The relationship between the audit efficiency and public accounting

Transcription

1 The relationship between the audit efficiency and public accounting Abolfazl Darehzereshki Department of accounting science and research branch islamicazad university yazd iran Saeed Saeida Ardakani Department of Commercial Management yazd university yazd iran Ramin Abghari Head of the Graduate School yazd branch islamicazad university yazd iran Corresponding Author: AbolfazlDarehZereshki Abstract The accountability right of the supreme audit court in accomplishing the public accountability is done through the governmental audit.therefore, the real governmental information should be the base of audit reports. Measuring the real amount of annual revenues and expenses and reporting the financial events and complete reflection in the reports, the accrual accounting provides the chance to have more precise evaluations. This study aims to examine the relationship between the establishment of governmental accounting and efficiency and effectiveness of the governmental audit. In doing so, some questionnaires have been distributed among the auditors and technical experts of the supreme audit court during Finally, 343 questionnaires were collected and tested to analyze data. The findings shows that the government establish an accrual accounting does not affect the effectiveness of the compliance audit on the effectiveness of the audit of financial statements and the effectiveness is the budget bill report. Keywords: Accrual government accounting, Accountability, Compliance audit, effectiveness of compliance Introduction The accountability of the supreme audit court in accomplishing the public accountability is conducted by the governmental audit. Therefore, audit reports should work as the base of governmental information. Measuring the real amount COPY RIGHT 2013 Institute of Interdisciplinary Business Research 420

2 of annual revenues and expenses and the reporting the financial events and complete reflection in the reports, the accrual accounting provides the chance to have more precise evaluations. Statement of Problem The history of the accountability concept returns back to the life of the Democratic political systems and is derived from the political philosophy. The present concept of the accountability is based on the concept of the right of knowing the facts and the accountability for the people. In the democratic societies, the individuals select their representatives and submit their power to them, but they maintain the right of accountability and knowing the facts (Kordestani, 2007). Accountability and responsiveness are closely related and the responsiveness depends on the volume of the information publicly available. The supreme audit court is considered as one of the independent monitoring agents and is the only institution working under the Islamic parliament which uses the financial reports of the government and a proper system of the data in the accountability process. This institution also makes the final results of their assessments available to the legal representatives of the citizens and public (Babajani, 2003). Hypotheses Development The main hypothesis of the study is: There is a significant relationship between establishing accrual government accounting systems and efficiency of the government audit. The subsidiary hypotheses include: 3. There is a significant relationship between establishing the accrual government accounting system and the efficiency of the compliance audit. 4. There is a significant relationship between establishing the accrual government accounting system and the efficiency of the financial statement audit. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 421

3 5. There is a significant relationship between establishing the accrual government accounting system and the efficiency of the performance audit. 6. There is a significant relationship between establishing the accrual government accounting system and the budget bill report. Methodology This is an applied study conducted through field and library studies. The related literature was initially reviewed and the university professors and experts were then consulted. Establishing the accrual government accounting and increasing the efficiency and effectiveness of the government auditing, the primary questionnaire was developed and distributed among the statistical sample in order to collect data. As the final step, the gathered data are analyzed by EXCEL and SPSS software. Population and Sample The supreme court of audit is the statistical population of the study (1800 individuals) selected by the specific sampling formulas. In addition, the primary questionnaire was piloted based on the limited population and was distributed among the whole individuals after the final verification. Research Background Babjani (2010) examined the role and the position of the accounting bases and the measurement approach and financial reporting of the public sector. He found that the theoretical bases of some items are not consistent with their accounting bases. These include reflecting and reporting of the capital assets, recording the depreciation of such assets and also reporting of the long-term assets based on the accrual base of accounting. It was also found that the difference in the definitions of the revenues and expenses is not associated with the employed accounting base. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 422

