Accounting tools
Mehri Bakhteyari; Javad Rezazadeh; kumars Biglar
Abstract
The implementation of the engagement quality control review (EQCR) by the engagement quality control reviewer has been considered as one of the key elements of quality control in the auditing standards and its implementation is required in the audit of companies listed on the stock exchange. In this ...
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The implementation of the engagement quality control review (EQCR) by the engagement quality control reviewer has been considered as one of the key elements of quality control in the auditing standards and its implementation is required in the audit of companies listed on the stock exchange. In this research, the data were collected through (1) conducting interviews with 25 partners of Iranian auditing firms in the spring and summer of 2023 and (2) the opinions of 12 certified accountants that were published in a newspaper or professional journals in the form of a conversation, round table, notes or articles. Then, by applying the grounded theory, the components that are the obstacles to the effective application of EQCR are identified and presented in the form of a conceptual system model. The validity of the research model was confirmed by 7 audit partners. The findings from the analysis of research data show that there are various obstacles in its different dimensions, the most important of which are: the structure and organization of some audit firm, the small size of many audit firms, economic considerations, low fees of Iranian audit firms, lack of qualified auditors, moral issues in the society, the society's specific problems, governing laws and regulations, weaknesses in quality grading of audit firms, inadequate communication with international professional communities, low awareness of auditing and lack of development, and low application of technology in Iranian audit firms. Considering that the international auditing standard 220 has been updated and includes more requirements for the EQCR, along with the findings of this research showing that the quality control standard is not effectively implemented by Iranian audit firms, some suggestions are given to fill these gaps.IntroductionThe objective of a firm is to design, implement, and operate a system of quality control for audit, review of financial statements, or other assurance or related services engagements performed by a firm, that provides the firm with reasonable assurance that: (a) The firm and its personnel fulfill their responsibilities in accordance with professional standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and (b) Engagement reports issued by the firm or engagement partners are appropriate in the circumstances. According to the auditing standards, engagement quality review is an objective evaluation of the significant judgments made by the engagement team and the conclusions reached thereon, performed by the engagement quality reviewer and completed on or before the date of the engagement report. Engagement quality reviewer is a partner, other individual in the firm, or an external individual, appointed by the firm to perform the engagement quality review (IAASB, 2020). Surveys show that engagement quality control review, as one of the key elements of quality control, has not been established in Iranian audit firms. Its causes have not been clarified in previous research. Therefore, in this research, we seek to clarify its causes and obstacles.Research Question(s)What are the obstacles of applying engagement quality control review in Iranian audit firms?Literature ReviewEngagement quality control review is one of the key elements of the quality control system of auditing firms, which is considered in the auditing standards. The literature review shows that this issue has not been studied in Iran. However, some Iranian certified public accountants and audit firm partners have pointed out some obstacles of implementing quality control reviews in the form of notes and roundtables published in professional journals. The Public Company Accounting Oversight Board has described the key issues of quality control review in the United States in 2023 in a report entitled " SPOTLIGHT: Inspection Observations Related to Engagement Quality Reviews". This report shows that there are still many concerns about the quality control review (PCAOB, 2023).MethodologyConsidering the nature of the research problem, which is subjective and relies on the experience of audit institution partners, the application of a qualitative research approach is deemed appropriate. Additionally, since no specific theory has elucidated this phenomenon and there has been no prior research in this area, the use of grounded theory is fitting. Conducting interviews is one of the main methods of data collection in grounded theory (Strauss & Corbin,1990). Therefore, research data have been collected through interviews. Interviews were conducted