Purpose To analyse the nature of financial reporting students' text-based interactions while collaboratively reading and annotating International Financial Reporting Standards (IFRS) using an online social annotation platform (OSAP) in a large real-world classroom.Motivation Fostering collaboration in large financial reporting classrooms remains a challenge and is underexplored, especially when it comes to reading and comprehending complex standards such as IFRS. Addressing this challenge is essential for promoting lifelong learning skills among future accountants.Design/Methodology This study was conducted in a large-class, real-world setting with minimal instructor intervention. Adopting a mixed methods approach, the study analysed student annotations downloaded from the OSAP generated during collaborative reading of a financial reporting standard, alongside data from student surveys to explore both interaction patterns and students' broader experiences with the platform.Main findings Students demonstrated high levels of collaboration, primarily through asking and answering questions. Their experiences of using the OSAP were positive; it encouraged pre-class preparation and improved their comprehension of the study material.Practical implications OSAPs can foster peer collaboration, increase engagement with complex texts, and improve comprehension in large classrooms, without increasing instructor workload.Novelty/Contribution This study provides a real-world analyses of peer interaction through OSAPs in large financial reporting classrooms, offering new insights into how digital tools support active reading and IFRS understanding.
Purpose: The study offers insights into the use and disclosure of intangible assets by companies listed on the London Stock Exchange (LSE) and the Nigerian Stock Exchange (NGX). Motivation: Intangible assets are increasingly important in modern business models. Despite this, International Accounting Standard 38 Intangible Assets (IAS 38) has not been substantively revised in decades. This study contributes to the International Accounting Standards Board's (IASB) planned comprehensive review of the standard. Methodology: Content analysis was used to collect data from the audited annual financial statements of companies listed on the London and Nigerian Stock Exchanges. Data was analysed using descriptive and inferential statistics. Main findings: Insignificant increases were noted in the disclosure of intangible assets in the past decade. Substantial increases were noted in the disclosure of unrecognised intangible assets. This suggests the inability of IAS 38 to serve the information needs of modern businesses.
Purpose and motivation: Despite challenges, public sectors worldwide are actively pursuing reforms, including efforts to enhance good corporate governance. The aim of this research was to determine whether differences exist in the root causes driving favourable audit outcomes, as a proxy for good corporate governance, within the three public sector spheres of South Africa, where it seems a differentiated approach to addressing challenges is required. Methodology: Annual reports were analysed over a 13-year period. Performing quantitative analysis, binary logistic regression was performed for each of the three targeted groups, using the audit outcome as the dependent variable. Thereafter the three regression models were compared, emphasising that comparing the estimated coefficients of the binary regression models is informative. Results: 'Internal control weaknesses' is the only statistically significant driver of sound corporate governance in all three spheres. Key drivers for the three spheres differ, indicating that different aspects drive sound corporate governance. Contribution: The results can guide policymakers, oversight entities, and public sector entities in tailoring their corporate governance efforts to enhance the likelihood of favourable audit outcomes. Countries that can identify with the South African situation can repeat the study to identify areas for improvement in their own environments.
Purpose: This study aims to assess whether the factors contributing to the audit expectation gap (AEG) in listed companies also apply to private companies, while also identifying additional factors unique to the private company context. Aim: Extant research on the AEG focuses on listed companies, despite private companies being more prevalent and differing in context, regulation and user expectations. Relying on listed-company findings risks overlooking these differences and misinforming stakeholders. This study addresses this shortcoming in a meaningful, though not exhaustive, way. Research approach/design and method: Semi-structured interviews were conducted with internal and external users of the financial statements of private companies, which include shareholders, members of management, credit managers at banking institutions and representatives of the South African Revenue Service. The constant comparative method was used to analyse the data. Main findings: Not all factors contributing to the AEG in listed companies are relevant to private companies. Users expect auditors to verify compliance with all laws and regulations and the effectiveness of internal controls, but do not expect auditors to detect all fraud. Additional contributors to the AEG, such as reliance on auditors to resolve agency conflict, are also identified and explained. Practical implications: This study's findings better equip standard setters and regulators to understand and address continued AEGs in the private company context. Contribution/value-add: This study extends the AEG literature by showing that conclusions drawn from listed-company contexts cannot automatically be applied to private companies, highlighting the need for context-specific research.
