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A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Business and Entrepreneurship".

Deadline for manuscript submissions: closed (30 June 2023) | Viewed by 65571

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Special Issue Editors

Dr. Mahmoud Elmarzouky

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Guest Editor

St Andrews Business School, University of St Andrews, The Gateway, North Haugh, St Andrews KY16 9RJ, UK
Interests: corporate narrative disclosure; content analysis; textual analysis; sustainable development goals (SDGs); climate change; carbon emission; financial reporting standards; corporate governance
Special Issues, Collections and Topics in MDPI journals

Prof. Dr. Khaled Hussainey

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Guest Editor

Bangor Business School, Bangor University, Hen Goleg, College Rd, Bangor LL57 2DG, UK
Interests: corporate narrative reporting; international financial reporting standards (IFRS); Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI); extensible business reporting language (XBRL); market-based accounting research; auditing; corporate governance; earnings management; corporate investment efficiency; corporate finance; Islamic accounting and finance
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

In this Special Issue, we are interested in bringing together rigorous manuscripts that advance auditing and financial reporting research. We invite manuscripts featuring original research that complements our understanding of the impact of the financial reporting or auditing standards on accounting and financial reporting practices, corporate governance, and investor and stakeholder’s decisions.

We call for manuscripts that deal with all aspects related to the impact of International Financial Reporting Standards (IFRS) and the International Standards on Auditing (ISA) on the reporting quantity and quality, voluntary and mandatory disclosure, and the qualitative characteristics of annual reports such as tone, readability, reporting practice, and stakeholders’ decisions.

The auditing environment has been changing rapidly. The new dynamic change in the International Standards such as: ISA 701, ISA 705, ISA 570 (revised), ISA 720 (revised) has formed a new shape for audit processing and reporting. There is also a significant change in the audit market, investor expectation, financial reporting, and audit practice. We also call for manuscripts that focus on impacts of the new auditing standards ISA 700 and ISA 701 on the level of assurance provided to the stakeholders, audit quality, audit cost and reporting quality.

Studies can be applied to one of the following:

ISA 700: The extended audit report.;
ISA 701: New Key Audit matters section, critical audit matters;
Isa 705 (revised): Modification to the auditors’ opinions;
ISA 570 (revised): Enhancing auditor reporting related to going concern;
ISA 720 (revised): “New other information” section;
Systematic and comprehensive literature reviews;
The new audit reporting and reporting quality;
The new audit reporting and investor reaction;
The new audit reporting and market reaction;
The new audit reporting and audit cost and/or audit delay;
The new audit reporting determinants and consequences (governance, audit committee, cost of debt, cost of equity, firm value, market value, etc.);
Comparative cross-country studies on the new audit regime;
The new audit report disclosure practice;
The unintended consequences of the new audit reporting;
How management reacts to the new audit form;
How different stakeholders react to the new audit form;
COVID-19 and the extended audit report;
How the IFRS impact the reporting quantity and quality;
Voluntary and mandatory disclosure;
The qualitative characteristics of the annual report;
IFRS and reporting practice;
IFRS and stakeholders’ decisions;
Costs and benefits of the extended audit report as a whole or any new sections added to it.

Dr. Mahmoud Elmarzouky
Prof. Dr. Khaled Hussainey
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

Extended audit report
Key audit matters
Corporate narrative disclosure
Financial reporting standards
International standards of auditing
Auditing quality.

Published Papers (13 papers)

