This report discusses and analyzes the four different articles of research in accounting. It analyzes the financial reporting and disclosure, and benefits and limitation of sampling based on the research studies in Bangladesh and Sri Lanka. Apart from this, it analyzes the agency theory, the assumption of agency theory, stewardship, the executive compensation, and the alternative theories of the agency theory. Furthermore, it analyzes an article by Kangarluie and Aalizadeh (2017) that focuses on the auditing expectation gap in Iran. This report includes the detailed analysis of research article in terms of literature review, methodology, hypothesis, and result. Eventually, it evaluates an article by Adeyemi and Olowookere (2011) and defines the population, research instrument in the article, and the relation between research questions and hypothesis in the article.
The table 3 in the study of financial reporting in Bangladesh and table 3 in the same study in Sri Lanka show the percentage of the companies making different kinds of disclosure to their stakeholders. The table 3 from the research study on the financial reporting in Bangladesh shows the reporting by the companies in investor’s relation. The number of companies studied was 98. The companies engaged in disclosing the share related information, news and announcement of the company, information about payment of dividend, medias and gallery, and price sensitive information (Mitra et al., 2017). Apart from this, the table 3 in this study shows the number of companies for individual items of the disclosure.
At the same time, table 3 in the study of Sri Lanka shows different kinds of information on the Sri Lankan Corporate Websites. Along with this, percentage, it shows the sectors from which companies were sampled. The table shows the information related to the history of the company, products and services of the company, and financial information. The Statistical test in the Panel B of table 3 shows that the industrial affiliation assists in determining that how intensively the companies in Sri Lanka involves in IFR practices (Kuruppu et al., 2015). This states the companies do IFR practices can disclose the financial information in different formats such as Flash, PDF, Audio, and Video. The Panel B of Table 3 shows the Chi-Square and Likelihood Ratio that helps in measuring the values and difference among industries in terms of types of information presented by them.
The research study based the sampling methods has different advantage and disadvantages. The main advantage of sampling in the research study is that the research cost is reduced in terms of the amount of money and amount of time. This helps in collecting only intensive and exhaustive data regarding the research problem (Hair, 2015). There is a chance of bias in the sampling that can affect the result of research. This is very hard to find the samples that can truly represent the population. On the other hand, the study whole population provides an accurate and reliable result that is not 100% possible in sampling method. However, this is very hard to analyze the individual variable or companies in the economy. This is very long and time-consuming research study.
Based on the above analysis, it can be said that the sampling approach is better in the analysis than the analysis of the entire population. There are different methods that can help in complementing the issues of bias and other issues. The sampling method can reduce the cost of research and time required in the research of entire population (Sarantakos, 2012). The sampling method is a more effective method in the given research article to reach the research purpose.
The agency theory has the influence on the structuring of the compensation packages of the employees. The agency theory stated that the shareholders decide the payment of the executives to maximize the surplus. The information provided by the executives can occur the moral hazards, which has a requirement that payment is sensitive in relation to business performance. The business firm may use the explicit bonus and equity-based pay program to get the information from the executives for the business growth (Sigler and Carolina, 2011). The structure of the executive compensation will represent the perceived and actual attributes of the executives that have an impact on the performance of a business entity and their costs. Along with this, agency theory defines that the member of the board of directors is responsible to set the executives to pay and it would be based on the firm performance. The theory stated that structure of the executive pay on basis of gender difference is inefficient (Ozkan, 2011). The compensation packages of the executives would be designed on basis of their performance. At the same time, agency theory defines that compensation package of the executive would depend on the changes in the performance and wealth of shareholders and compensation package of the CEO would be decided on basis of firm performance and interests of the shareholders. The compensation package of the CEO can enhance the firm performance effectively they get higher compensation package and vice-versa (Cai et al, 2011). In this way, CEO compensation and firms performance have a positive relationship.
Based on research, it can be stated that employees who are the risk takers they expect the high compensation packages. This is because to handle the risks they need to hard work and more work that consumes their time so to compensate the time they are expected to the higher compensation package. However, employees who avoid the risks they expect the lesser compensation packages as they do not have to do hard work (Hemmings, 2016). The risk avoider employees avoid the risks and handle the easy tasks, and get the lower compensation packages. Along with this, the executives provide the important information
If company vied the compensation of executive as excessive then it may affect the profitability of the company negatively. This is because the excessive compensation of executive increases the expenses of the company that reduces the profitability or level of company profit. Along with this, when company viewed the compensation of executive as excessive then company accountant or internal auditor’s needs to aware about the adjustment of the compensation amount. If the accountant does not record the executive compensation as excessive but company views as excessive then it affects the reliability and validity of the company financial statements negatively (Graham et al, 2011). The view of the company in relation to executive compensation as excessive influence the interest or productivity of the executive that company considers his/her compensation as excessive or he/she is an irrelevance for the company.
