating in this field has also increased recently. In 2014, Sustainability Index was created within the Istanbul Stock Exchange (ISE). Idea: The understanding of the social responsibility applications and priority areas vary between different countries depending on their economic, social and political dynamics. In order to see the intra-regional variations, in this paper, we compare corporate social responsibility and sustainability applications in Turkey and in the neighboring regions by selecting Russia and Greece in the same region. Data: For the analysis, we collect recent sustainability reports of Turkish companies from GRI database and make a content analysis to evaluate practical applications of CSR and sustainability in Turkey. Then, we discuss corporate social responsibility applications in Russia and Greece. In the first part of our paper we examine corporate social responsibility and sustainability applications in Turkey by making an analysis of sustainability reports and CSR activities in Turkey. In the following part we discuss corporate social responsibility applications in the neighboring regions and make a comparison with Turkey. To this end, sustainability reports of Russian Federation and Greek companies in GRI database are analyzed for CSR activities. In the final part of our paper, we make a comparative analysis of CSR applications in Turkey and in the neighboring regions. Findings: The final analysis of CSR in Turkey and neighboring countries supports the idea that understanding of CSR varies in different countries depending on their social structure and economic development level.

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Internal and external corporate governance mechanisms and earnings management: an international perspective

Author(s): Fatma Zehri,Inaam Zgarni / Language(s): English Issue: 1/2020

Research question: This research aims to: 1. Determine which corporate governance mechanisms are most relevant in constraining earnings management and 2. Explain whether differences in results found in previous literature are attributable to moderating effects related to the legal system (common vs civil law). Motivation: One research topic of interest in the last two decades has been the effect of corporate governance mechanisms on earnings management. Idea: This research constitutes an extension of the study conducted by Zgarni and Haloui (2016) whose subject matter deals with only two corporate governance mechanisms, audit committee and audit quality, whereas the present paper contribution consists of testing the relevance of the findings achieved by Zgarni and Haloui (2016) after three years of study. Data: The study is based on a meta-analysis of 75 studies, the research approach being derived from Hunter et al. (1982). Research Findings: The empirical results show that the board of directors, the audit committee and audit size are statistically significant in reducing earnings management. Our findings emphasize the need to explicitly consider the influences of legal and institutional settings when analyzing the interactions between corporate governance and earnings management. The issues discussed in this article should be relevant to improve the supervision of companies and mitigating the earnings management. Especially, we provide some interesting insights to stakeholders, government regulators, banks, academics and research professionals.

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The impact of organizational characteristics on the adoption of contemporary cost management techniques by the textile industry in North Macedonia

Author(s): Dusica Stevceska-Srbinovska,Marina Stojanova,Snezhana Hristova,Jadranka Mrsik / Language(s): English Issue: 1/2020

Research Question: What is the association between the choice of contemporary cost management methods and enterprise and employee characteristics? Motivation: Modern techniques of cost accounting assist strategic management of contemporary organization to achieve their strategic objectives. External versus internal, long-term unlike short-term perspective is what differentiates the strategic cost management approach from the traditional cost management system. We draw on previous studies in order to examine the impact of organizational and employee characteristics on the adoption of contemporary cost management methods given the lack of research data in developing countries like North Macedonia. Idea: This research examines the usage of contemporary cost management methods by textile companies headquartered in North Macedonia and encompasses five strategic cost management techniques: activity based costing, product life-cycle, target costing, competitive advantage style and value chain analysis. Also, the study looks into the association of certain organizational characteristics with the implementation of contemporary cost management techniques and compares the findings to the conclusions reached by authors like Rossi (2014), Haldma and Lääts (2002), O’Connor et al. (2011). Data: The field work is based on a questionnaire distributed to companies from the textile industry. Tools: We analyze a sample of 46 surveys (response rate of 81 percent): one survey per garment company. Findings: Even though the initial assumption was that textile enterprises in North Macedonia do not apply contemporary cost management methods in strategic management of operations, the research proved the opposite to be true. However, the use of a chosen method does not depend on demographic characteristics of the respondents or company capital. The search for an implementation motive should be expanded and sought after in the operational and process features of entities. Contribution: This study is expected to increase the awareness about contemporary cost methods and to broaden the understanding of the relationships between organizational and employee factors and management accounting techniques employed.

