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Study on the association between earnings management and value relevance based on the reporting method used for operating cash flows

Author(s): Maria Carmen Huian,Marilena Mironiuc,Mihaela Chiriac / Language(s): English,Romanian Issue: 149/2018

This paper analyses the association between earnings management and value relevance of accounting information, for a number of 556 observations from a sample of 65 companies listed on the Bucharest Stock Exchange during a 10 year period: 2006-2015. Sampled companies are classified according to the method used for the reporting of operating cash flows. Findings confirm that entities using the indirect method have a higher level of discretionary accruals and are more tempted to opportunistically increase their earnings. As far as value relevance is concerned, results show that participants on the Romanian capital market place more weight on the information reported by entities experiencing higher levels of discretionary accruals.

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Audit opinion impact in the investors’ perception – empirical evidence on Bucharest Stock Exchange

Author(s): Tatiana Danescu,Ioan-Ovidiu Spătăcean / Language(s): English,Romanian Issue: 149/2018

The integrity and credibility of financial statements are sensitive aspects that significantly influence the investors’ confidence in the capital market efficiency. Recent research in the area of (re)establishing effective communication between the auditor and the investors have brought into the attention of audit practitioners the provisions of International Standard on Auditing (ISA) 701 “Communicating Key Audit Matters in the Independent Auditor’s Report.” This approach proves that investors demand more information that accompanies the audit opinion, when forming a decision to buy, hold or sell equity instruments. Our research is focused on identifying, isolating and analyzing the significant changes in financial asset trading prices, as a consequence of publishing the auditor report. Thus, the overall objective is to assess the impact of the modified opinion, expressed by the auditor in accordance with ISA 705 “Modifications to the Opinion in the Independent Auditor’s Report”, upon the prices of financial assets. Subsequently, the specific objectives aim to identify quantifiable adjustments in the financial position of the entities and to analyze its impact on trading prices. Research is focused on a sample that consists of 32 listed entities, of which 25 entities are included in the BET-XT index and seven entities are traded on the alternative trading system AeRO, selected in relation to the liquidity degree measured by the BVB market operator. Our observations upon changes in financial asset prices were focused on 2009-2017 period, while the analized audit reports addressed the reporting periods from 2008 to 2016, included.

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Determinants of employees’ psychological ownership on budgetary slack

Author(s): Cheok Mui Yee,Edward Wong Sek Khin,Kamisah Ismail / Language(s): English,Romanian Issue: 149/2018

The existence of budgetary slack permeates every level of private sector organisations. Employees (i.e., budget makers) usually request excessive budgetary resources in the budgeting process. Due to its dysfunctional nature, existing researchers had extensively examined the relationship between budgetary slack and employees’ performance. This study adopted a survey questionnaire approach to examine the relationship between determinants of psychological ownership and employees’ intention to create slack in budgeting. There were 475 budget makers from private sector organisations in the Klang Valley, Malaysia who participated in this study through a questionnaire survey. Preliminary data analysis was performed using normality, multi-collinearity, variance inflation index (VIF), common method variance, and reliability analysis. Multiple regression analysis was also applied to investigate the relationships of each dimension of employees’ psychological ownership on budgetary slack. This paper is considered a pioneer empirical study that investigates the determinants of psychological ownership on budgetary slack among budget makers from the psychological perspective in the context of private sector organisations in Malaysia, where slack activities in budgeting existed.

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Information security challenges - vulnerabilities brought by ERP applications and cloud platforms

Author(s): Sînziana-Maria Rîndaşu / Language(s): English,Romanian Issue: 149/2018

The accounting profession is in a continuous process of change as ERP applications and emerging technologies such as cloud computing continue to bring improvements into the accounting and financial areas. Nevertheless, beside the variety of benefits, these technologies carry specific risks that can affect the fundamental characteristics and security aspects of data. This paper aims to highlight the most common vulnerabilities of ERP applications and cloud computing platforms in the context of digital accounting. At the same time, in addition to the technical aspects and good practices used to prevent and correct these vulnerabilities, the study focuses on a critical component of data security: the human factor. Moreover, the empirical research conducted has highlighted the fact that young professionals understand the need for sensitive data protection, but they do not always display the best behavior to prevent security incidents. This article aims to provide an overview of ERP applications and cloud computing platforms that are currently used in the financial and accounting field, focusing on the main technical vulnerabilities and the human factor, which is one of the most important aspects of data security.