with 25 partners of audit firms in the spring and summer of 2023. It is noteworthy that in grounded theory, all information is considered as data (Danai Fred et al., 2013). Hence, discussions, roundtables or articles published by 12 Iranian certified public accountants in professional journals or newspapers were also used as data. In the qualitative method of research, unlike the quantitative approach, statistical sampling is not important and sampling is judgmental. That is, people who have the most experience and involvement with the studied phenomenon are selected. Interviews with participants continue until theoretical saturation is reached, meaning that new participants do not introduce new insights beyond what has already been discussed.The interviews are then transcribed, and conceptual tags are attached to each sentence or paragraph of the text. In grounded theory, data analysis is done in three stages: open coding, axial coding, and selective coding. In this research, three methods were used to analyze the data.ResultsAfter conducting the research and data analysis, it is found that there are various obstacles in various dimensions for the application of quality control in Iranian audit firms. These obstacles were extracted in the form of conceptual tags. Based on selective coding, they were classified into different categories. To provide a comprehensible presentation of the barriers, these conceptual labels were categorized and presented in the form of inputs, processes, outputs, consequences, and contextual factors. Presenting these conceptual labels of obstacles in different dimensions helps us to have an accurate picture of the causes and obstacles so that we can adopt strategies to solve them. Some of the most important obstacles are: the structure and organization of some audit firms, the small size of many audit firms, economic considerations, low fees of Iranian audit firms, lack of qualified auditors, moral issues in the society, the society's specific problems, governing laws and regulations, weaknesses in quality grading of audit firms, inadequate communication with international professional communities, low awareness of auditing, and lack of development, and low application of technology in Iranian audit firms.DiscussionIn this research, after analyzing the data, many obstacles are extracted in various dimensions. These factors limit the effective implementation of engagement quality control review as one of the key elements of the audit quality control system. With these conditions, achieving audit quality becomes challenging.ConclusionIn this research, the obstacles to the application of quality control review in Iranian audit firms were examined. The findings show that there are many obstacles in different dimensions. The structure and organization of some audit firm, the small size of many audit firms, economic considerations, low fees of Iranian audit firms, lack of qualified auditors, moral issues in the society, the society's specific problems, governing laws and regulations, weaknesses in quality grading of audit firms, inadequate communication with international professional communities, low awareness of auditing and lack of development, and low application of technology in Iranian audit firms are the main obstacles to the application of engagement quality control review in Iranian audit firms. If these obstacles are not removed, the audit quality of Iranian audit firms will be affected. Additionally, in the present circumstances, it cannot be assured that professional standards will be fully followed. This research is the first Iranian research that has studied this issue and can be an avenue for future research. Future research could study other stakeholders or rank these obstacles. Furthermore, conducting similar research in the future will clarify the extent to which these obstacles can be overcome. The findings of this research can provide a clear perspective on engagement quality control review in Iranian audit firms and its obstacles to regulators, such as the Iranian Association of Certified Public Accountants (IACPA). One suggestion arising from the findings could be to increase the weight of the scores related to the engagement quality control review. Another suggestion would be to promote and clarify the benefits of engagement quality control review for audit firms. The last suggestion is the training of competent quality control reviewers by the AICPA or other educational and professional centers.AcknowledgmentsWe acknowledge the participants in this research who helped us.
Financial Accounting
Mohammad ali Karimi; Gholamreza Kordestani; . Kumars Biglar
Abstract
The public financial management system in developing countries faces ongoing challenges. These challenges include ensuring the compatibility of budget planning and discipline with macroeconomics, resource allocation in accordance with poverty reduction strategies, and effectively implementing programs ...