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Investigating IFRS compliance in transitioning countries: A qualitative study

Author(s): Silvia Petre,Nadia Albu / Language(s): English Issue: 1/2020

Idea: The purpose of the paper is to investigate the institutional context in which companies’ compliance with IFRS is created over time. Data: We collected financial and non-financial data from the Bucharest Stock Exchange website, from companies’ website and from the media, for three pharma companies listed on the Bucharest Stock Exchange. We focused on the period 2013-2017, given that 2012 is the first year for the IFRS application in Romania in the individual accounts. Tools: We employed the EY (2012) Disclosure Checklist and the Dichotomous approach (Tsalavoutas, 2011) to determine the IFRS compliance index. We mobilize an institutional theory-based framework to analyze the IFRS compliance index. What’s new? Our results indicate that the level of compliance is an organizational response to macro-, industry-, and organizational level factors. Moreover, companies face several pressures for compliance with different requirements, and choose to what pressures to comply first. Therefore, compliance with disclosure requirements from some IFRS is a piece in an organizational puzzle, so wider frameworks and analyses are needed to understand organizational responses. So what?: Companies respond with various levels of compliance in emerging economies such as Romania, and understanding the factors influencing compliance is of interest for regulators, auditors, and capital market participants. Contribution: We contribute with a qualitative, institutional-based study to a research stream dominated by archival methods, and bring complementary explanations for organizational levels of compliance with IFRS.

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The impact of fraud-themed course on students’ attitude to fraud. Does previous studies and background matter?

Author(s): Maria Vassiljev / Language(s): English Issue: 1/2020

Research Question: The main research question is “Has the fraud examination had any impact on accounting and audit students’ attitudes to fraud?” Motivation: The problem of financial statement fraud is still actual. Accountants and auditors need a special education about fraud and ethical values to recognize a situation of fraud. To examine the influence of a correspondent course Nguyen et al. (2008) have examined students’ ethical values before and after the course of business ethics, Rennie and Rudland (2003) have researched potential impact of course on students’ attitude to academic misconduct. The novelty of the study is a questionnaire built on the basis of Fraud Triangle to find out students’ attitude to factors of fraud. Idea: The main idea is to examine whether the course of fraud examination changes accounting and audit students’ attitude to fraud? Also, the study tries to find out is there any difference in attitude to fraud conditioned by students’ background? Data: 55 postgraduate students of TalTech School of Business and Governance and 70 participants in the professional training programme “Accountant-financial officer” have filled in questionnaires in academic years 2015/2016–2018/2019. Tools: A questionnaire is chosen as a research method. Student’s t-test and one-way analysis of variance (one-way ANOVA) are used to answer all research questions. Findings: The course of fraud examination has a slight positive influence on students’ perception of fraud. A surprising result was that students without degree in accounting were slightly more optimistic in their ethical attitude to fraud. Younger and less experienced students more than others consider it possible for fraud to be committed. Therefore the course on ethics and fraud should be integral part of continuous education of accounting professionals. Contribution: Researches on topic of how to measure a change of attitude or ethical values have been combined, Fraud Triangle is offered as a basis for questionnaire.

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The dynamics of audit market and financial reporting under International Financial Reporting Standards: the case of Romanian listed companies