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Risks of Cyber Attacks on Financial Audit Activity

Author(s): Gheorghe Popescu,Cristina-Raluca Popescu / Language(s): English,Romanian Issue: 149/2018

Simultaneously with increasing the speed and precision of data processing, multiple connectivity, fast transmission over long distances, and their results, the development and generalization of automatic processing, brought many new vulnerabilities and deficiencies, otherwise inevitable, the basis of new risk categories. The risks of cyber attacks on financial auditing involve the risk management of information systems security. Identifying, mitigating or eliminating the effects are mandatory requirements without which a high-quality financial audit can not be achieved in a highly computerized environment. To substantiate specific risk management actions on information systems security, in this study we analyzed the main types and techniques used in cyber attacks by making their radiography, identifying the strengths and weaknesses of new technologies and systems that are or not favoring security systems. At the same time, we analyzed the security system of an information system, organized it in layers, and revealed the specific areas for the security evaluation of the Mehari method. Finally, some of the results of a survey based on a questionnaire made with the support of master students of the "Information Systems Audit and Control" course were revealed, with three of the most common weaknesses identified for each security domain.

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The diversification of income sources in the higher education public institutions budgets

Author(s): Oana Chirica,Bogdan Puscas / Language(s): English,Romanian Issue: 149/2018

The formation of public institutions income has been approached nationally and internationally alike. In concrete terms, the dependence on a single financing source can cause financial instability at the level of public universities. That is the reason why strategic management in education institutions needs to focus on attracting revenue sources, other than subsidies from state budget, and their use in the context of financial autonomy can ensure the achievement of goals in the institutional strategy. This research is based on literature review on the need to diversify universities’ financing sources and the means to achieve that. The identification of complementary sources for financing education – a real challenge for universities – can lead to an increase of their competitiveness nationally and internationally. Our research highlights the relevance and the problematic of diversifying financing sources of public universities. To this end, it centralizes types of extra-budgetary revenue sources: revenues from educational taxes, from registration and enrolment taxes, from resits taxes, from services taxes, etc. Various policies on educational taxes are also analysed, in the context of the competition among universities, as well as ways of ensuring provisions in the case of a decrease in the attractiveness of programs.

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On hedge effectiveness assessment under IFRS 9

Author(s): Jatinder Pal Singh / Language(s): English,Romanian Issue: 149/2018

IFRS 9 has introduced certain radical changes to the hedge effectiveness assessment criteria of IAS 39 for entities desirous of availing hedge accounting. It is necessary for business entities contemplating the use of financial derivatives for hedging purposes to appreciate the nuances associated with the upstaged provisions of hedge accounting of IFRS 9 in context of hedge effectiveness requirements envisaged therein. The present article addresses this issue and provides a threadbare analysis of the fundamental model on which the IFRS 9 hedge effectiveness assessment is premised.

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Изследване на състоянието и развитието на управленското счетоводство на база на публикациите в специализираните счетоводни списания

Author(s): Dragan Georgiev,Iliyan Hristov / Language(s): Bulgarian Issue: 4/2017

The article examines researches that apply citation analysis and literature review approaches to publications in specialized journals in the field of management accounting. The aim is to emphasize their role as a multifunctional methods and their value in identifying the thematic focus of current publications in this field. Furthermore literature review results set new benchmarks and provide opportunities for future researches in the field of management accounting.

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How has IFRS impacted financial reporting for unlisted entities?

Author(s): Elina Haapamäki / Language(s): English Issue: 1/2018

This paper addresses the question whether adoption of International Financial Reporting Standards (IFRS) is associated with low earnings management in unlisted companies in three European countries. Therefore, this paper investigates whether companies that have adopted IFRS voluntarily engage significantly less in earnings management compared to companies that have not adopted IFRS. Moreover, this study examines firm-specific incentives and their role in the adoption decision within different institutional settings. The distribution of earnings is analyzed to discover whether companies have managed their earnings. Logistic regression analysis is used to examine the firm-specific incentives. Empirical findings reveal that in sample of unlisted firms using IFRS the distribution of earnings is smoother. Thus, the results provide supporting evidence for the adoption of IFRS. Moreover, results of this study provide relatively good empirical support for statements that large unlisted firms with foreign owners and that are profitable are more likely to adopt IFRS voluntarily. However, the firm-specific incentives play different role in the adoption decision process in weak institutional settings compared to strong institutional settings.

