THE IRANIAN ACCOUNTING AND AUDITING REVIEW
Year:2024 | Volume:31 | Issue:2|Papers Count:8

Objective Inflation accounting plays an essential role in improving the reporting process of business entities facing chronic and double-digit inflation. Addressing this issue requires attention to both the challenges and opportunities associated with inflation accounting. Consequently, the challenges of using inflationary accounting are significant. However, opportunities for employing inflationary accounting also arise. This research aims to identify the challenges and opportunities of applying inflationary accounting in Iran, aligning with the implementation of international accounting standards. Methods The required data was collected through the distribution of questionnaires among 239 users of financial statements, preparers of financial statements, independent auditors, and academic staff members of universities. The data collection period was during the fall and winter of 2022 and the spring of 2023. Statistical analysis was done using factorial, exploratory, and confirmatory analysis with the help of AMOS and SPSS software. Results Based on the findings, the challenges of using inflation accounting were identified in the following areas: economic environment and financial reporting, educational and executive issues, audit and assurance issues, and institutional and infrastructure issues. Additionally, opportunities for using inflation accounting in Iran's reporting environment were found in audit and assurance issues, infrastructure and institutional issues, the economic environment and financial reporting, and educational and executive issues.   Conclusion The application of inflation accounting in educational and executive, audit and assurance, institutional and infrastructural, economic, and financial reporting sectors is facing challenges. Auditing and assurance, institutional and infrastructure, economic and financial reporting, and educational and executive departments represent opportunities for using inflation accounting in Iran. In other words, the application of inflation accounting in Iran faces severe challenges. However, there are more opportunities to use inflation accounting and to adopt and implement it,sufficient measures must be taken to solve these challenges. To apply inflation accounting effectively, it is crucial to consider not only the economic environment, financial reporting, auditing and assurance factors, and institutional and infrastructure aspects but also the training of practitioners and executives. Additionally, the application of inflation accounting, along with the auditing and assurance of financial statements and improvements in the status of reporting units, will enhance the transparency of the economic and financial environment and address educational and executive issues.

Objective Cash management policies have always been one of the most important financial policies in the process of managing companies. Considering the importance of cash management in companies and accounting standards, the presentation of the cash flow statement is considered one of the basic financial statements. Cash flows from operating activities indicate that the main and continuous operations and activities that generate the operating income of the commercial unit have led to sufficient cash flows to repay loans, maintain the operating capacity of the commercial unit, pay dividends, and make new investments. Various research has been conducted regarding the relationship between the sensitivity of cash holdings to cash flows. The results of some studies are also focused on the asymmetry of cash flows. However, investigating the effects of corporate governance mechanisms on the sensitivity of cash holdings under the condition of cash flow asymmetry is an issue that has not been investigated. Therefore, the purpose of this research is to investigate the sensitivity of cash holdings to asymmetric operational cash flows, considering the financial constraints and external supervision of institutional owners in companies listed on the Tehran Stock Exchange. Methods The statistical population consists of all the companies listed on the Tehran Stock Exchange during the Iranian calendar years 1393 to 1400 (2014 to 2022). The sample consists of 104 companies. To check the stationarity of the research variables, Levin, Lin, and Chu's unit root test was used, and to test the research hypotheses, the combined data regression method was utilized. Moreover, for the evaluation of the goodness of the proposed regression models, some necessary pretests were implemented. Results The findings show that companies with higher operating cash flows hold more cash. Financial constraints and institutional ownership do not have a significant effect on the sensitivity of cash holdings to asymmetric operating cash flows. Results from control variables also indicate that the Tobin ratio and the size of the company have a positive and significant effect on cash holdings. However, no evidence was found of a positive influence of the debt ratio on the amount of cash holdings. Conclusion Findings indicate that the sensitivity of cash holdings to asymmetric operating cash flows is higher in companies with greater operating cash flows. This result may be due to the pursuit of future profitable opportunities or to reduce liquidity risk in the inflationary, unstable, and dynamic business environment of Iran. Other results show that financial restrictions and institutional ownership, contrary to expectations and existing literature, do not have a significant effect on the sensitivity of cash holdings to asymmetric operating cash flows. This lack of effect may be attributed to the presence of state ownership. The results underscore the need for further research in the future.