Author(s): Marta Tache / Language(s): English Issue: 1/2020

Research question: The purpose of this article is to analyze the dynamics of audit market related to the audit services and financial reporting in accordance with International Financial Reporting Standards. Motivation: Although there is a solid foundation of rules and principles, the practical controversy over the rule of law, the features of the financial market, the characteristics of the accounting regulation process and the ability to adapt the environment seem to be endless. A credibility benchmark is made by the auditor's opinion that increases the reliability of financial statements, thus providing investors with assurance about the entity's independence. In this context, a strong maturation of Romanian market seems to improve the institutional context under IFRS adoption and an increased number of companies audited by Big 4 reveals a solid audit market. Idea: The main purpose of the research is to investigate the actual circumstances regarding International Financial Reporting Standards and the changes on audit market regulated by International Standard on Auditing (IAS), regarding Romanian listed companies. The in-depth knowledge of these elements makes it possible to highlight the existing achievements, thus marking a bond between IFRS and IAS, as two congruent standards. Data: In the present survey, a sample of 20 companies listed on the Bucharest Stock Exchange, Premium Shares, during 2016-2018 has been analyzed. Tools: The study implies a quantitative model based on Whitney test for verifying the association between the type of auditor and the audit opinion in the context of IFRS. Findings: The result indicates that the majority of firms is audited by Big 4 and a change of audit firm is not directly associated to the change of audit opinion after the adoption of IFRS became mandatory. In the same time, the present survey shows a continuous improvement of the audit market under IFRS adoption.

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Spis treści

Author(s): Author Not Specified / Language(s): Polish Issue: 106/2020

Anna Szychta, Od Zespołu Redakcyjnego– Editorial 7 Anna Bartoszewicz, Małgorzata Cygańska, Ekonomiczno-finansowe aspekty realizacji zadań audytowych w szpitalach– Economic and financial consequences of the implementation of audit tasks in hospitals 9 Piotr Bednarek, Przesłanki monitorowania działań w audycie wewnętrznym – badanie pilotażowe – Premises for monitoring activities in the internal audit – pilot study 31 Ewa Chojnacka, Emilia Jadanowska, Użyteczność i korzyści ujawniania infor-macji niefinansowych – wyniki badania ankietowego przeprowadzonego wśród spółek notowanych na Giełdzie Papierów Wartościowych w Warszawie– Usefulness and benefits of disclosing non-financial information – results of a survey conducted among companies listed on the Warsaw Stock Exchange 45 Przemysław Czajor, Identyfikacja obszarów oddziaływania MSSF 9 na sytuację finansowo-majątkową jednostek oraz ocena skutków jego wdrożenia na przykładzie spółek notowanych na Giełdzie Papierów Wartościowych w Warszawie – Identification of areas of impact of IFRS 9 on the financial situation of entities and assessment of the effects of its implementation on the example of companies listed on the Warsaw Stock Exchange 67 Barbara Gierusz, Monika Mazurowska, Rola rezerw bilansowych w kształtowaniu kondycji finansowej przedsiębiorstwa– The role of reserves in creating the financial condition of the company 91 Cyryl Kotyla, Elektroniczne dowody księgowe w rozumieniu eIDAS– Electronic accounting documents as defined by eIDAS 107 Z historii rachunkowości / Accounting history Anna Olewnik-Dejewska, Bilanse wybranych nieruchomości ziemskich w międzywojennej Polsce – Balance sheets of selected manor estates in Poland in the inter-war period 133 W kierunku umiędzynarodowienia / Towards internationalization Justyna Dobroszek, Michał Biernacki, Małgorzata Macuda, Management accounting in logistics and supply chain management: evidence from Poland– Rachunkowość zarządcza w logistyce i zarządzaniu łańcuchem dostaw: przykład z Polski 153 Justyna Dobroszek, Michał Biernacki, Małgorzata Macuda, Management accounting in logistics and supply chain management: evidence from Poland– Rachunkowość zarządcza w logistyce i zarządzaniu łańcuchem dostaw: przykład z Polski 153 Sarhad Hamza Khdir, Anna Białek-Jaworska, IFRS adoption in emerging markets: the case of Iraq – Przyjęcie MSSF na rynkach wschodzących: przypadek Iraku 177 Monika Łada, Anna Konieczny, Jacek Wolak, A career in BPO and SSC Accounting Service Centers in Poland – the similarities and differences in selected aspects– Kariera w centrach usług księgowych BPO i SSC – podobieństwa i różnice w wybranych aspektach 191 Sprawozdania z konferencji / Report of the conference Beata Sadowska, Piotr Waśniewski, Sprawozdanie z forum Controlling – kształtowanie przyszłości– Report from the Controlling forum – shaping the future 213 Konferencje naukowe w dziedzinie rachunkowości i finansów organizowane przez szkoły wyższe w Polsce w 2020 roku– Scientific conferences in the field of accounting and finance organized by universities in Poland in 2020 217 Informacje dla autorów 219 Instructions for authors 229