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Mergers and accounting performance: Some evidence from Greece during the economic crisis

Author(s): Michail Pazarskis,George Drogalas,Andreas Koutoupis / Language(s): English Issue: 1/2018

The study examines the impact of mergers on the accounting performance of merger-involved firms in Greece. The study analyses four basic profitability ratios from financial statements of a sample of sixty Greek listed firms at the Athens Exchange that executed as acquirers’ one merger in the period a ten-year-period (2005-2014). In order to measure firms’ accounting performance, comparisons of pre- and post-merger firm profitability are examined for one year before and after the merger events (with data analysis from 2004 to 2015). The results revealed that mergers have had a negative impact on profitability and, in general, on accounting performance of the merger-involved firms. Furthermore, the study investigates the impact of the economic crisis on the success of mergers in Greece. There is evidence there is also a negative effect on accounting performance after mergers during the period of the economic crisis in Greece.

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Timeliness of earnings reported by Romanian listed companies

Author(s): Mihai Carp,Constantin Toma / Language(s): English Issue: 1/2018

The paper aims to analyze the quality of financial information, by assessing the timeliness of earnings, using information specific to non-financial companies listed on the regulated section of Bucharest Stock Exchange. The study also seeks to assess the symmetry of actions for the timely recognition of potential gains and losses (components of the economic income) and, if there is an asymmetry, to identify the sense of the temporary gap. The phenomenon is analysed in conjunction with a number of control factors such as the Romanian Accounting Standards (RAS), the International Financial Reporting Standards (IFRS), the degree of indebtedness or the entities’ field of activity. Quantitative analysis performed through econometric models consecrated in the field, such as Basu (1997) and Ball and Shivakumar (2005), reveals that the companies included in the study provide financial information that meets the qualitatively criterion assessed, respectively earnings timeliness. Deepening the analysis has made it possible to identify a timely recognition both for unrealised gains and potential losses, as a result of tests carried out on the whole sample, an advance in what concerns the inclusion of economic lose in the accounting income compared to the recognition of economic gains. The presence of disjunctive factors in the analysis generated a number of particular results. In the case of normally indebted companies that apply the IFRS, a timely recognition of economic gains and losses was noted, without the gap specific to conservatism.

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The impact of the implementations of the Sysrust’s framework upon the quality of financial reporting: structural equation modelling approach

Author(s): Ahmed Al-Dmour,Maysem Abbod,Rand Al-Dmour / Language(s): English Issue: 1/2018

The purpose of this research is to examine empirically, validate, and predict the reliability of the proposed relationship between the reliability of AIS process in the context of SysTrust' framework (principles and criteria) and the quality of financial reporting in shareholdings companies in Jordan. For this purpose, a primary data was used that was collected through a self-structured questionnaire from 239 of shareholdings companies. The extent of SysTrust's framework (principles and criteria) and the quality of financial reporting were also measured. The data were analyzed using structural equation modeling. The results showed that the magnitude and significance of the loading estimate and they indicated that all of the main five principles of SysTrust's framework are relevant in predicting the quality of financial reporting. Moreover, the reliability of AIS by the implementation of these five principles of SysTrust's framework were positively impacting the quality of financial reporting, as the structural coefficient for these paths are significant.

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Using social media analytics: The effect of President Trump’s tweets on companies’ performance

Author(s): Ahmad H. Juma’h,Yazan Alnsour / Language(s): English Issue: 1/2018

Social media is becoming one of the main sources of unstructured data. Many financial analysts use Twitter to gather data and obtain meaningful insights. Recently, high-profile politicians like President Trump have been using Twitter to communicate with the public. The President’s Tweets are used as considered to be informative signals that may influence consumers and affect investors’ decisions in the stock market. The effect of these signals can be measured by coinciding changes in the stock market or changes in the share prices of certain companies targeted in the President’s Tweets. The Tweets used in this research include keywords that are related to finance and economics, public policy, political considerations, and targeted companies. Event study methodology is used to determine the relationship between Trump’s Tweets’ content and daily changes in major indexes and targeted companies’ excess returns. Although many of the recent discussions have indicated that Trump’s microblogging can affect the financial markets, the results, on average, show no significant effect of Trump’s Tweets on either market indexes nor on most of the targeted companies share prices.