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Research

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15 pages, 615 KiB

Open AccessArticle

The Role of The Internal Auditor in Strengthening the Governance of Economic Organizations Using the Three Lines of Defense Model

by Omar Ikbal Tawfik, Omar Durrah and Karima Ali Aljawhar

J. Risk Financial Manag. 2023, 16(7), 341; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm16070341 - 20 Jul 2023

Viewed by 3134

Abstract

Purpose: This paper aims to investigate the impact of the three lines of defense (TLOD) in strengthening corporate governance in industrial companies in the Sultanate of Oman. Methodology: A questionnaire was used to collect data from industrial companies in the Sultanate of Oman. A total of 300 questionnaires were distributed; for the 159 valid questionnaires used for analysis, PLS-SEM was used in the data analysis. Results: The results showed a significant impact of the three variables (commitment of operational management to legal, regulatory, and ethical requirements; risk management, compliance, and quality functions; and the role of assertive internal auditing according to the third line of defense model) in strengthening corporate governance. Practical implications: The study indicates that the TLOD model plays a more decisive role in determining the strengthening of corporate governance, and therefore, the results of the study can help industrial companies to understand the role of the TLOD model in strengthening control procedures, risk management, and governance. Originality/value: The study constitutes a management strategy that assists organizations in diagnosing the degree of corporate compliance with the TLOD and identifying weaknesses in their procedures. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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25 pages, 2252 KiB

Open AccessArticle

The Impact of M&As on Shareholders’ Wealth: Evidence from Greece

by George Giannopoulos, Alexandra Lianou and Mahmoud Elmarzouky

J. Risk Financial Manag. 2023, 16(3), 199; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm16030199 - 14 Mar 2023

Cited by 1 | Viewed by 3062

Abstract

This study aims to investigate the effect of mergers and acquisitions (M&A) on shareholders’ wealth. Additionally, this study investigates the impact of the economic crisis during 2007–2008 on the shareholders’ perceptions of gaining additional value from mergers and acquisitions. In this paper, a sample of 84 M&As from 2006 to 2015 in Greece are studied to investigate the effect on shareholders of bidder companies. We find significantly negative abnormal returns just before the announcement of M&A, which negatively affects the bidder firms’ value. It is also observed that after 2009 M&A cases decreased, maybe because of the crisis in Greece that changed the investors’ perception of a value-destroying event. Companies that engage in M&A activities during economic downturns tend to experience a decline in shareholder value. This could be due to various factors, such as increased uncertainty and risk associated with such activities during economic uncertainty. By understanding the potential impact of such activities on shareholder value, companies can make more informed decisions about whether and when to pursue M&A opportunities. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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9 pages, 253 KiB

Open AccessArticle

Financial Report Readability and Accounting Conservatism

by Zhimin (Jimmy) Yu

J. Risk Financial Manag. 2022, 15(10), 454; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15100454 - 11 Oct 2022

Cited by 2 | Viewed by 1766

Abstract

Accounting conservatism could affect the quantitative information on a financial statement. In this paper, the author focuses on qualitative information on financial statements. The author investigates the association between financial report readability and accounting conservatism and uses the FOG index to measure financial report readability. By using management discussion and analysis (MD&A) from 1996 to 2019, the author finds that financial report readability is positively associated with accounting conservatism. Additionally, the author separates the samples into high-compensation incentive and low-compensation incentive subsamples. The results show that the above association is stronger in the high-compensation incentive samples than in the low-compensation incentive samples. This result implies that accounting conservatism could mitigate managerial opportunism in the qualitative disclosure setting. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

20 pages, 393 KiB

Open AccessArticle

The Financial Determinants of Integrated Reporting Disclosure by Jordanian Companies

by Hamzeh Al Amosh, Saleh F. A. Khatib and Khaled Hussainey

J. Risk Financial Manag. 2022, 15(9), 375; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15090375 - 25 Aug 2022

Cited by 4 | Viewed by 2183

Abstract

The paper aims to investigate the effect of financial leverage, profitability, liquidity ratios, cash holdings, and interest coverage ratios on the level of integrated reporting disclosure—as one of the reports that promotes sustainable development—of Jordanian industrial listed companies. The content analysis method was used to analyze the annual reports of 51 listed Jordanian industrial companies during the years from 2014 to 2019 (306 firm-year observations). The analysis showed that financial leverage, profitability, liquidity and cash holdings are important determinants for integrated reporting, whereas the analysis did not support the effect of the interest coverage ratio. To the best of our knowledge, this is the first empirical study that deals with the impact of a set of financial variables on integrated reporting in the context of emerging countries such as Jordan. This is also the first study that deals with disclosing integrated reports through the perspective of shareholders and stakeholders, as integrated reporting contains two parts, financial and non-financial; therefore, the current study contributes to the disclosure literature by providing new theoretical and empirical evidence in the context of emerging markets. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