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A Theoretical Analysis on measuring the Quality Disclosure of the Economic Financial Information

Author(s): Ioana Herbei (Mot) / Language(s): English Issue: 2/2018

In the current economic context, disclosure quality (DQ) became a decisive factor in communication policies of the entities, playing a fundamental role in the economic growth and the efficient functioning of entities on the market, and especially in creating or destroying the competitive advantage they hold. Many authors place the accounting information in the perimeter of the objectivity and the accuracy, which is essential in making economic decisions by the leadership. Thus, in support of decision-makers, accountants apply professional judgment (judgment of International Financial Reporting Standards), taking decisions in terms of the use of accounting treatments to achieve a quality of financial reporting information.The objective of this paper is to analyze the DQ measurement of economic-financial information, considering the debate existing today on this issue, especially as we note that the accounting information can be the best friend of actual and potential investors if it’s used properly

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Family presence in the firm’s capital and external auditor choice: Evidence from French listed firms

Author(s): Salma Damak Ayadi,Rahma Ben Salem,Asma Abdouli / Language(s): English Issue: 2/2020

Research question: The study investigates the impact of family presence in the firm’s capital on the demand for audit quality. Motivation: The place occupied by family businesses in the world economy and the role of external auditors as a guarantor of the quality of financial information. Idea: Auditor choice is one of the most important decisions a firm has to make. It is an important external governance mechanism. This study shows the effect of family presence in the firm’s capital on auditor choice. Data: In the study, a data set of 257 French listed firms during 2016 has been analysed. Tools: The study proposes a quantitative model based upon a binary logistic regression. Findings: Our results support that the family ownership structure is significantly and negatively related to the choice of higher-auditor quality. These results have allowed us to conclude that French family listed firms are less likely to appoint higher quality auditors. In summary, we find that family presence negatively affects the demand for audit quality.

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The transition to IPSAS standards: the extent of adoption and the influence of institutional, contingency and economic network factors

Author(s): Amel Amiri,Sarra Elleuch Hamza / Language(s): English Issue: 2/2020

Research Question: the study identifies the reasons behind the country choice between different IPSAS adoption approaches. Motivation: Our motivation is guided by the growing interest in financial reporting for the public sector. In this sense, this study is distinguished from the former articles by increasing the extent of adoption into four categories instead of dividing it into two classes (adopters vs. non-adopters). Besides, this paper differs from previous studies by relying jointly on not only the institutional and the contingency but also the economic network factors to explain countries’ decision to adopt IPSAS. Idea: In this paper, we deal with two objectives. Our first aim is to propose a new measure of the extent of the adoption of International Public Sector Accounting Standards (IPSAS). On the other hand, our second aim is to identify the factors influencing the IPSAS adoption decision. Data: Different sources are used: the IFAC’s websites, the ACCA’s website, the big audit firms websites, international banks and countries Ministries of Finance websites. Tools: Fifteen explanatory variables were retained to explain the variation in the extent of IPSAS adoption of 84 countries. Principal Component Analysis (PCA) is adopted to summarize the huge quantity of information presented in the explanatory variables. Then, a multinomial logistic regression is used to test our hypotheses. Findings: Our main results show that coercive and mimetic institutional pressures positively affect the adoption of cash-basis IPSAS. Whereas, the good economic governance has a significantly impact on the full accrual-basis IPSAS adoption. The close of economic relationships with international partners pushes countries to adopt modified accrual-basis IPSAS. Contribution: These findings help non-adopting countries that intend to move in the IPSAS direction to predict the form of their future adoption.