ObjectiveThere are always incentives for agency problems in firms due to potential conflicts of interest among managers, shareholders, and stakeholders. Therefore, efforts to disclose appropriate and high-quality information are one of the approaches to reduce agency conflicts. Since integrated reporting is viewed as a future-oriented approach, it is crucial to assess the potential consequences of adopting an integrated reporting framework on financial reporting quality, taking agency motives into account This research analyzed the impact of the level of reporting convergence toward an integrated framework on financial reporting quality and agency conflicts. MethodsTo measure reporting convergence toward integrated reporting, a checklist was used that was designed based on the international integrated reporting framework. The integrated reporting framework is principles-based. The purpose of this framework is to establish guiding principles and content elements that govern the overall content of an integrated report. The guiding principles underpin the preparation and presentation of an integrated report, informing the content and how information is presented, while the content elements provide details of the information to be reported. Earnings quality, as a proxy for financial information quality, was assessed based on the inverse absolute value of residuals' standard deviation derived from an accrual model at the firm level. Agency cost, as a proxy for conflict of interest, was measured using an efficiency criterion based on the ratio of operational expenses to operational revenues. The research population includes 144 firms listed on the Tehran Stock Exchange over seven years from March 2016 to March 2023. Multivariable panel regression models, based on firm-year observations, were used to test the research hypotheses. ResultsThe findings showed that an increase in convergence level toward an integrated reporting framework improved earnings quality and reduced agency costs. Additionally, although agency costs reduced earnings quality, information disclosure based on integrated reporting mitigated this effect, thereby improving reported earnings quality. Firms that have a higher level of information disclosure following the integrated reporting framework use fewer earnings management tricks and exhibit higher earnings quality. Furthermore, the impact of implementing integrated reporting on earnings quality can be influenced by agency costs. Integrated reporting, as a superior information disclosure mechanism, strongly relates to financial information quality in firms facing agency costs. The effectiveness of integrated reporting is more pronounced in firms with agency problems. ConclusionThe results indicated that the improvement in transparency and completeness of information disclosure, due to the reporting convergence toward an integrated framework, increases financial information quality, especially earnings quality, over time. In addition, focusing on the benefits of integrated reporting mitigates agency conflicts and reduces agency costs. Acceptance of new reporting approaches requires studying their dimensions and possible future consequences. Since the movement toward an integrated reporting framework in Iran is not accompanied by specific requirements, it is suggested to analyze the challenges, opportunities, threats, drivers, barriers, and consequences of the integrated reporting approach by focusing on the information needs of interested groups.

Objective Judgment and decision-making are integral to any auditing activity and become more complex depending on the nature of the judgment and the subject of the decision. Therefore, identifying the factors that affect this process is essential. Among these factors, professional skepticism plays a significant role in the quality of judgment and decision-making. However, the impact of professional skepticism varies when the decision-maker experiences diminished self-control or ego depletion. This study is significant due to the diverse and economically consequential groups affected by accounting judgments and decision-making, and it helps justify why certain judgments and decisions are made. Consequently, the primary aim of this research is to examine the role of professional skepticism in shaping the quality of judgment and decision-making among forensic auditors and to explore the moderating effect of ego depletion on these processes. Methods The present research used a non-probability sampling method with available samples. Data were collected through standard questionnaire distribution and direct contact with 950 Iranian members of the official judiciary experts in accounting and auditing (members of the justice official expert and judicial authority), ultimately resulting in the receipt of 300 completed questionnaires. The data were analyzed using Structural Equation Modeling (SEM) with SPSS and Smart PLS software. Results The research findings are practically useful for diverse groups and offer valuable insights to both the forensic auditing community and researchers. The results indicate that professional skepticism has a significant and positive effect on the quality of judgment and decision-making. In other words, an increase in professional skepticism improves the quality of judgment and decision-making among forensic auditors. Additionally, the findings suggest that most forensic auditors face issues related to overwork, which is the primary cause of ego depletion. Generally, ego depletion leads to a decrease in professional skepticism, ultimately resulting in a decline in the quality of judgment and decision-making among forensic auditors. Further findings showed that although there is a positive relationship between professional skepticism and the quality of judgment and decision-making, the effect of ego depletion is negative. However, this relationship varies at different levels. Conclusion The research findings can contribute to enhancing the productivity of forensic auditors concerning judgment and decision-making. In conclusion, these findings can be instrumental in diagnosing professional issues and elucidating factors that influence the quality of judgment and decision-making among forensic auditors. Additionally, third parties could be considered stakeholders in understanding why decision-makers make certain decisions and the consequences of those decisions.