14 pages, 635 KiB

Open AccessArticle

The Use of Artificial Intelligence and Audit Quality: An Analysis from the Perspectives of External Auditors in the UAE

by Nora Azima Noordin, Khaled Hussainey and Ahmad Faisal Hayek

J. Risk Financial Manag. 2022, 15(8), 339; https://doi.org/10.3390/jrfm15080339 - 31 Jul 2022

Cited by 13 | Viewed by 14698

Abstract

This paper aims to explore external auditors’ perception of the use of artificial intelligence (AI) in the United Arab Emirates (UAE). It investigates whether there is a perception among external auditors toward the contribution of AI to audit quality. It also aims to test whether the perception of AI usage and its impact on audit quality differs between local and international external auditors. Data were collected using an online survey from 22 local and 41 international audit firms to achieve these research objectives. Participants were either the auditing manager, audit partners, senior auditors or other personnel who may have experience in the field of accounting and auditing. To test our hypotheses, data analysis was undertaken using reliability and validity tests, descriptive analysis and independent samples t-test. We found that the analysis shows that there is a non-significant difference in the perceived contribution of AI to audit quality between local and international audit firms. All the audit firms, whether local or international, have equal perceived contributions with regard to the audit quality. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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21 pages, 530 KiB

Open AccessArticle

Identification of Risk Factors in Business Valuation

by Muhammad Najib Razali, Rohaya Abdul Jalil, Kamalahasan Achu and Hishamuddin Mohd Ali

J. Risk Financial Manag. 2022, 15(7), 282; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15070282 - 27 Jun 2022

Cited by 1 | Viewed by 3664

Abstract

It is widely accepted that risk and uncertainty are integral parts of the property valuation process. Uncertainty in property valuation is derived from the characteristics of property itself. The issue pertaining to risk and uncertainty in property valuations is currently one of the key concerns in global valuation practice to date in addressing the decision of risk and uncertainty in valuation, especially for business purposes or in the current term known as business valuation. The judgment and experience still depend on the expertise of the individual valuers alone. The valuation methods used can cause problems if certain elements in business such as risk are highlighted, especially to determine market value. There is a need for valuers to express assumptions which take into account risk and uncertainties, and then pass on the results of the estimation process to the end user of the valuation report. This research employed Analytical Hierarchical Process (AHP) to identify the level of risk in business valuation for valuers to identify which risk areas will expose them to professional liabilities, which then leads to mitigation of risk to determine value in business valuations. AHP will also be able to identify the level of risk in each of the approaches in business valuation which could help valuers to determine the value and market value in the valuation process. This paper will propose some practical approaches of how to address the risk and uncertainty of the valuation process, especially for the purpose of business valuation. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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23 pages, 370 KiB

Open AccessArticle

Empirically Investigating the Disclosure of Nonfinancial Information: A Content Study on Corporations Listed in the Saudi Capital Market

by Reem Fraih Alshiban and Khalid Rasheed Al-Adeem

J. Risk Financial Manag. 2022, 15(6), 251; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15060251 - 02 Jun 2022

Cited by 2 | Viewed by 2862

Abstract

This study empirically assesses the disclosure of nonfinancial information in corporate reporting. In examining the contents of annual and board reports for 50 listed corporations, a coding sheet was developed by combining the two coding sheets of Boshnak and the European Directive 2014/95/EU. All corporations in three sectors—energy, utilities, and materials, which collectively represents 85.51% of the Saudi market capitalization—encompass the sample. Results reveal that employees, community, and products and services information have a moderate disclosure level. In contrast, environmental, customers, and fighting corruption have a low level. The findings also show that nonfinancial disclosure of the selected sectors on average range between 28.85% for the corporations in the material sector to 39.22% for the corporations in utilities sector. The corporations in the energy sector scored, on average, 37.65%. The mean for the entire sample of the ratios of disclosed nonfinancial items is 30.35%. However, the average disclosure level is without substantial improvement since 2012 and 2013, as previously reported The Capital Market Authority (CMA) is recommended to mandate nonfinancial information disclosure. It is a step toward realization aspects of Saudi Vision 2030 concerning with, for instance, protecting environment and other related matters. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