PurposeThis study investigates whether the current interpretation of section 8(8) of the VAT Act, in relation to indemnity payments under zero-rated non-life insurance contracts, upholds legal certainty, fairness, and sound tax policy in South Africa. MotivationSection 8(8), which deems non-life insurance indemnity payments as a supply for the insured, was amended. Although the legislative amendments did not specifically relate to zero-rated supplies under insurance cover, they did place a renewed spotlight on the VAT treatment and the differing interpretations. The authors challenge the prevailing SARS interpretation on both legal and policy grounds, arguing that it may not reflect the legislature's intention and gives rise to inequitable outcomes. Design/Methodology/ApproachA doctrinal legal research approach was employed, supported by policy analysis and comparative insights from New Zealand's VAT system. Main findingsThe study contends that SARS's interpretation extends beyond the wording and intent of the legislation. This position undermines VAT neutrality and results in inconsistencies in the treatment of cross-border non-life insurance transactions. Practical implicationsAmending the wording of section 8(8) would provide greater clarity, promote equity, and enhance certainty for affected taxpayers and the broader insurance industry. Novelty/ContributionThis is the first academic study to offer an alternative interpretation of section 8(8) of the VAT Act in the context of zero-rated insurance indemnity payments. The study contributes to legal and policy discourse by proposing a more coherent reading of the provision that aligns with principles of VAT neutrality, legislative intent, and international best practice.
PurposeThis study examines the use of three types of nudge messages (reciprocity, social norm, deterrence) as a tool to positively influence tax compliance behaviour of small business owners.MotivationTax revenues are the main source of government income for many economies and it is through this revenue that citizens can benefit from public goods and services provided by governments. Increasing the level of tax compliance is a step towards a fair allocation of the tax burden and distribution of resources.Design/methodology/approachData were collected using an online field experiment conducted with small business owners in South Africa as participants.Main findingsThe experimental results show that nudge messages have an impact on tax compliance behaviour. Exposure to a social norm or a deterrence nudge message has a positive impact on tax compliance when compared with control conditions. The relationship between the social norm nudge message and tax compliance behaviour was statistically significant. However, the results indicate that the impact of nudge messages on tax compliance behaviour is not always positive, as the reciprocity nudge message showed a negative (boomerang) effect when compared with control conditions. Furthermore, the results show tax compliance differences between message types, with the tax compliance difference between the social norm nudge message and the reciprocity nudge message being statistically significant. A similar statistically significant difference was observed between the deterrence nudge message and the reciprocity nudge message.Practical implications/Managerial impactThe findings of this study can assist tax authorities in both developing and developed countries with designing appropriate nudge messages.ContributionThis study improves understanding of the impact of nudge messages on tax compliance behaviour in a developing country. It provides evidence of the relative strength of reciprocity, social norms and deterrence nudge messages in influencing tax compliance behaviour. Additionally, it seeks to add to the body of knowledge related to how the effectiveness of reciprocity, social norm and deterrence nudges may be affected by perceptions of corruption and attitudes towards tax. The study also contributes to the body of knowledge by considering business taxpayers rather than individuals not in business.
PurposeThis study examines the ambiguity of financial reporting judgement disclosures of South African listed companies (including whether these disclosures are boilerplate).MotivationApplying International Financial Reporting Standards (IFRSs) requires judgement, which may increase measurement uncertainty and decrease the decision-usefulness of financial information. However, transparent disclosures regarding financial reporting judgements could mitigate these risks.MethodologyQuantitative content analysis, using a self-developed disclosure checklist and Likert scales, was performed for 104 companies during 2020-2023 to measure the ambiguity of financial reporting judgement disclosures when applying selected IFRSs.Main findingsCompanies generally displayed low ambiguity when disclosing financial reporting judgements associated with financial instruments, group-related accounting, leases, depreciation, goodwill and investment property. Average to high disclosure ambiguity was detected regarding fair value measurement, revenue recognition and provisions. Significant differences in ambiguity were identified based on the year, company size and industry.Managerial impactIt is recommended that management and audit committees annually reassess their disclosure practices relating to financial reporting judgements to augment the decision-usefulness of annual report disclosures and reduce boilerplate disclosures.NoveltyThe study focuses not on mere disclosure compliance but on the ambiguity of disclosures relating to financial reporting judgements in a period encompassing a global pandemic, to assess the usefulness of disclosures for decision-making.