4 Cohen et al (2013) investigated the cash and accrual basis of accounting and their role in the local governments and found that the accrual accounting information plays a more essential role in the main decisions. Fan (2012) conducted a study about the demand for the performance audit based on the economy and found that the lower financial transparency is an indicator of more performance audit. Harun (2012) tried to examine the establishment of the accrual accounting in the public center of Indonesia and his results showed that the accrual accounting is performed in terms of the economic and political dimensions. Gonzalez et al (2012) studied the continuous auditing and their results revealed that this procedure is still remaining at the internal audit level. Eija (208) found that the accrual and cash accounting bases are not merely appropriate for determining the budget and the employment of the accrual accounting is not an assurance for the intergenerational assets, transparency or accounting ability. In addition, the findings revealed that some consistent accounting standards are required for the continuity of the accrual accounting of the governmental sector. Rowles (2007) explored the impacts of accrual accounting on the economic decisions and found that the different economic decisions in the public and private sectors and also the specific economic situations lead to the improper accrual accounting in the public sector. Barret (1998) classified the accounting consequences into seven categories. As the first step, there is a comprehensive definition provided for the government costs which leads to the second consequence of emphasizing on the control of costs and effectiveness measurement. Then, the accrual items have significant impacts on the pricing methods; the fourth consequence is the need to represent higher productivity in the bargaining negotiations. The fifth consequence is the more accountability of the invested resources in the public agents. However, the sixth consequence is the accountability in the downward impacts of the debt policies referring to the significance of capital measurement. Finally, measuring the COPY RIGHT 2013 Institute of Interdisciplinary Business Research 423

5 Number Very high High Median Low Very low financial impacts of the government policies contains more advantages for the budget. Table 1 shows the frequency table of the collected data and the responses to each question. Table 1 Description Effect establishing the accrual government accounting system on the 1 Reducing the time for preparing the related reports by following the laws and regulations (compliance audit) 2 Facilitating the implication trend of the financial statement audit 3 Preparing the on-time compliance audit report 4 Preparing performance audit reports with a prospective approach 5 Facilitating the examination of understandable topics sin relation to the nonconformity with the laws and regulations (compliance audit) 6 Reducing the time to prepare the budget bill report 7 The investigation level of the financial statement audit Frequency Facilitating the implication trend COPY RIGHT 2013 Institute of Interdisciplinary Business Research 424

6 of performance audit 9 Reducing the time of preparing financial statement audit 10 On-time preparation of the budget bill reports 11 Facilitating the implication trend of the compliance audit 12 Facilitating the examination of the reportable items in terms of the performance audit Hypotheses Testing The first assumptionexamines the impact of establishing accrual accounting on the efficiency of the governmentaudit. The first subsidiary assumption examines the impact of establishing accrual accounting on the efficiency of the compliance audit. The respondents believe that the establishment of the accrual accounting does not influence on the efficiency of the compliance audit. H 0 : P 0.5 The respondents believe that the establishment of the accrual accounting influences on the efficiency of the compliance audit. H 1 : P > 0.5 The second assumption examines the impact of the establishment of accrual accounting on the efficiency of the financial statement audit. The respondents believe that the establishment of accrual accounting does not influence on the efficiency of the financial statement audit. H 0 : P 0.5 COPY RIGHT 2013 Institute of Interdisciplinary Business Research 425

7 The respondents believe that the establishment of accrual accounting influences on the efficiency of the financial statement audit. H 1 : P > 0.5 The third assumption examines the impact of the establishment of accrual accounting on the efficiency of the performance audit. The respondents believe that the establishment of accrual accounting does not influence on the efficiency of the performance audit. H 0 : P 0.5 The respondents believe that the establishment of accrual accounting influences on the efficiency of the performance audit. H 1 : P > 0/5 The fourth assumption examines the impact of the establishment of accrual accounting on the efficiency of the budget bill report. The respondents believe that the establishment of accrual accounting does not influence on the efficiency of the budget bill report. H 0 : P 0.5 The respondents believe that the establishment of accrual accounting influences on the efficiency of the budget bill report. H 1 : P > 0.5 In the first subsidiary hypothesis, H0 is confirmed and the second, third and fourth hypotheses are rejected. That is, the respondents believe that establishing an accrual government accounting has no impact on the efficiency of the compliance audit, but it impacts the efficiency of the financial statement audit, performance audit and budget bill report. The findings are demonstrated in table 2. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 426

8 Independent variable Dependent variable Sig Result Table2 Establishment of the accrual government audit Efficiency of Efficiency of the Efficiency of Efficiency the budget bill performance the financial of the report audit statement compliance audit audit H0 is rejected. H0 is rejected. H0 is rejected. H0 is That is, the That is, the That is, the confirmed. accrual accrual accrual That is, the government government government accrual accounting accounting accounting government impacts the impacts the impacts the accounting efficiency of efficiency of the efficiency of has no the budget bill performance the financial impact on report audit statement the audit efficiency of the compliance audit COPY RIGHT 2013 Institute of Interdisciplinary Business Research 427