The agency theory assumes that principal pay the compensation to agents on basis of their services. This means the reward and compensation of the agents or employees would be decided on basis of their performance and services (Jabeen, 2011). This assumption is the challenge as because the compensation is indeed a cost of the company. The compensation that company provides to its employees on basis of their performance and level of services increases the cost of the company as employees get the higher amount from the company rather than predetermined salary or compensation (Armstrong, 2010).
The theory of the inspired confidence and policeman are the alternative theories to agency theory. The theory of confidence stated that auditors perform the various general functions in relation to society and provides the independent opinion to business firms based on the evaluation. The theory of the confidence also defines that confidence is betrayed if the auditors are underperformed and do not fulfill the expectation of the society. The theory also stated that expectations of the society are influenced by the change in the environment and perceptions (Olowookere, 2011). At the same time, the second alternative theory is a policeman that defined it is the responsibility of the auditors that they detect the fraud in the audit work and focus on the arithmetical accuracy. However, the theory of policeman is unable to explain the shift of auditing in relation to fairness and trust of the firm’s financial reports.
The agency theory assumes that agents are not trustworthy but does not disclose the causes. However, the theory of confidence defined the cause of confidence betrayed, as underperformance and un-fulfillment of the social expectation are the cause of lost of confidence. Furthermore, the theory of policeman defined that it is the responsibility of auditors that they detect the fraud in the financial statements.
The concept of stewards comes from the Geek, Chinese, Roman, and Egyptian. Over the time, stewardship is highly related to accounting that can be defined by the elaborate record keeping in relation to inflows/outflows of resources, and inventory for the purpose of prevention of loss. After this Stewardship developed as Sustainability and involved the overview of the operational control regarding the conservation of resources. At this stage, stewards focus on the efficient operations, the duty of care, sustainability, and management of resources. The stage of the stewards is developed as growth after the sustainability. At this stage, the stewards need to play a significant role in the expansion of the master’s resources and focus on the maximization of assets, uncertainty with a focus on the outcomes and goals (Wilson, 2016). The stage of the stewards recording also developed as an optimization. In this stage, stewards need to identify the better investment opportunities in a business venture where the company can achieve the higher return on the investment. Along with this, stewards should focus on the economy, flexibility, planning, effectiveness, and strategic control. At the stage, stewards also perform their duty with independence and with a high degree of trust to build the relationship with suppliers and business owners.
The introduction is the first chapter in any research paper that provides initial information about the research problem, research background, research significance, and sections of the research. At the same time, the literature review is the second chapter that focuses on the research problem and provides the basic conceptual information about the research problem and research topic selected (Sekaran and Bougie, 2016). The research in the given article is focused on exploring the expectation gap in the auditing in Iran. It aims to investigate the expectation gap of some private independent auditing firms. The literature review in the given article has prepared based on the information from different researcher papers concerning to the auditing and expectation gap in auditing. The literature review has defined the gap between auditors’ understanding of their profession and the perception of other people (Kangarluie and Aalizadeh, 2017). There is very less research included in the literature that can affect the understanding because the literature result focused on the expectation gap in sectors and fraud but did not focus on the reason for the gap in detail. The literature review also included some previous investigation on the private agencies that helped the better empirical investigation the researcher in this research study.
Methodology:
The research methodology is an important part of any research that defines the methods used in the research. The research methodology includes the research design, data collection methods, sampling methods, and data analysis methods. Both primary and secondary data were collected in the research to analyze the expectation gap in auditing. The researcher was mostly collected quantitative data as the research aimed empirical investigation of expectation gap (Bryman and Bell, 2015). The researcher did sample research because it was very hard to do the whole population research. The researcher selected samples from the auditing officials and the management from the firms. Apart from this, the survey method was used to collect the information. The questionnaire consisting Likert scale questions was used. The survey methods helped the research in collecting relevant and reliable information. The methods used in the data collection were effective. The sample size is too big that caused difficulty in the collecting the information (Eriksson and Kovalainen, 2015).
At the same time, different data analytical techniques were used in this research. Cronbach alpha was used in this research that proved that the data collected in the research was highly consistent and relevant to the research topic. The statistical tools such as mean, median, standard deviation, K-S statistics, and the economic tools such as F-test, t-test, and others were used to analyze the data. These data analysis techniques are quite effective and ensure the effective analysis of data. They helped the research in reaching an impactful conclusion based on the information (Kangarluie and Aalizadeh, 2017). Therefore, it can be said that research methodology in the given research article is quite effective for meeting the purpose of the empirical research. They helped in the empirical investigation of the managers and auditors to analyze the expectation gap.
Hypothesis:
There is two hypothesis in the given research article.
H1: Significant difference between roles and responsiveness of auditors in management and in point of views of auditors
H2: There is the difference between independence of auditors in the management and in point of views of auditors (Kangarluie and Aalizadeh, 2017).