Purpose:This study explores the relationship between phases of financial distress and earnings management strategies on a sample of companies listed on India's Bombay Stock Exchange (BSE).Motivation:As India is an emerging economy with evolving laws, Indian companies lack stringent corporate governance norms, leading them to practice more earnings management during difficult phases of the business cycle.Design/methodology/approach:The study examines a sample of 1377 companies for the period from 2017 to 2023 with the help of panel data regression analysis.Findings:It concludes that during the initial phase of distress, companies resort to real earnings management to improve their financial status, while during severe financial distress, managers opt for accrual earnings management and classification shifting.Research implications:Investors need to be aware of earnings management's impact on financial indicators. To mitigate the risks associated with earnings management, regulatory authorities should strengthen corporate governance norms, improve financial disclosure practices, and enhance the role of auditors.Originality:It contributes to existing literature in three ways. Firstly, it is based on a large sample size, taking all the listed manufacturing companies. Second, it examines three types of earnings management: accrual and real earnings management, and classification shifting. Third, it studies the earnings management scenario through companies' different financial stages.
PurposeThis paper aims to identify some determinants of management entrenchment and examine whether management entrenchment impacts firm performance.MotivationDespite more than three decades of empirical research and large theoretical background, the relationship between managers' discretionary behaviour and firm performance has not yet been completely understood. That can be explained by the phenomena of management entrenchment. Theoretical background as well as previous empirical results are often contradictory. For some authors, management entrenchment may affect firm performance negatively. Others consider it to be beneficial, since it may lead managers to choose riskier projects, which is more profitable for shareholders. Our study seeks to bridge this gap and contribute to the debate on the potential effect of management entrenchment on firm performance.Design/Methodology/ApproachTo measure management entrenchment, we construct an index based on some proxies from corporate governance mechanisms which are related to the position of the CEO within the company, namely: 1) CEO's ownership, 2) CEO duality, 3) CEO retirement age, 4) CEO's seniority and 5) Overinvestment. We regressed management entrenchment index on board of directors' control, dividend policy, firm leverage, free cash flows, firm size and external audit's quality. Then, we regressed firm performance, measured alternatively by the return on assets (ROA) the Market-to-Book ratio (MTB) on management entrenchment index, firm size and firm age. Our sample includes 90 French companies listed during 2008-2022 period.Main findingsOur findings show that: 1) small firms, firms with small boards of directors and firms with lower leverage ratio tend to experience a high degree of management entrenchment and 2) management entrenchment has a significantly negative influence on firm performance, whether measured by an accounting-based proxy, the return on assets or by a market-based proxy, the Market-to-Book ratio.Practical implications/Managerial impactOur findings can help shareholders as well as regulators to establish corporate governance mechanisms which are able to reduce management entrenchment and therefore avoid dropping in firm performance.Novelty/ContributionOur study may contribute to a consensus on the relationship between management entrenchment and firm performance. Indeed, there is a conflict between theoretical backgrounds regarding the impact of management entrenchment on firm performance. This conflict may explain the mitigated results of previous empirical investigations. In addition, we adopted a new measure of management entrenchment and conducted empirical investigation on a different context that is French listed companies which have not been widely studied.
Purpose:This study explores how expert participants reacted to public policy amendments that extended the role of public sector auditors in South Africa.Design/Methodology/Approach:The study uses a qualitative approach relying on documental analysis of public comment letters, public hearing minutes for the Public Audit Amendment Act No. 05 of 2018 (PAAA), and semi-structured interviews with auditing experts.Findings:The study finds that policymakers positioned the Auditor-General of South Africa (AGSA) to address governance challenges and unethical practices in the public sector, given the AGSA's credibility, competence, and institutional independence. This perception justified the expansion of the AGSA's roles. The study shows how the expanded roles have not changed governance practices but have amplified legal tactics to evade accountability. The study shows how additional unfunded legal, investigative and advisory roles threaten the structural independence and competency of public sector auditors, which has negative future impacts on the AGSA's credibility. Additionally, it provides evidence that the expanded roles create a duplication of responsibilities, shielding other state institutions from performing their existing oversight mandates and undermining constitutional democracy.Originality:The study is the first to evaluate the practical impacts of changes to public policy initiated to grant more powers to public sector auditors in an emerging economy riddled with corruption through the lens of auditing experts.Contribution:The study may be useful to policymakers and AGSA leadership in understanding experts' perspectives on government policy regarding observed practices on the ground.