ObjectiveIndependent auditing plays a fundamental role in improving users' decision-making and market efficiency through validating financial reports. The quality of the work of these auditors depends on several factors, one of the most important of which is their independence. Since the phenomenon of auditor change is related to independence, this phenomenon, which is considered one of the vital issues of every company, should be carefully examined. The phenomenon of auditor change creates a break between auditors and the employer. Predicting the continuation or termination of the relationship between the auditor and the client in the coming years is one of the challenging issues in the field of auditing. In this regard, the purpose of this research is to predict voluntary auditor change (non-continuation of the relationship with the current client) using a meta-heuristic algorithm (Water Cycle Algorithm, WCA) and to compare the results with the logistic regression method.MethodsThe statistical sample is 185 companies listed on the Tehran Stock Exchange, selected by the systematic elimination method from 2017 to 2023, and their information was collected. Years with mandatory auditor switching are excluded. Then, Excel and Matlab software were used for implementing methods and predicting auditor change. Thirteen financial and non-financial variables that were extracted from the literature were used to predict auditor change in this research. These independent variables include: current ratio, working capital, debt ratio, asset ratio, return on assets, earnings quality, firm size, audit firm size, auditor opinion type, management change, separation between CEO and the chair of the board of directors, accounting conservatism, and firm competition power. Moreover, using the confusion matrix, which includes 4 evaluation criteria: accuracy, precision, sensitivity, and specificity, the results obtained from the Water Cycle Algorithm were compared with the results of logistic regression, a prominent method for forecasting binary variables such as auditor change. Additionally, these algorithms were run 10 times to ensure the reliability of the results.ResultsIn almost all implementations and based on all 4 performance evaluation criteria, the Water Cycle Algorithm is more suitable than logistic regression for predicting auditor change. In general, the criteria of accuracy, precision, sensitivity, and specificity in predicting the change of auditor using the Water Cycle Algorithm were 89%, 75%, 2%, and 99.9%, respectively. In comparison, the logistic regression criteria were 67%, 74%, 1%, and 99.8%, respectivelyConclusionThe Water Cycle Algorithm can be useful for predicting voluntary auditor changes by users and auditing firms. Audit institutions can use this tool to predict the continuation or non-continuation of their relationship with clients in the coming years and better plan to maximize profitability. Audit clients and companies can also use this tool to forecast future relationships with auditors and plan and schedule more efficiently for selecting the next auditor.

Objective The activities aimed at avoiding corporate tax payments have drawn considerable attention from lawmakers, international institutions such as the Organisation for Economic Co-operation and Development (OECD), the general media, and academics. These activities involve managers implementing strategies that reduce corporate tax payments through various forms and methods. This research studies the tax cash savings strategy. The purpose of this study is to investigate how companies utilize the cash flows resulting from tax avoidance and whether the presence of women on the board of directors can strengthen the effect of tax avoidance through cash tax savings. Methods To achieve this, data was collected from a sample of 119 listed manufacturing companies in selected Persian Gulf countries, including Iran, Qatar, Oman, Kuwait, and Saudi Arabia, during the years 2015-2021. The data was analyzed using a multiple linear regression model with the Pooled Generalized Least Squares (PGLS) method. Results The examination of the variables indicates the presence of tax avoidance through the method of tax cash savings among the listed companies on the selected stock exchanges of the chosen countries. Furthermore, the results show that these companies utilize the cash flows generated from tax cash savings through various strategies, such as investment or dividend distribution to shareholders. Contrary to expectations, the presence of women on the board of directors did not demonstrate a significant impact on decision-making. However, it is worth noting that the number of female directors on the board was typically limited to one, which may have influenced the extent of their impact on decision-making. Conclusion The results of this study indicate that there is a significant relationship between tax cash savings and investment, meaning that companies utilize the cash flows derived from taxes for investment purposes. There is also a significant relationship between tax cash savings and dividend payments, suggesting that companies allocate a portion of the funds generated from tax cash savings towards distributing dividends to shareholders. Thus, managers choose a combination of asset investment and dividend payments to utilize the cash flows resulting from tax avoidance. The negative coefficient of tax cash savings indicates that companies prefer to use the excess funds generated from tax avoidance for optimal investment purposes. In this regard, the presence of gender diversity on the boards of directors in the countries of this region does not affect the relationship between these two variables. Based on research conducted in other countries, the lack of influence of women on the boards of companies may be due to the relatively low or high number of women, which is typically a result of factors such as culture, governance laws, gender discrimination, and others.

