Empirical Studies in Financial Accounting

Abstract In year 1377, the Auditing organization in Iran issued its Statement of Auditing Standards 40 (SAS 40): "Accounting and Internal Control System and Audit Risk Assessment". The standard identifies inherent risk as one of the three components of   audit risk; inherent risk being defined as "the susceptibility of an account   balance or class of transactions to material misstatement". If the inherent risk is low, less substantive testing is required, with possible resultant savings in staff time and audit costs.  It is thus beneficial for the audit firms and clients to assess adequately   the inherent risk element of an audit assignment to ensure that audits are carried out as efficiently and effectively as possible. This   research    project   focuses   on   inherent    risk   and   using   a questionnaire    survey   investigates    143 auditors’    perception   of the importance of certain factors which may determine inherent risk. The finding  of the study suggests  that variables  identified  in the literature as being closely  associated  with inherent  risk factors  are regarded in a similar  fashion  by auditors;  variable  such as bonus  schemes tied to management  earnings,   a high   turnover rate in top   management personnel, a company reputation for taking unusual  business   risks and history of material errors are believed to be the  major determinants   of inherent  risk. Finally,  the evidence  revealed  that  (1) misunderstanding    the  significance   of  the  risk  factor  is  due  to  the disregard  of various  meaning  of the words.(2)  Auditors  had difficulty in distinguishing   between  inherent risk and control  risk factors.

Abstract Profit as the most important factor of measurement of an operation of an entity, is one of the topics of accounting which has secured its special place in the theoretical issue for a number of years. Accounting from the beginning of 20^th century has started its activity in the scientific and classic form.  In the last number of decades, especially from the year 1960 onward   after   efficient   market hypothesis (EMH), with the start of experimental --evidential researches by Ball and Brown about the content of information pertaining accounting earning was able to stable its theoretic fundamentals on the basis of evidence. In this research, the content of information of predicted profit is studied. The results reported here indicate that Earning Forecast by companies possessing information and efficiency content and from this purpose the importance of prediction of accounting  earning due to its role and effect in the decision takings of users especially  investor's is considerable.

Abstract In time past many ratios such as current ratio and quick ratio had been used for evaluations of corporation liquidity authority and ability in debt repayment. But in recent years because of some deficiency and defection of these two ratios some other ratios such as liquidity index, cash comprehensive liquidity index, net liquidity index, cash conversion cycle, lambda and etc. have been presented. In this essay in addition to presentation of these modern ratios via calculation of modern ratio correlation with traditional ratios, we will discuss to some extent the informational identify of them. For this reason  all  active  corporation   in  food  industry  of  negotiable   papers exchange  have  been  chosen  and ratios  for a period  of 5 year  (1377-1381)  have  been  calculated   and  the  correlation   of  them  have  been calculated  by SPSS(a  software). The  results  of this research  show  that although  the ratios  have  a near relationship   with  traditional  ratios but they  are some  differences  that can  play  an important   role  on our decision  and  they  contain  various and  more  information   than  traditional   ratios  and  can  help  users  to make their decision  better  than before.

Abstract Financial experts in the response to critics of EVA, propose the refined form of EVA that focuses on relevance of information versus its reliability. In  other words' this measure that we call it "REVA", computes the opportunity cost of used resources in the base of their market values. In   this research we studied information content and explanatory power of REVA for different measures of risk-adjusted stock return. The hypothesis of this study was tested for 50 active corporations   introduced in the research period.  We   used  the available statistical society of corporations accepted in Tehran stock exchange, and tested the Correlation degree between variables of the research and the explanatory  power of REVA for  the changes  of different measures   for risk-adjusted   stock  return.  The  results  of this study   indicate   that,  there   is  a  weak  positive   correlation    between REV A and measures  of risk-adjusted  stock return,  and  a (differential or  abnormal   return)'   REV A  (total  risk-adjusted    stock  return),   and RVOL   (systematic    risk-adjusted    stock   return)    orderly    have   the greatest  correlation   coefficient  with REV A. It means:  rREVA,α > rREVA,RVAR > rREVA,RVOL

Abstract This empirical study has been done with the goal of developing auditing knowledge and the efficiency of its operations when using the statistical analytical procedures. In this research, eight alternative models have been evaluated, including five regression models, one time - series model ( consus X-Ii) and two non-statistical models (Martingale and sub-Martingale). Both financial and non-financial data were collected from a sample of petrochemical   companies for the period march, 1998 through March 2001. The information was used to predict sales revenue and production expense account balances. According  to the results,  regression  models  have better  performance for predicting  account  balances  in performing  auditing  analytical procedures  in comparison  to Two other models. Logarithmic regression has been evaluated as the best statistical analytical procedure. The foresaid procedure has a constant performance   in sample companies of the industry.  In performing statistical analytical procedures, monthly models perform better than seasonal ones.  Pooled models have a better ability for prediction than single company models. Furthermore,   the results of this research show incremental   benefits of using nonfinancial variable in performing statistical analytical procedures in auditing