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The impact of tax rates on tax evasion: A macroeconomic study

Author(s): Wajdi Affes / Language(s): English Issue: 2/2020

Research Question: What is the impact of high tax rates on the level of tax evasion in different economies? Motivation: after the occurrence of the famous panama papers and paradise papers scandal (Alstadsæte et al., 2019) and seeing that tax burden has been incessantly increased due to higher tax burden (Slemrod, 2017). Many research papers focused on the impact of tax evasion on the equilibrium of economies (Fisman & Wei, 2004; Picur & Riahi-Belkaoui, 2006). That’s why we tried in our research paper to insist on the growth of the income tax rate as a principal determinant of tax evasion by emphasizing the importance of the economic characteristics of different countries. Idea: We examine the impact of tax burden on the level of tax evasion by analyzing the relationship between tax rates and tax evasion in the developed and emerging countries while taking on consideration their economic characteristics. Data: First of all, we analyze a sample of 143 countries where we focus on the cited relationship, then we divide this sample into 33 developed countries and 110 emerging countries. The collected data are related to the period preceding the publication date of the panama papers. Tools: We use a cross section analysis based on univariate and multivariate regression model applied for the whole sample and the two cited subsample groups. Findings: We find a positive and significant relationship between tax rates and tax evasion. This relationship no longer remains significant in the first group of the study which is composed by 33 developed countries however the second group composed by 110 emerging countries indicates that there is a positive and significant relationship between the two studied variables. Hence, in the following research we will strive for highlighting the main discriminate variables between both of the two cited samples. Contribution: The empirical findings have economic and tax implications for governments and decision and policies makers especially in economies with high levels of tax evasion.

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The effect of family ownership on accrual-based and real activities based earnings management: Evidence from the French context

Author(s): Zeineb Feki Cherif,Salma Damak Ayadi,Houda Ben Hamadi Melaouhia / Language(s): English Issue: 2/2020

Research Question: What is the effect of family ownership on accrual-based earnings management (ABEM) and on real earnings management (REM)? Motivation: Despite the importance and the predominance of family companies among the worldwide listed firms, there is a few study having examined earnings management in family businesses when compared to non-families ones. Their particular characteristics distinguishing them from typical public companies, family firms could provide an interesting setting for the purpose of investigating their earnings quality. Idea: Using agency theory and socio-emotional wealth (SEW) theory, we suggested and explained the impact of family ownership on earnings management. Data: We analyze a sample of French firms listed in CAC All-Tradable index in the period ranging from 2014 to 2016. Tools: We adopts the Generalized Least Squared (GLS) technique correcting heteroskedasticity and serial correlation problems related to panel data. Findings: We document that family ownership has no significant effects on ABEM, but it has a positive and significant influence on REM. In fact, this study conducted on French family firms shows that they are more involved in upward earnings management than non-family firms. Our results supports the hypothesis that family firms suffer from type II agency problems, and it can be explained by the desire to ensure the control and influence among the firm. Contributions: This study is expected to increase the understanding of the family firms’ behavior in terms of their earnings management practices building on the both agency and SEW theory.

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The simultaneous determination of cash conversion cycle components

Author(s): Georgios Kolias,Nikolaos Arnis,Kostas Karamanis / Language(s): English Issue: 2/2020

Research Question: What are the interaction effects and links between the cash conversion cycle components? Motivation: One of the major difficulties in studying the links between the components of the cash conversion cycle is the fact that each of them is a determinant of the others. Idea: We develop a model to define the direction of the relations between cash conversion cycle components taking into consideration the contemporaneous correlation between them. Data: For the purposes of our study we use a balance panel dataset from Greek wholesale sector over the period 2005 - 2014. Tools: Error components three-stage least squares estimation for simultaneous equations of panel data is used. Findings: Our results show that inventory, accounts receivable and accounts payable are mutually endogenous factors and identify the causal relationships. We find that not only accounts payable lead to an increase in accounts receivable, but also accounts receivable leads to an increase in accounts payable. We argue that the causes for the effect of receivables on inventory differ from that of inventory on receivables. Contribution: The results of this study would be useful for wholesalers and supply chain managers to analyze and identify the interactions of inventory and trade credit policies. Moreover, our model can be used for the more accurate forecasting of inventory, accounts receivable and accounts payable.