9 Conclusion Analyzing the general questions Using the descriptive statistics of the general information of 343 questionnaires, the following table has been analyzed. Description Gender Education Male Female Ph.D Number Percentage degree Master Job background Organizational Bachelor Junior college diploma Diploma More than Less than 5 Senior audit position Audit in charge and equal Principal auditor and equal Senior audit and equal Audit and equal To examine the impact of education, job background, organizational positions and education major on the opinions of the respondents, Kruskal-Wallis test has been used and it was found that the education degree had no impact on the opinions of COPY RIGHT 2013 Institute of Interdisciplinary Business Research 428

10 the respondents, but the job background, organizational position and education major affect the opinions of the respondents. Analyzes of the hypotheses Based on the value of sig=0.084, it is found that there is no significant relationship between the establishment of the accrual government accounting system and efficiency of the compliance audit. The results of the second subsidiary hypothesis: Based on the value of sig=0.000, it is found that there is a significant relationship between the establishment of the accrual government accounting system and efficiency of the financial statement audit. The results of the third subsidiary hypothesis: Based on the value of sig=0.000, it is found that there is a significant relationship between the establishment of the accrual government accounting system and efficiency of the performance audit. The results of the fourth subsidiary hypothesis: Based on the value of sig=0.000, it is found that there is a significant relationship between the establishment of the accrual government accounting system and efficiency of the budget bill report. Suggestions The following suggestions are provided: a) The findings represent that establishment of the accrual government accounting system influences on the efficiency and effectiveness of the auditing of the financial statements, performance audit and budget bill report. The supreme audit court, as the only agent of the government auditing in Iran, aims at the performance and comprehensive audit (including compliance audit, financial statements and environmental )and enhancement of the quality of the budget bill report. It is offered that the COPY RIGHT 2013 Institute of Interdisciplinary Business Research 429

11 supreme audit court requires the executive organizations to perform the accrual accounting. b) The findings of the study show that the accrual government accounting plays an essential role in the quality of the audit reports of the state. Since the operational budgeting is one of the fundamental structures of the accrual governmental accounting, the audit court should seriously follow the trend of implementing the operational budgeting. c) Due to the effective role of implementing accrual government accounting on the quality of the audit reports and based on the fact that the correction of some regulations (such as provision 23 of the public audit Act-definition of expenses) is one of the structures of the accrual government accounting, the supreme audit court is essential to follow this affair. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 430

12 References 1- Alan S. Bunker (2004),Effective Auditing: How to Be a Good Auditor RSO Magazine. Volume 9, No Accounting information roles in local governments", Journal of Applied Accounting Research, Vol. 14 Iss: 2, pp Babajani, J.,(2006), necessitates the useofaccrual accountinginthe public sectorandthepublicsectorfor use iniran, LightPeak, numberforty-fifth year 4- BabajaniJ.,(2010),The role ofaccountingand theapproach isbased onthe sizeofthepublic sectoraccounting and financial reporting, JournalofAccounting. 5- Barret, managing in accrual accounting environment, paper presented to ripa conference (conberra, February), George C. Gonzalez, Pratyush N. Sharma, Dennis F. Galletta,(2012), The antecedents of the use of continuous auditing in the internal auditing context,journal of accounting information systems 7- Harun, Karen Van Peursem, Ian Eggleton, (2012) "Institutionalization of accrual accounting in the Indonesian public sector", Journal of Accounting & Organizational Change, Vol. 8 Iss: 3, pp Kurdistan, GR,(2007),accountabilityinpublic sectoraccounting, auditmagazine, Winter,Number39 9- Sandra Cohen, NikolaosKaimenakis, George Venieris, (2013) "Reaping the benefits of two worlds: An explanatory study of the cash and the accrual Harun 10- Ui Fan, (2012) "Government performance auditing demand research based on the neo-institutional economics", China Finance Review International, Vol. 2 Iss: 2, pp Tom rowles, accrual accounting in the public sector : its usefulness in economic design makin, journal of finance and management, in the public services m volume 3 number 2 COPY RIGHT 2013 Institute of Interdisciplinary Business Research 431