16 pages, 345 KiB

Open AccessArticle

The ESG Disclosure and the Financial Performance of Norwegian Listed Firms

by George Giannopoulos, Renate Victoria Kihle Fagernes, Mahmoud Elmarzouky and Kazi Abul Bashar Muhammad Afzal Hossain

J. Risk Financial Manag. 2022, 15(6), 237; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15060237 - 26 May 2022

Cited by 25 | Viewed by 11722

Abstract

The world is constantly changing, and with an evolving global environmental crisis, there is a growing trend of Corporate Social Responsibility, and Environmental, Social, and Governance (ESG) disclosure initiatives. The final report on the new E.U. taxonomy for sustainable activities was released in 2020, making ESG disclosure more relevant. This paper investigates the effects of ESG initiatives on the financial performance of Norwegian listed companies from 2010 to 2019. ESG is measured through the Thomson Reuters Eikon ESG disclosure score and financial performance through ROA and Tobin’s Q. To the best of our knowledge, this is the first time this relationship has been investigated in Norway. Using panel data regression analysis and two proxies for the dependent variable (financial performance), the results of this study are mixed. In particular, findings suggest a strong significant relationship between ESG initiatives and financial performance. More specifically, the regression model, with ROA as the dependent variable, suggests that ESG initiatives have a clear negative impact. On the other hand, the variable Tobin’s Q increases when ESG increases. This could be explained by the different horizons of the measures and other factors affecting the business environment. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

16 pages, 294 KiB

Open AccessArticle

Corporate Fraud and Accounting Firm Involvement: Evidence from China

by Jun Wang and Duo Wang

J. Risk Financial Manag. 2022, 15(4), 180; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15040180 - 13 Apr 2022

Cited by 5 | Viewed by 4567

Abstract

In some cases, accounting firms and individual auditors will be punished by the China Securities Regulatory Commission (CSRC) for involvement in the violations of their client companies. Taking the enforcement actions against listed companies and accounting firms of the CSRC from 2006 to 2019 as a research sample, this paper manually sorted out the specific characteristics of corporate fraud and empirically examined the regulatory authorities’ supervision tendency to auditors. The results show that accounting firms are more likely to be involved when their client companies’ fraudulent practices affect financial statements, occur during the IPO process, and continue for a longer period of time. Income statement manipulation and higher fraud amounts also increase the probability of accounting firms being sanctioned. Further analyses show that regulators’ supervision intensity is increasing over time, and they impose penalties on auditors based on the severity of corporate fraud; however, the intensity and differentiation of the sanctions are still insufficient. This study expands relevant research on accounting firm sanctions and provides empirical evidence for further improvement of audit industry supervision in an emerging market. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

21 pages, 717 KiB

Open AccessArticle

Board Information Technology Governance Mechanisms and Firm Performance among Iraqi Medium-Sized Enterprises: Do IT Capabilities Matter?