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Public interest oversight on professional accountancy: How do accountants perceive it in Turkey?

Author(s): Recep Pekdemir,Nimet Duygu Zigindere,Ayca Zeynep Suer / Language(s): English Issue: 2/2020

Research Question: The study investigates consequences of the public oversight establishment on accounting profession and also attempts to understand the thoughts and perceptions of the licensed/certified professional accountants on the public oversight activities in Turkey as an emerging country. Motivation: Public oversight activities have been evolved since it has existed less than two decades. After the Sarbanes & Oxley Act, first initiative was appeared in the United States as the PCAOB Public Company Accounting Oversight Board, then many countries have followed. Public interest oversight institutions play a crucial role as a leader of integrity in ensuring high quality auditing within accurate and informative framework. Idea: This study can be model or benchmark for the studies that can be realized in the other developing countries that might be trying to develop and improve accounting and auditing profession. The study shows the public oversight on accountancy has been a need for a better financial reporting for an effective and efficient financial market. Data: In the survey, members of licensed professional accountants, members of licensed prospective future professional accountants, and licensed auditors were included. Tools: Using a questionnaire, a survey was conducted as a methodological approach to determine the thoughts, perceptions, and expectations of respondents. Findings: The study concludes that professional accountants are aware of public oversight regulations and activities in Turkey. They are mainly thinking that public oversight activities will be impacting positively to the Turkish public accounting profession. Also, professional accountants mainly perceive that public oversight activities will be contributing efficient and effective financial reporting for financial and money markets in the country. Particularly financial statement audit environment has been changed and up scaled due to inspection activities of the public oversight organization on the auditors and audit firms. The results of the study might be interesting for the stakeholders of the public oversight activities on accounting profession.

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Current security threats in the national and international context

Author(s): Lavinia Mihaela Cristea / Language(s): English Issue: 2/2020

Research Question: What are the main security threats emphasized by national and international surveys? Motivation: The rapid growth of IT brings worldwide security issues (Takahashi et al., 2010; Benjamin et al., 2015). IT usage brings new challenges (e.g. higher risks of data exposure, sensitive corporate data, phishing, electronic fraud, impersonations, information security issues) (Morrow, 2012; Thielens, 2013; Rîndașu, 2016), cybercrime being a “sophisticated transnational threat operating on an industrial scale” (Hunton, 2012: 203). Idea: This paper intends to underline the great exposure of financial and non-financial information in the new cybersecurity context, indicated by IT impact on security threats and cyberattacks. Data: The author traced the analysis of the most frequent cyber threats, over a period of six years (2013-2018), based on 20 security reports. Tools: The author adopts the qualitative method, applying critical observations on emerging technologies impact. A hand-collecting method is required, for the analysis and comparison of cybersecurity threats reports. Findings: This investigation highlights Targeted attacks/ APTs, malware and ransomware on top security threats that continue to disrupt worldwide and Romanian landscape, along with a major rate of employee errors. The paper enhances on the consequences, main security threats and concludes on security cybercrime prevention (i.e. adequate business model implementation, Cloud security solutions, 24/7 monitoring for continuous protection, continuous IT security training, implemented modules against a variety of security incidents, regular updates). Contribution: By bringing to the fore actual security issues, the author concludes on main security threats and completes previous specialized works on security against cybercrime.

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Implementing Benford’s law in continuous monitoring applications