Purpose:This paper investigates the effect of executive pay and committee diversity on the financial performance of JSE-listed companies.Motivation:There are few to no studies on the topic in South Africa, even though executive pay has been a focal point in the country due to the regulatory landscape intertwined with the JSE, Africa's largest capital market.Design/Methodology/Approach:We employ a quantitative and deductive design with the GLS method to analyse 660 firm-year panel data from non-financial listed firms on the JSE spanning 2016-2022.Main findings:The results show that executive pay, female presence on boards, and female chair on remuneration committee demonstrate a significant positive relationship with financial performance, while Black directors and CEO duality demonstrate a significant negative effect on performance.Practical implications:The study outcome calls for boards and remuneration committees of JSE-listed companies to use data-based context-sensitive methods for executive pay development to achieve better operational results while avoiding rigid numerical performance assessment and creating gender-sensitive governance standards that enable women in leadership roles.Novelty/Contribution:Our study contributes to the literature gap in Sub-Saharan Africa, especially South Africa, on the topic and advocates for board diversity and the keen interest of shareholders and investors in the work and composition of the remuneration committee due to recent controversies in the compensation of company directors across the globe.
PurposeTo develop an ethical artificial intelligence (AI) corporate governance (CG) framework to guide South African business leaders in deploying and integrating AI into business processes, thus providing practical guidance to ensure responsible, transparent, and stakeholder-centric AI adoption.MotivationAI governance remains largely underdeveloped across Africa, particularly in South Africa, where businesses experience significant dilemmas in adopting and implementing an ethical AI framework. This study addresses that gap by developing a structured approach to ethical AI CG that supports responsible business practices.Design/Methodology/ApproachA sequential mixed-methods approach was employed, combining a systematic literature review based on the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) guidelines, with quantitative insights from a questionnaire.Main findingsThe study identified five essential elements for an effective ethical AI CG framework, namely transparency, machine bias, privacy, beneficial AI, and responsible AI, all of which must be stakeholder-centric.Practical implicationsA robust ethical CG framework tailored for South African business environments will encourage ethical AI adoption, strengthen adherence to the King IV Code, and enhance stakeholder trust while mitigating AI-driven risks inherent in technologies. The study emphasises continuous monitoring, stakeholder engagement, and compliance with legal frameworks like the Protection of Personal Information Act (POPIA). While the framework is tailored for South Africa, its principles can enjoy broader applications in other African business contexts.Novelty/ContributionThis study developed a novel ethical AI CG framework for South African businesses using a sequential mixed-methods approach incorporating stakeholder views.
PurposeThe purpose of this article is to critically analyse the value-added tax (VAT) levied in South Africa in respect of non-fungible token (NFT) transactions.MotivationNFTs represent a novel category of tradable digital assets that use blockchain technology. The South African Revenue Service (SARS) has not issued any guidelines on the VAT treatment of NFTs and therefore the VAT treatment is uncertain.Design/Methodology/ApproachA doctrinal research methodology, which included a comparative study with other jurisdictions, was employed to critically analyse the VAT levied in respect of NFT transactions.Main findingsThis article found that an NFT transaction constitutes a "taxable supply" and that it can constitute the "supply" of "goods" or "services". Although the VAT consequences of NFT transactions that constitute "goods" are easily established, the VAT consequences of NFT transactions that constitute "services" remain uncertain. The classification of whether the services qualify as financial services, electronic services or imported services remain uncertain.Practical implicationsThe findings of this article accordingly suggest that legislative amendments be made to the VAT Act or that guidance be issued by SARS to clarify the VAT consequences of NFT transactions.Novelty/ContributionAcademic research on the VAT treatment of NFTs is also limited. This was the first study in South Africa to critically analyse the VAT treatment of NFT transactions.
PurposeThis article explores the disclosure practices of South African JSE-listed food and beverage companies concerning the Sustainable Development Goal (SDG) 2, 'Zero Hunger'.MotivationCompanies are encouraged to adopt and integrate sustainability practices and SDGs reporting into their reporting cycle.Design/Methodology/ApproachA content analysis was performed using 40 SDG 2 evaluation question criteria to examine the integrated and sustainability reports of 12 South African-listed food and beverage companies for the financial period 2022.Main findingsThe study found a considerably low level of SDG 2 reporting in the South African food and beverage industry, particularly in aspects related to product health and nutrition, and food safety. However, there is a notable emphasis on disclosing energy utilisation to address South Africa's energy crisis.Practical implications/Managerial impactThe study provides valuable recommendations to the South African food and beverage industry on how to improve their SDG 2 disclosures and transparency regarding food practices.Novelty/ContributionThis study provides new evidence on SDG 2 reporting in the food and beverage industry. It offers valuable insights into how companies voluntarily adhere to guidance frameworks and standards.