These two hypotheses were developed based on the previous studies and the literature reviews. The hypotheses were provable and relate to the research problem and topic in the article. The research hypothesis relates to the expectation gap in the auditing.
Results:
Through the analysis of the data in the given research article, it is found that there is a significant difference between two groups. They are different to each other in terms of independence and their role and responsibilities (Kangarluie and Aalizadeh, 2017). The Levene’s test was used to analyze the data that analyzed that there is the difference between the role and responsibilities of auditors in their point of views as well as management. It has been supported by different kinds of literature in the literature review.
Conclusion:
The research paper had an empirical investigation that successfully investigated the expectation gap in auditing of some private organization in Iran (Kangarluie and Aalizadeh, 2017). The conclusion section in the paper summarized the research methodology and finding of the research effectively.
A population is the group or total of the individuals who are the interest of the researcher. The population is the universe that is targeted by the researcher for the research study. The research population is targeted on basis of different factors such as cultural, ethnic, racial subgroups and socioeconomic conditions (Neuendorf, 2016). The selection of target population is important to conduct the research study in an effective manner to achieve the research objectives. The selection of targeted population supports the researcher in the selection of the sample. This is because the population is the total number of individuals and it is not possible for the researcher to study the entire population. Therefore, the population is divided into different groups based on the different factors such as geographical boundaries, cultural factors, demographic factors, and nature of business organizations. In this given article, the targeted population is the all the users of the financial statements in Nigeria to know about the perception of stakeholders in relation to audit performance gap in Nigeria (Olowookere, 2011). This targeted population has supported the researcher in selection of sample on basis of total population.
The research instruments are that equipment or tools that are used by the research for conducting the research study. The research instruments need to be used or assessed by the researcher for the validity and reliability of research outcomes. The validation of research instruments involves the information about the methods used to collect the primary and secondary data, and selection of a sample from the total population (Sousa and Rojjanasrirat, 2011). These different instruments enhance the reliability and validity of research study. In the given article, the researcher ensures that use of the questionnaire method is appropriate to conduct the pilot survey of selected 10 sample or members of the entire targeted population (Olowookere, 2011). Along with this, the two different experts design the questionnaire, which belongs to accounting field and designed questionnaire is pre-tested before conducting the survey.
The research questions are linked with the research hypotheses as research questions fulfill the research hypotheses effectively. The identification of the roles and responsibilities of external auditors measures the credibility of the external auditors. Along with this, research question also measures the perception of the financial statements users in relation to audit performance expectation gap that also provides the information that external auditors provide the opinion and issue the credible assurance when they are required (Olowookere, 2011). Based on this, it can be stated that in the given article, the research questions and research hypotheses are well linked and there is relationship exists between the both things.
Conclusion:
From the above analysis, it can be said that the report has effectively met all the requirements. It has analyzed the four articles effectively. All the questions have been answered based on the research into articles.
References:
Armstrong, M., (2010) Armstrong’s handbook of reward management practice: Improving performance through reward. Kogan Page Publishers.
Bryman, A. and Bell, E. (2015) Business research methods. USA: Oxford University Press.
Cai, Y., Jo, H. and Pan, C., (2011) Vice or virtue? The impact of corporate social responsibility on executive compensation. Journal of Business Ethics, 104(2), pp.159-173.
Eriksson, P. and Kovalainen, A. (2015) Qualitative Methods in Business Research: A Practical Guide to Social Research. UK: Sage
Forbes-Pitt, K. (2011) The Assumption of Agency Theory. UK: Taylor & Francis.
Graham, J.R., Li, S. and Qiu, J., (2011) Managerial attributes and executive compensation. The Review of Financial Studies, 25(1), pp.144-186.
Hair, J.F., (2015) Essentials of business research methods. USA: ME Sharpe.
Hemmings, P., (2016) Compensation Systems, Job Performance, and How to Ask for a Pay Raise. USA: Xlibris Corporation.
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Kangarluie, S & Aalizadeh, A. (2017) ‘The expectation gap in auditing’, Accounting, vol. 3, no. 1, pp. 19-22.
Kuruppu, N, Oyelere, P & Al-Jabri, H. (2015) ‘Internet financial reporting and disclosure practices of publicly traded corporations: evidence from Sri Lanka’, Accounting & Taxation, vol. 7, no. 1, pp. 75-91.
Mitra, RK, Hossain, DM & Mazumder, MMM. (2017) ‘Web-based corporate reporting: an exploratory study on the Bangladeshi companies’, Middle East Journal of Business, vol. 12, no. 3, pp. 25-30.
Neuendorf, K.A., (2016) The content analysis guidebook. USA: Sage.
Olowookere, J.K., (2011) Stakeholders’ perception of audit performance gap in Nigeria. International Journal of Accounting and Financial Reporting, 1(1), p.29.
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