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The public financial management system in developing countries faces ongoing challenges. These challenges include ensuring the compatibility of budget planning and discipline with macroeconomics, resource allocation in accordance with poverty reduction strategies, and effectively implementing programs and activities while monitoring results. This research was conducted to identify the challenges of the public financial management system in the country. This qualitative study utilized the content analysis method to analyze data collected between 1400-1401. The required information was collected and analyzed through semi-structured interviews conducted with 15 experts to identify the challenges related to the country's public financial management systems. The challenges related to various public financial management sub-systems including the tax system, treasury system, asset and debt management system, budgeting system, accounting and financial reporting system, audit system, and performance evaluation system were identified in four elements, financial and non-financial resources, management and governance system, institutional framework, and support structures and in twelve dimensions including lack of financial resources, weak infrastructure and equipment, human resource problems, weakness in executive and operational processes, insufficient support of managers, influence and lobbying, lack of accountability, weak rules and standards, lack of transparency, weak training, non-implementation of accrual accounting, and weak performance budgeting. Identifying these challenges can provide a framework for improving the financial management system and help those involved in reforming the public financial management system.IntroductionStrong public financial management can reduce poverty, increase social justice, meet the information needs of stakeholders to assess accountability, and provide the basis for economic and social satisfaction, and contribute to sustainability in different dimensions. To achieve strong public financial management, there is a need to transform the public financial management subsystems.Studies have shown the necessity for reforming public finance management subsystems (Babajani, et al., 2012; Agha Mohammad et al., 2020; Nyamita, et al, 2015). To initiate reforms and strengthen the public financial management system, it is necessary to transition from traditional approaches to new ones that identify existing challenges and obstacles. By resolving them and building capacity, a foundation can be established for reforming the public financial management system. Therefore, the research question at hand is: What are the challenges facing public sector fiscal management?This research aims to introduce the literature related to the subject and explore the less-investigated issues associated with assessing financial management capacity and challenges within its sub-systems. In other words, the objective is to provide a deeper insight for responsible institutions and researchers to evaluate the capacity and challenges of public sector financial management.2-Literature ReviewThe research literature is presented in two parts: challenges related to public financial management sub-systems and assessing public financial management capacity.2-1: Challenges related to government financial management subsystems.Studies have shown that the tax system, treasury system, asset and debt management system, budgeting system, accounting and reporting system, audit system, and performance evaluation system are facing challenges.2-2: Assessing the capacity of public financial managementWhen assessing public financial management systems, the issue of capacity should be considered as crucial. Olander (2007) introduces four interdependent elements that need to be taken into account when assessing and developing public financial management capacity: management, resources, support structures, and the institutional framework. These elements represent the same challenges and limitations that must be identified and strengthened in the evaluation of public financial management. Doing so creates the necessary foundation for reforming and improving public financial management. MethodologyThis research employed a qualitative design. Data was collected through interviews, and the content analysis approach was utilized for analysis. A total of 15 individuals from the public sector were interviewed as part of the research. ResultsThe research results are presented in two parts.4-1) the codes extracted from the interviews are provided in Table.1, which consists of 7 main categories, 12 subcategories (dimensions), and a total of 70 concept elements (challenge factors).4-2) Research Concept Model.Drawing upon the research findings and recognizing that financial management comprises a comprehensive system of subsystems, the challenges associated with these subsystems also reflect the challenges of the overall financial management system. This is illustrated in Figure 1, which identifies 4 elements and 12 dimensions. DiscussionThe challenges related to public financial management subsystems, namely the tax system, the treasury system, the asset and debt management system, the budgeting system, the accounting and financial reporting system, the audit system, and the performance evaluation system can be grouped into four elements: financial and non-financial resources, management and governance system, institutional framework, and support structures. These challenges span across twelve dimensions, including: lack of financial resources, weak infrastructure and equipment, human resource problems, weakness in executive and operational processes, insufficient support of managers, influence and lobbying, lack of accountability, weak rules and standards, lack of transparency, weak training, non-implementation of accrual accounting, and weakness in performance budgeting. Identifying these challenges provides a framework for improving the financial management system and assists those involved in the reform of the public financial management system. ConclusionTo achieve the goals and capitalize on improvement opportunities, the financial management system must address several challenges. These challenges can be overcome through necessary reforms in the public financial management sub-systems, which require cooperation and coordination among executive bodies. The outcome of these reforms and the resolution of challenges will result in a robust public financial management system. This, in turn, will bring about stable financial income, resource discipline and efficiency, increased accountability and transparency, proper management of public funds, and ultimately good governance.However, it is important to acknowledge an important limitation: The breadth of dimensions and sub-systems related to the research subject. Limited access to experts and familiarity with all relevant topics presented a constraint. One potential solution to address the need for skilled human resources in the public sector is the establishment of a public financial management course. By developing the course curriculum in accordance with the actual needs of the public sector, this limitation can be mitigated.
