Audit sampling: a simulation study

Auditors use extensive auditing techniques to audit financial statements in an effort to accumulate evidence. However. auditor always sought a cheaper audit technique that does not compromise much on the quality of the audit. One of techniques used by auditor using cost-effective and efficient sampling plan. In practice. auditors use small sample size as minimum as 25 items. Therefore. this simulation exercise is to test whether the given sampling plan has a reasonable chance of picking up errors and estimating the degree of value error that actually exists in an accounting population . We conclude that those firms using samples of less than 50 units for auditing accounting populations with low error rates have a low probability of picking up error. Therefore. we suggest that the minimum sample size per population should increase to at least 50 units. in order to improve their error detection process and ultimately the quality of their audit

The Comparative Analysis of Personality and Beliefs About Knowledge Towards Academic Performance at Three Levels Accreditation of Universities in Indonesia : Evidence from Accounting Students in Indonesia

The development of the accountancy profession in Indonesia is not as fast as other Southeast Asian countries.. Accounting graduates should be able to fill in the accountancy profession but a little interested.  This problem started out of the process of accounting education  especially output of the learning process  namely Academic Performance.. The objective of the study is to investigate the comparative influence of personality and beliefs about knowledge on Academic Performance  among on accounting student in Indonesia. The participants of this research were 750 Indonesian accounting students at three level accreditation. Data were analyzed with Regression and path analysis to examine the relationship among the variables. The result showed that personality influenced the academic performance at level B accreditation and beliefs about knowledge influenced the Academic Performance at level A accreditation, and the two of independent influenced the Academic performance at level C accreditation. Furthermore, accounting students at C accreditation university has the largest influence  of personality towards Academic Performance. In the other hand, accounting students at A accreditation university has the largest influence of beliefs about knowledge towards Academic Performance . These findings will contribute to the literary education of accounting in which psychological factors required for accounting students to get academic performance best in their studies. Next when they, they were more competent, willing and interested to join the accounting profession. Keywords—Academic Performance, Personality factors, Beliefs  about knowledge, Regression Analysis, Accounting profession DOI: 10.7176/RJFA/11-6-13 Publication date:March 31st 202

Sampling Size and Auditors' Judgments: A Simulation

Auditors usually seek cost-effective and efficient techniques to accumulate evidence in an effort tu express their opinions on financial statements. One such technique is audit sampling, and in the United Kingdom auditors use sample sizes as small as 25 items. This study uses the Monte Carlo simulation technique to determine whether an auditor's opinion using both different sample size and error levels is within an acceptable degree of accuracy. The results suggest that samples of fewer than 50 items are not large enough to provide a successful sampling plan unless the error value is very low. To improve the sampling plan and the quality of the audit, the sample size should, therefore, be increased to more than 50 items

Stock Returns and the Weekend Effect: the Malaysian Experience

Market behaviour of stock returns and the weekend effect were investigated. Our study confirms the presence of the day of the week effect or Monday effect in the Malaysian Stock Market. In particular, over the 1975-1985 periods, the lowest mean return occurred on Tuesday and both Monday and Tuesday returns were negative

Forecasting financial problems in emerging capital markets

The advent of the Asian Financial Crisis (AFC) in the Southeast Asia in 1997 is an appealing case for research work in assessing corporate financial distress. From international perspective, AFC is a product of contagion effect that spread from Thailand and consequently to the other Asian countries. Domestically, the AFC has resulted a sudden economic slump and corporate failures in these economies. This paper examines the corporate failure before the 1997 Asian Financial Crisis in three emerging capital markets namely Malaysia, Singapore and Thailand, and develops, tests, and analyses a model for classifying and predicting financial distress. A failure classification model based on multiple discriminant analysis was utilised to classify listed corporations from these countries for the 1980 to 1996 period. The model is tested on a sample of 33 Malaysian, 17 Singaporean and 52 Thailand failed firms and similar number of non-failed firms in the respective countries as a control sample. The failure prediction model developed successfully discriminates between failed and non-failed listed firms at the rate of 86%, 82% and 71% of Malaysian, Singaporean and Thailand firms respectively. Further validation of findings show that the predictive accuracy was significantly better than chance. © EuroJournals Publishing, Inc. 2006

Value relevance of earnings and book value of equity: evidence from Malaysia

The purpose of this paper is to examine the value relevance of accounting information in the Malaysian main capital markets’ firms by employing the basic Ohlson model. The study employs Prais-Winsten regression, correlated panels corrected standard errors (PCSEs) to analyze data due to the existence of cross sectional dependence across panels. The results show that the book value of equity is significantly value relevant variable in decision making, while earnings are not as opposed to the conceptual framework for financial reporting. It shows that investors focus on the book value of equity while less emphasis on earnings in investment decision making due to the perception of managerial bias in the reported earnings

A reassessment of the relationship between working capital management and firm performance: evidence from non-financial companies in Nigeria