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The impact of macroeconomic variables on the evolution of the credit risk rate

Author(s): Luminița Gabriela Istrate,Bogdan Stefan Ionescu / Language(s): English Issue: 1/2018

The dynamics of the real economy is a major driver of the evolution of arrears at the level of the pool of loans granted to non-financial companies, completed by the financial pressure induced by the monetary conditions. Lending allows on the one hand providing resources for companies that need financing for investment projects, on the other hand, it supports the fund holders to place resources for obtaining profit. The role of the lending policy in the activity of commercial banks is very important, as it may influence both the cost of credits and the loan portfolio quality in the future. The purpose of this research is to find the macroeconomic variables that significantly influence credit risk and to develop a statistical model for predicting the doubtful and non-performing loans rate. Thus, it is envisaged the research of mechanisms by which the dynamics of the real economy and the money market conditions influence the evolution of the credit risk in different business sectors.

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What factors affect the choice of accounting as a career? The case of Romania

Author(s): Cristina-Florina Țicoi,Nadia Albu / Language(s): English Issue: 1/2018

This paper aims to examine the motivations of choosing accounting as a profession in Romania. The paper is motivated by the recent interest at the international level in understanding the trends in the accounting profession. The theoretical tension arises from the Romanian context given the significant challenges for the profession triggered by the transition from communism to a market-based economy. We use a survey-based approach. The sample consists of 112 students undertaking accounting courses both for Bachelor’s Degree or Master Courses at two Romanian universities and 125 professionals belonging to The Body of Expert and Licensed Accountants of Romania. We find that the most important group of factors in choosing the accounting career includes the intellectual motivation, followed by relational and financial incentives. There are a few significant differences between men and women, and between students and professionals. When differences occur, women manifest a lower level of motivation, and professional accountants a higher level of motivation. The results show the driving forces behind the composition of the accounting profession and inform the sociology of the profession, of interest for both academia and practice. Our study contributes to an emerging national and international literature investigating the accounting profession by providing concrete information about the motivations of choosing it in Romania.

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Positive and negative implications entailed by fixed-term employment contracts

Author(s): Mihaela-Emilia Marica / Language(s): English Issue: 1/2018

Generally, fixed-term employment contracts are seen as a stepping stone to permanent employment; they have become popular among the flexible forms of work contracts, and are the object of an increasing number of debates and assessments, investigating both the perspective legislation and the specific conseuences on the parties concluding a fixed-term employment contract. Despite the positive aspects of temporary employment - a positive effect on the rate of employment, and the common perception of such contracts as a preliminary step to permanent employmnet, as well as the flexibility they bring to the labor market - one cannot ignore the negative implications of fixed-term employment contract on the nature of the employment relationship, the system of social protection, the working conditions, the economic security, and the job stability. Based on these considerations, the present paper investigates the advantages and disadvantages of the individual fixed-term employment contract from the standpoints of both employers and employees. Obviously, this approach aims to explore the usefulness and importance of these contract types, as means for balancing the needs of employers and employees on the labor market, and for identifying concrete instances that justify the liberalization of fixed-term employment, despite all the inherent risks entailed by any type of non-standard work: lack of job security; reduced social protection and security for those concluding such a contract.

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A reverse engineered pitch on Cremers et al. (2015), “Aggregate jump and volatility risk in the cross-section of stock returns”

Author(s): Qingxia (Jenny) Wang / Language(s): English Issue: 1/2018

This pitching research letter presents the reverse-engineering process and personal reflections on a reverse engineered pitch by utilizing the pitching research template developed by Faff (2015, 2017). The pitch template is a simple and useful tool for helping PhD students and other academic researchers to develop research ideas and enhance communication in the research process. In this letter, I describe the steps and insights during reverse-engineering an existing journal paper into the pitching research template. In summary, I find it is very helpful for me to clearly understand the pitched paper and generate my research idea through applying the pitching research temple.

