Document Type : Research Paper
Author
Department of Accountijg,Faculty of Management and Accounting, Shahid Beheshti University,Tehran,Iran
Abstract
Disclosing key audit matters since 2022 has become necessary to enhance the informational value of the auditor's report, but research evidence regarding its consequences is limited. Among the implications, its impact on the auditor's perception of accountability and decision-making regarding adjustments to financial statements is notable. To this end, a two-way between-groups experiment with a (2×2) design was conducted. Participants in this study included 120 partners, managers, and senior auditors employed in accounting firms that are members of the Institute of Certified Public Accountants. A scenario of a fictional company was provided to participants, and the independent variables of the research were manipulated at four levels: 1) Disclosure (or nondisclosure) of key audit matters and 2) Normal (or extended) management explanatory note. The findings suggest that both the disclosure of key audit matters and the extended management note reduce the auditor's sense of accountability, and this decreasing effect is maximized at the interaction of key audit matters and the extended note. This indicates the unintended consequences of key audit matters disclosure on the auditor's accountability perception. Furthermore, the results showed that the disclosure of key audit matters and extended notes led to increased expected adjustments by auditors to identify impairment losses, suggesting a more conservative behavior from auditors. The research outcomes regarding the implications of expanded disclosure on the auditor's perception of accountability, decision-making, and judgment on financial statement adjustments can be valuable for regulatory and supervisory bodies as well as auditors.
Introduction
Corporate reporting plays an essential role in the effective functioning of the global economy and makes an important contribution to shaping our understanding of the current and future drivers of value creation in business and the financial sector. Corporate reporting is constantly evolving in order to meet the demands of a diverse and expanding range of users, and efforts have been made to adapt reporting procedures to continuous changes in the regulatory and business environment. Policymakers and various stakeholders in corporate reporting need to develop new approaches for forecasting and policymaking with regard to future developments. In this situation, there is a growing demand to increase transparency and improve reporting mechanisms, and therefore, professional and academic authorities, standard-setting authorities, regulatory bodies, and other interested groups in corporate reporting have started to conduct studies, provide solutions, and requirements in order to improve the corporate reporting system. In this regard, legislative institutions and standard-setting organizations have always tried to provide standards and recommendations in an evolutionary process to improve reporting and meet the information needs of investors in allocating their resources. Therefore, an appropriate policy for changes in the corporate reporting system is very important. Corporate reporting requires the adoption of appropriate decisions by corporate reporting policymakers.
Research Questions:
The main research questions are as follows:
What are the main scenarios of the possible future of corporate reporting in Iran's economic environment?
According to different scenarios, what should be the appropriate policy for the stakeholders of corporate reporting?
Methodology
This study is applied research, and a mixed methodology has been used to achieve the objectives of the research. In order to identify the driving forces affecting the future of corporate reporting through semi-structured interviews, according to Kvale and Brinkman (2009), and to analyze the data from the interviews, the thematic analysis method was used. In order to evaluate the qualitative part, appropriate methods for this type of research have been used according to the approach of Creswell (2008). In the second step, fuzzy Delphi analysis was used in order to create a consensus regarding the identified drivers. Next, to measure the level of importance and uncertainty, a questionnaire including the list of consensus drivers affecting the future of corporate reporting was provided to the participating experts in the previous stages of the research. In order to evaluate the policy options, first of all, with the expert panel method, policy issues in corporate reporting were identified, and action options were developed for each issue. Then, the evaluation of the policy options based on the opinion of the experts was done with the questionnaire tool. The results of the questionnaire analysis were analyzed using MATLAB software and the development of a fuzzy inference system.
Results
In the exploratory interview phase with experts, a total of 37 effective drivers affecting corporate reporting were identified, and after two stages of fuzzy Delphi implementation, a total of 18 drivers were approved and agreed upon by the experts. The drivers agreed upon by the experts were considered as the basis for developing the scenario based on the Schwartz model (1991). The three drivers of "entering the global economic arena with the removal of sanctions", "privatization of ownership," and "changing the collateral-based financing system to credit-based" are the drivers that together have a high level of importance and uncertainty and constitute the main basis for developing distinct corporate reporting scenarios. Considering that three drivers are the basis for designing the scenarios and each one has two possible states, a total of eight scenarios were designed. To evaluate policy options, five main corporate reporting challenges were identified, and ten action options were developed. Finally, according to the analysis of the evaluation results of the policy options based on the robust planning criteria, the best policy option was determined.
Conclusion
The evaluation of different scenarios shows that scenario number 1, with the main indicators of increasing the link with the global economy, privatization of ownership, and credit-oriented financing, is a favorable scenario for corporate reporting, where there is a more suitable platform, demand, and environment for the development and progress of corporate reporting. However, it is important to note that in this scenario, the level of expectations from corporate reporting is also higher, and if these needs are not adequately met, the stakeholders' reliance on other information mechanisms will increase. According to the analysis of the results of the evaluation of policy options based on robust planning criteria, the policy option that includes: increasing the target audience group, giving more priority to public interests, more recognition of intangible assets, moving towards the adoption of international standards, and developing non-financial reporting types with new requirements was identified as the best policy option for corporate reporting, as it demonstrates appropriate and acceptable performance in different scenarios.
Keywords
- Adjustment Decisions
- Auditor's Accountability
- Fair Value Accounting Estimate
- Key Audit Matters
- Management Disclosures
Main Subjects
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