This paper reassesses the relationship between working capital management (WCM) and firm performance in the Nigerian context. The study is motivated by the limited insights available on the impacts of WCM on firm performance in the country. To date, most studies from Nigeria have been largely descriptive and focused on a small sample size that is non-representative of the population. In addition, there are limited rigorous statistical analyses involved in such studies. This paper addresses the methodological limitations apparent in prior literature and provides a better understanding of the relationship between WCM and firm performance, revealing how firms can manage their operations more profitably. The paper adopts a panel data regression analysis on a sample of 75 non-financial firms listed on the Nigerian Stock Exchange from 2007 to 2015. The results of the analyses showed that WCM variables have an inconsistent relationship with the measures of performance adopted, which were return on assets and Tobin’s Q. Specifically, accounts receivable management and inventory management were negatively associated with the return on assets, while accounts payable management, cash conversion cycle and cash conversion efficiency were positively associated with return on assets. Additionally, accounts receivable management and inventory management were positively associated with Tobin’s Q, whereas accounts payable management, cash conversion cycle and cash conversion efficiency were negatively associated with Tobin’s Q. These results were found to be robust using quantile regression. The results of the quantile regression showed inconsistency across the various quantiles used (0.10, 0.25, 0.50 and 0.75). These findings have two important implications. The first is that WCM variables influence the performance of firms. The second is that the mixed findings partly indicate that firms and managers must understand and formulate WCM policies that reflect their peculiar conditions

Study of the Effect in the Output Membership Function When Tuning a Fuzzy Logic Controller

This paper describes a study of tuning process for fuzzy logic controller (FLC) design. In fuzzy logic controller design, there is no systematic procedure to tune fuzzy logic controller to follow a desired set point. The tuning process of Fuzzy Logic Controllers (FLCs) using trial-and-error approach is commonly done until satisfactory results are obtained. This is usually a tedious and time-consuming task but it has been widely employed and has been used in many successful industrial applications. The performance of the system can be analyzed. If the results are not as desired, changes are made either to the number of the fuzzy partitions or the mapping of the membership function and then the system can be tested again. This paper demonstrates a faster tuning process by adjusting the mapping of the membership function to get desired output. Through identifying and analyzing what will be done on adjusting mapping of membership functions by utilizing knowledge from the experts, it will be demonstrated in this paper that the tuning process of FLCs can be easily simplified

Efficiency of Gulf Cooperation Council banks: empirical evidence using data envelopment analysis

Purpose: This paper aims to investigate the efficiency level of Gulf Cooperation Council (GCC) banks on technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE). Both PTE and SE represent the potential factors that influence the efficiency of the GCC banks. In total, 43 GCC banks were observed in this study over the period from 2007 until 2011. Design/methodology/approach: The Data Envelopment Analysis, a non-parametric method using variable returns to scale under Banker, Charnes and Cooper model, was used with assets and deposit (as input) and loan and income (as output). Findings: On average, the results show that many GCC banks are operating within an optimal scale of efficiency. Nevertheless, the results also show managerial inefficiency in the use of resources. Furthermore, the results indicate that, while the larger banks (the 22 largest) tend to operate at constant returns to scale (CRS) or decreasing returns to scale, the smaller banks (the 21 smallest) are susceptible to operate at either CRS or increasing returns to scale. Research limitations/implications: Because of the chosen research method, the results may lack generalisation. Therefore, researchers are encouraged to test the propositions further. An additional implication of the results is that it was able to identify some banks that may become potential targets for outside acquisition. Practical implications: The findings should be useful to banks in the GCC in increasing their efficiencies and recognizing those with a potential for outside acquisition. Originality/value: The findings are valuable because they will facilitate the maintenance of efficient banks in the GCC. This is necessary to enable the countries to maintain a healthy and sustainable economy

Directors’ tenure and their independence: capital market perspective

The independence of non-executive directors has long been a concern.The independent directors are not only required to be independent from management but also free from any other relationships which can interfere with their objectivity.Recently, the concern has been focused on long tenure of independent directors.Regulators seem to believe that long tenure may impair independence, hence attempts to limit the tenure have been recommended, even though it has not been made mandatory.However, theories concerning long tenure are contradictory and empirical evidences are weak. Earlier studies are based on theory-driven approach, which only examines the association between directors’ tenure and proxies of financial reporting quality.This study on the other hand, proposes a different approach based on earnings response coefficient model which not only examines investors’ perceptions but also their reactions.This is based on the widely accepted independence model where independence should not only be in the form of fact but also appearance. The interaction between directors’ tenure and earnings performance is hypothesized to have a significant negative relationship with the cumulative abnormal return.Low perceived earnings quality in financial accounts from long tenure by investors is expected to result in lower coefficient of earnings.This study will provide additional literature and knowledge on the effect of independent directors’ tenure. It can assist regulators in revising the requirement for directors’ tenure