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Scenariusze rozwoju rynku mieszkaniowego miasta metropolitalnego na przykładzie Krakowa

Author(s): Piotr Lityński / Language(s): English Issue: 333/2018

The aim of the article is to identify future trends in the housing market of a developing metropolitan city. The recognition of these tendencies is crucial for the course of economic development processes in the country. Housing plays an important role in social, economic and spatial development. In empirical studies, three scenarios have been adopted for the development of the housing market. As an example, the City of Cracow, which is the second largest city in Poland with a dynamically developing economy, was chosen. Among the important conclusions is the conclusion that the pro‑supply housing activity of the national government can have a lesser impact on the development of the metropolitan housing market than the losses caused by governmental activity in areas outside the building sector (e.g.: the reform of higher education) which reduces demand for housing. Extrapolation methods were used in the conducted analyses and CSO as well as external reports served as data sources. // Celem artykułu jest rozpoznanie przyszłych tendencji kształtowania się rynku mieszkaniowego rozwijającego się miasta metropolitalnego. Owe tendencje mają znaczenie dla przebiegu procesów rozwoju gospodarczego kraju. Mieszkalnictwo odgrywa bowiem ważną rolę w rozwoju społecznym, gospodarczym i przestrzennym. W badaniach empirycznych założono trzy scenariusze rozwoju rynku mieszkaniowego. Jako przykład wybrano Kraków – drugie co do wielkości miasto w Polsce, z dynamicznie rozwijającą się gospodarką. Jeden z wniosków artykułu brzmi: propodażowa aktywność państwa w zakresie mieszkań w mniejszym stopniu może oddziaływać na rozwój rynku mieszkaniowego miasta metropolitalnego niż straty wywołane aktywnością państwa w sektorach pozabudowlanych (np. reformą szkolnictwa wyższego), które ograniczają popyt mieszkaniowy. W analizach wykorzystano metody ekstrapolacyjne, a źródła danych to GUS oraz zewnętrzne opracowania eksperckie.

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Współpraca organów korporacyjnych spółki giełdowej z biegłym rewidentem jako element realizacji dobrych praktyk

Author(s): Halina Buk / Language(s): Polish Issue: 9/2017

Polish Financial Supervision Authority and the Warsaw Stock Exchange have for several years been promoting the rules of good practice and their use by public interest entities. Practice shows that more and more large entities systematically use good practices, with some exceptions. The article examines the cooperation that occurs between corporate organs of the companies and auditors, presenting it as an important factor in corporate governance. In the recommended principles this area is treated as being of secondary importance. For the audit committee, it is only monitoring and coordinating the process of auditing financial statements that are recommended. Auditing committees are created only when there are more than five members sitting on the supervisory board. However, the majority of Polish companies have five-member boards. The conclusion, therefore, is that cooperation between corporate management boards and auditors is very restricted.

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Проблеми формування системи порівнянних показників прибутковості підприємств країн-членів ОЕСР і України

Author(s): Tatiana Chaika / Language(s): Ukrainian Issue: 04/2018

The purpose of the article is to study the degree of coherence of the methods of calculating the operating profitability coefficients in the OECD countries and in Ukraine; the development of practical recommendations for the development of the system of indicators of operational profitability, suitable for comparative analysis at the international level (taking into account the specifics of domestic and international accounting practices).As a result of the study, there was a discrepancy in the names and methods of calculating the profitability of operational activities in the OECD countries and in Ukraine. Before conducting a comparative analysis of the profitability of Ukrainian and foreign enterprises, it is necessary to conduct a preliminary review of the methods of calculating the comparable indicators. Establishing a mutually unequivocal correspondence between the generally accepted international profitability ratios and the procedure for their calculation based on the reporting of National Accounting Standard of Ukraine, systematization of international and Ukrainian names will facilitate their convenient and correct application in comparative analytical work. If necessary, it is possible to use formulas expressing the functional dependence between the profitability coefficients, calculated on the basis of cost and income approaches. Traditionally, Ukrainian analysts are more likely to use cost-effectiveness (markup) indicators, while the foreign ones -- margin returns. Markup indicators always show a higher value for profitability than the margin returns. These indicators are functionally linked, so in the case of misconceptions, there is an opportunity to recalculate.Comparing the results of different companies' operations, it is necessary to take into account the specifics and scope of their activities. For example, the Berry Ratio is appropriate for analyzing distributor companies, and gross profit markup should be used in the analysis of manufacturing companies. Clarification of the advantages and disadvantages of individual profitability indicators will avoid their formal application; will contribute to a clearer and more complete explanation of the results.

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