Purpose:This study revisits the relationship between real earnings management (REM) and financial performance (FP) and examines the moderating effect of the whistleblowing policy (WBP) on the REM-FP relationship. It further investigates the potential channels through which REM deters FP.Aim:This study empirically tests whether the perceptual deterrence theory is relevant to the ongoing debates and variations in the relationship between real earnings management practices and financial performance.Design/Methodology/Approach:The study utilises a panel data set of publicly quoted non-financial companies operating in twelve (12) sub-Saharan African countries from 2014 to 2020. It employs the disclosure of WBP in the corporate governance section of annual reports to gauge WBP, while REM is estimated using aggregated real earnings components (abnormal production costs, abnormal discretionary expenditures, and abnormal cash inflows).Main Findings:The study finds that REM reduces FP. Findings also indicate that WBP mitigates the adverse impacts of REM on FP. This study further empirically documents that "agency costs," "CEO integrity," and "financial distress" are potential channels through which REM negatively impacts FP. Our results align with disaggregated measures of REM, sub-sample analysis, and considerations of endogeneity issues.Practical Implications:Our findings suggest that corporate firms that implement a robust whistleblowing policy can deter REM practices and lessen negative market reactions. This policy promotes a culture of integrity and empowers employees to report financial misconduct without fear of retaliation, thereby enhancing transparency and reducing market volatility while improving operational efficiency and profitability.Novelty/Contribution:This study presents a whistleblowing policy as a means of deterring REM practices through the theoretical lens of perceptual deterrence theory. It also contributes by documenting that agency costs, CEO integrity, and financial distress represent the channels through which REM practices negatively affect financial performance.
PurposeTo ascertain how JSE-listed companies use derivatives to hedge.AimDetermine whether JSE-listed companies apply established rationales for corporate hedging practices.Design/Methodology/ApproachThis empirical study uses data from the Johannesburg Stock Exchange (JSE), South Africa, as a proxy for emerging markets.Main findingsBinomial logistic regression, applied to the 200 largest non-financial firms (by market capitalization) on the JSE from 2005 to 2017, indicates that larger firms, higher leveraged firms, ones with better growth prospects, and less information asymmetry between directors and management are more likely to use derivatives to hedge.Practical implicationsThe findings suggest that some traditional determinants for corporate hedging practices apply in an emerging market context, but local conditions still remain an important consideration.Novelty/ContributionBy confirming the applicability of traditional hedging theories in an emerging market context, the study extends the theoretical understanding of corporate risk management. It supports the notion that established hedging rationales, such as reducing financial distress costs and addressing information asymmetry, are relevant across different economic contexts.
PurposeThe main objective of this study is to analyse the impact of auditor gender on audit fees, with a view to establishing whether there are any differences in audit price depending on the gender of the auditor.MotivationThe existence of a gender gap in audit fees is a problem. In order to try to reduce this gap, it is necessary to understand the determinants of audit fees according to gender.Design/Methodology/ApproachThe sample under analysis is made up of 3217 unlisted Spanish companies. In order to fulfil our aim, an audit fee model is put forward, applying a multiple linear regression analysis differentiated by auditor gender.Main findingsThe results point to an absence of any statistically significant association between audit fees and auditor gender. In contrast to other countries within the same context, Spanish female audit partners do not generate higher audit fees than their male counterparts; there is no female audit fee premium as there seems to be in other countries such as Belgium, France, Finland, China or the USA.Practical implicationsDifferences were found among the factors which determine audit fees; there tend to be fewer factors considered in audits signed by female auditors, with indicators related to the economic and financial situation of the company under audit excluded from the fees model. These results could be justified by differences between male and female auditors with respect to audit planning and efficiency.Novelty/ContributionThis paper is a contribution to the literature on gender in auditing, and offers up evidence on the impact of auditor gender on audit fees within a specific context that has not been studied in any depth, namely the Spanish auditing market for unlisted companies.