Objective The issue of financing is a significant management topic for entities, with objectives including investment, profitability, risk reduction, and meeting the company's financial needs. Debt contracts are crucial financial resources for companies. Iranian companies typically use bank facilities or issue debt securities to outsource financing. Since financial statements are an important source of information for providers of financial resources, this research aims to examine the relationship between earnings quality and financing through bank facilities and debt securities and to compare these methods. Additionally, the research investigates the effect of the type of guarantee (bank guarantees compared to other types of guarantees) on the extent of companies' access to resources from issuing debt securities in the capital market. Methods The statistical population of this research is the companies listed on the Tehran Securities Exchange and Iran Fara Bourse from 2011 to 2022. To test the first, second, and fourth hypotheses of the research, multiple linear regression was used, and Kramer’s Z test was used to test the third hypothesis. Results The results of the research showed that there is a significant positive relationship between the earnings quality and receiving bank facilities and issuing debt securities in the capital market. As a result, by increasing the quality of accounting information and especially earnings quality, the company's access to financial resources from the providers of financial resources increases. Conclusion Therefore, company managers are advised to improve the quality of financial reporting and earnings quality to enhance their access to bank financial resources and the issuance of debt securities. Also, the results of Kramer’s Z test showed that the relationship between earnings quality and issuing debt securities is stronger than the relationship between earnings quality and receiving bank facilities. Therefore, it is recommended that the managers of companies who plan to finance through debt securities should focus on improving their financial reporting and earnings quality. This is because the Securities and Exchange Organization places considerable importance on the audited financial statements and the earnings quality at the time of granting the license to issue debt securities. In addition, the results showed that the type of guarantee (use of bank guarantees compared to other guarantees) enhances companies' access to financial resources by issuing debt securities. Therefore, it is recommended that the companies use bank guarantees when issuing debt securities if they have access to banks as guarantors, taking into account the final cost of the debt under these conditions. This is because, based on the results of this research, if bank guarantees are used, the possibility of companies accessing resources from the issuance of debt securities increases.

Objective In recent years, numerous changes and developments have impacted the auditing profession and are expected to continue influencing it in the future. Advances in information technology and the impact of their tools on audits, new needs of audit users, new reporting and governance models, domestic and global economic and political events, etc., are examples of these changes. Evidence shows that the necessary changes in auditing are not keeping pace with the speed of these developments, resulting in delayed and mostly passive responses. To sustain the profession, improve service delivery, and enhance audit quality, it is crucial to respond to upcoming changes proactively and be prepared for the future by identifying and reacting to emerging trends. Otherwise, the auditing profession risks losing its status as a valuable service. Identifying the drivers of change is the first step in addressing these changes, allowing us to prepare for future events. Therefore, the purpose of this research is to systematically review the literature, classify the results, and interpret the findings to identify the future drivers of auditing. Methods This research is both practical and qualitative, conducted using a meta-synthesis approach. The process involved setting research questions, systematically reviewing the literature, screening the identified studies, extracting information from the articles, and analyzing and synthesizing the qualitative findings. After quality control, an interpretation of the findings was presented. By employing a meta-synthesis approach, the research provides comprehensive and interpretive results, offering a clear picture of the future of auditing. Results After reviewing the content of 41 studies, 62 drivers affecting the future of auditing were identified and categorized based on their impact on the near and distant environments. Of these, 28 drivers were classified according to the P. E. S. T. L. E. framework (Political, Economic, Social, Technological, Legal, and Environmental). Additionally, 34 drivers related to the near environment were organized into eight general categories: human resources, academic and professional education, audit procedures and approaches, professional structure, stakeholders, work standards, reporting frameworks and corporate governance, and customers and the business environment. Conclusion Based on the findings of the conducted studies, stakeholder needs to give meaning to the audit. Currently, stakeholders expect the audit to provide more insight into a changing environment. Additionally, they anticipate an expanded audit scope and the use of more innovative tools. To meet these needs, auditors are expected to proactively address changes, enhance the quality of auditing by acquiring and applying necessary skills, and ensure that the educational system includes more up-to-date topics. Policymakers should also ensure the continuous adaptation of standards to align with ongoing changes in this complex environment.