Author(s): Kishore Singh,Peter Best / Language(s): English Issue: 2/2020

Research Question: Do modern ERP systems record sufficient information to allow retrospective monitoring of accounts payable transactions? Can Benford’s Law be applied to these transactions to detect potential fraud in accounting data? Motivation: Modern ERP systems are capable of recording several thousands of transactions daily. This makes it difficult to find a few instances of anomalous activities among legitimate transactions. As organizations continue to become more complex and demand more integrated business processes, automated analytics may provide auditors and fraud examiners some degree of assurance on continuous information simultaneously with, or shortly after disclosure of information. Idea: In this study we develop a proof of concept prototype to monitor invoice transactions and identify those that violate Benford’s law. The prototype exploits audit trails in enterprise systems. Data: Data was obtained from the SAP ERP systems of two large organizations. Organization 1, a government department, provided a one month sample of accounting transaction data. Organization 2, a global manufacturing company, provided a six month sample of their transaction data. Tools: Verification and validation was achieved by obtaining independent reviews from an expert and a panel of auditing practitioners. Their feedback was sought using a survey instrument where they rated various aspects of the prototype software. Findings: A key aim was to demonstrate the feasibility of implementing Benford’s analysis in continuous monitoring applications by exploiting audit trails in ERP systems. The concept was demonstrated by designing prototype software. We found that Benford’s analysis, is a useful tool for identifying suspicious transactions. These transactions may contain possible errors, potential fraud or other irregularities. Contribution: An important contribution of the study is that the entire population of transactions for a specified time period are analyzed. This approach is in contrast with the traditional or manual audit approach which is limited because it reviews only a small percentage of a large population of transactions. The prototype demonstrates the application of technology and data analytics to process transaction data from a SAP ERP system in a near real-time basis. This represents the next step in the evolution of the financial audit from manual to automated methods.

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IMPACT OF ENVIRONMENTAL, DEMOGRAPHICAL AND PERSONAL FACTORS ON AUDITORS’ ETHICAL DECISION MAKING IN NIGERIA

Author(s): Temitope Olamide Fagbemi / Language(s): English Issue: 3/2020

This research introduces organization and personal dimensions to the study of ethics amid the adverse reactions of the users of the financial statements to a business fiasco. Using survey research design, a sample of one hundred and thirty-eight audit firms was taken while Probit analysis was used in testing the propositions made. Findings indicate that knowledge of the client industry and government policy are vital in shaping ethical decision making. It was concluded that environmental uncertainties and personal orientation of the auditor offers explanations to the dilemma and decision making of the auditor. Thus, it is suggested that a critical review of audit personnel characteristics and the technological environment would be a step in the right direction if the ethical dilemma is to be minimized.

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MANIPULATION OF FINANCIAL STATEMENTS THROUGH THE USE OF CREATIVE ACCOUNTING. CASE OF ROMANIAN COMPANIES

Author(s): Ioana-Lavinia Safta,Monica Violeta Achim,Sorin Nicolae Borlea / Language(s): English Issue: 3/2020

The manipulation of the information presented through financial statements could represent a significant red flag for suspected fraud. In our paper, we investigated the extent to which the Romanian companies resort to manipulation of information data presented through the reported annual financial statements. For this purpose, we used a group consisting of 62 non-financial companies listed on the Bucharest Stock Exchange for the analyzed period 2017- 2018. The results of our study show that a majority percentage of the Romanian companies (approx. 84%) resort to manipulation of information provided through financial statements. Following the analysis carried out by activity fields, the results show that the companies activating in the fields of tourism, constructions, trade and transport resort to the manipulation of financial statements in the percent of 100%, followed by the companies activating in the field of production (86%) and services (50%). Our results are extremely useful to the users of financial information who must acknowledge the risks that they are exposed to in their decision-making process.

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ANALYSIS OF ECONOMIC PERFORMANCE IN AGRICULTURE USING ECONOMETRIC MODELING

Author(s): Sorina Simona Bumbescu / Language(s): English Issue: 3/2020

Agriculture is a priority sector of the national economy, so the analysis of the economic performance of agricultural holdings in Romania using modern methods, such as econometric modeling, is of particular importance. In this article is made an analysis of economic performance, expressed by ROA and ROE, for the first 500 farms in Romania (ordered by turnover size), over a period of 5 years, the purpose being to provide an answer to a fundamental research question: Which are the economic indicators/ variables that significantly influence the economic performance expressed by ROA and ROE? The results of this study highlight the relevance of the econometric modeling applied for performance analysis as well as the main indicators that significantly influence the economic performance of agricultural holdings expressed by ROA and ROE. The paper brings a significant contribution to make correct decisions aimed at the economic performance of the agricultural sector.

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