by Ibrahim M. Menshawy, Rohaida Basiruddin, Raihana Mohdali and Nazahan Qahatan

J. Risk Financial Manag. 2022, 15(2), 72; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15020072 - 10 Feb 2022

Cited by 4 | Viewed by 2956

Abstract

This paper aims to investigate the perceptions of Iraqi medium-sized enterprises’ board members on how board information technology governance mechanisms affect their companies’ performance with the help of IT capabilities as a mediator. The study is based on a survey of 223 board members using a stratified random sampling technique. The Structural Equation Model (SEM) method results show that board IT governance structure and board IT governance relational have a significant direct and indirect positive relationship with firm performance through IT capabilities. Contrariwise, IT capabilities do not interfere with the relationship between board IT governance processes mechanisms and firm performance. Our study contributes to the IT business literature by addressing new relationships and providing empirical evidence that explains the inconsistent and mixed results of prior studies. Moreover, it extends and complements these prior studies by considering three board IT governance mechanisms, four IT capabilities, and merges the two dimensions of firm performance in a developing country that offers different institutional settings and litigation environment. The study findings offer notable implications for business practitioners and industry leaders to enhance the IT environment and maximize their corporate outcomes. In addition, these findings draw the attention of the board members, management, and corporate general assemblies to recognize the importance of intensifying the investment in IT capabilities to gain superior firm performance. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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12 pages, 272 KiB

Open AccessArticle

COVID-19 Disclosure: A Novel Measurement and Annual Report Uncertainty

by Mahmoud Elmarzouky, Khaldoon Albitar, Atm Enayet Karim and Ahmed Saber Moussa

J. Risk Financial Manag. 2021, 14(12), 616; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14120616 - 19 Dec 2021

Cited by 20 | Viewed by 4072

Abstract

This paper provides a unique COVID-19 disclosure measurement and investigates the association between the level of COVID-19 disclosure and uncertainty within annual reports for UK FTSE-All share non-financial firms. We used automated textual analysis to score the sampled annual reports. The results show that the level of COVID-19 disclosure varies from industry to industry. Furthermore, there is a positive relationship between COVID-19 disclosure and uncertainty in annual reports. Firms with larger boards exhibit more significant uncertainty in annual reports with COVID-19 disclosure. However, the significance of uncertainty in annual reports with COVID-19 disclosure remains at the same level with different board independence percentages. The unique findings of this paper are extremely relevant to governments, shareholders, policymakers, suppliers, and creditors. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

17 pages, 358 KiB

Open AccessArticle

Audit Committees and COVID-19-Related Disclosure Tone: Evidence from Oman

by Badar Alshabibi, Shanmuga Pria and Khaled Hussainey

J. Risk Financial Manag. 2021, 14(12), 609; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14120609 - 15 Dec 2021

Cited by 8 | Viewed by 3978

Abstract

In this study, we content analyzed chairman’s statements to measure the tone of COVID-19-related disclosure in Omani listed firms for the year ending 2020. We also examined whether audit committee (AC) characteristics influence disclosure tone. After controlling for corporate board and firm characteristics, our regression analysis showed that two AC characteristics (gender diversity and overlapped directors) positively affect good news information and negatively affect bad news information. It also showed that AC size positively affects bad news information. No evidence was found that the AC independence, meeting frequency, multi-directorships, and financial expertise have an impact on the tone of COVID-19-related disclosures. Our paper contributes to the growing literature by being the first study to examine whether AC characteristics influenced disclosure tone during the COVID-19 pandemic. Our results indicate that investors and regulatory bodies should take AC characteristics into account in determining the tone of COVID-19-related disclosures. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

Review

Jump to: Research

12 pages, 339 KiB

Open AccessReview

Cross-Section of Returns, Predictors Credibility, and Method Issues

by Zhimin (Jimmy) Yu

J. Risk Financial Manag. 2023, 16(1), 34; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm16010034 - 05 Jan 2023

Cited by 3 | Viewed by 1819

Abstract

The paper focuses on the relationship between firms’ characteristics and cross-section returns. The author reviews and critically assesses the most recent contributions in the literature. After comparing the abnormal returns (Alpha) and t statistics of the original works with those of replication works, the author concludes that 94 characteristics are robust. The limitation of the paper is that measurement errors in the COMPUSTAT could affect the predictability of cross-section returns. The practical implication of the paper is that the author validates the practice of fundamental analysis. Investors could benefit from those discovered characteristics. The author validates the policy consequence and connects the theoretical frameworks with empirical results. The author evaluates the empirical methodology and proposes several methods to improve future research. Full article

(This article belongs to the Special Issue Contemporary Issues on Auditing and Financial Reporting)

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