Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.

A life jacket with holes- : a case study of 'temporary engagement' : a strategy used by Education Queensland to employ beginning secondary teachers

This research investigated the impact of Education Queensland's employment policy and practices for beginning secondary teachers appointed on temporary engagement. The context was the public secondary school sector within the state of Queensland, Australia. The study was set within a context of the changing nature of work from full-time permanent employment towards casual, fixed-term contracts, temporary and part-time employment, a trend reflected in the employment patterns for teachers within Australia. Two broad categories of literature relating to the research problem of this thesis were reviewed, namely the beginning teacher and permanency or tenure. The focus in the research literature on beginning teachers was the professional experiences of teachers within the classroom and school. There was a paucity of research that considered the working and industrial conditions of temporary employment for beginning teachers or the personal and professional implications of this form of employment. The review of the context and literature was conceptualised as a Beginning Temporary Teacher Theoretical Framework which served to inform the study. Using a qualitative case study methodology, the research techniques employed for the thesis were semi-structured interview and document analysis. A simultaneously conducted research project in which the researcher participated entitled 'Winning the Lottery? Beginning Teachers on Temporary Engagement' foregrounded this thesis in terms of refining the research question, contributing to the literature and in the selection of the participants. For this case study the perspectives of four distinct yet inter-related categories of professionals were sought. These included four beginning secondary teachers, three school administrators, a Senior Personnel Officer with Education Queensland, and a representative from the Queensland Teachers' Union. The research findings indicated that none of the beginning teachers or other professionals viewed starting a career in teaching on temporary engagement as the ideal. The negative features identified were the differential treatment received and the high level of uncertainty associated with temporary employment. Differential treatment tended to indicate 'less' entitlements, in terms of access to induction and professional development, recreational and sick leave, acceptance by and expectations of other colleagues, and avenues of redress in grievance cases. Moreover, interviews indicated a high level of uncertainty in terms of starting within the teaching profession, commencing at a new school, and a regular income. In addition, frequent changes in schools and/or cohorts of students exacerbated levels of uncertainty. The beginning teachers reported significantly decreased motivation, self-esteem and sense of belonging, and increased stress levels. There was an even more marked negative impact on those beginning teachers who had experienced a higher number of temporary engagements and schools in their first year of teaching. Conversely, strong staff support and a reasonable length of time in the one school improved the quality of the beginning teachers' experiences. The overall impact of being on temporary engagement resulted in delayed permanent position appointments, decreased commitment to particular schools and to Education Queensland as the employing authority, and for two of the beginning teachers, it produced a desire to seek alternative employment. The implementation of Education Queensland's policies relating to working conditions and entitlements for these temporary beginning teachers at the school level was revealed to be less than satisfactory. There was a tendency towards 'just-in- time' management of the beginning teacher on temporary engagement. The beginning teachers received 'less-than-messages' about access to and use of departmental documentation, support through induction and professional development, and their transition from temporary to permanent employment. To ensure a more systematic, supportive and inclusive process for managing the temporary beginning teacher, a conceptual framework entitled 'Continuums of Tension' was developed. The four continuums included permanent employment - temporary employment; system perspective - individual perspective; teaching as a profession - teaching as a job; and the permanent beginning teacher - university graduate. The general principles of the human resource policies of Education Queensland were based on a commitment to permanent employment, a system's perspective, viewing teaching as a profession and a homogeneous group of permanent beginning teachers. Contrasting with this, the beginning teacher on temporary engagement tended to operate from the position of temporary employment and a perspective that was individually based. Their priorities therefore included the 'occupational' aspects of being a temporary teacher striving to become permanent. Thus there existed a tension or contradiction between the general principles of human resource policies within Education Queensland and the employment experiences of beginning teachers on temporary engagement. The study proposed three actions for resolution to address the aforementioned tensions. The actions included: (a) the effective provision and targeted communication of information; (b) support, induction and professional development; and (c) a coordinated approach between Education Queensland, Queensland Teachers' Union, the Universities and the beginning teacher. These actions are fm1her refined to include: (a) an induction kit to suppm1 the individual through the pre-employment to permanent employee phases, (b) an extrapolation of the roles and responsibilities of Education Queensland personnel charged with supporting the beginning temporary teacher, and (c) a series of recommendations to effect a coordinated approach amongst the key stakeholders. The theoretical and conceptual frameworks have provided a means of addressing the identified needs of the beginning teacher on temporary engagement. As such, this study has contributed to the research literature on teacher employment and professionalism and aims to provide a beginning temporary teacher with managed professional and occupational support.

Legislative and security requirements of audit material for evidentiary purpose

This research used the Queensland Police Service, Australia, as a major case study. Information on principles, techniques and processes used, and the reason for the recording, storing and release of audit information for evidentiary purposes is reported. It is shown that Law Enforcement Agencies have a two-fold interest in, and legal obligation pertaining to, audit trails. The first interest relates to the situation where audit trails are actually used by criminals in the commission of crime and the second to where audit trails are generated by the information systems used by the police themselves in support of the recording and investigation of crime. Eleven court cases involving Queensland Police Service audit trails used in evidence in Queensland courts were selected for further analysis. It is shown that, of the cases studied, none of the evidence presented was rejected or seriously challenged from a technical perspective. These results were further analysed and related to normal requirements for trusted maintenance of audit trail information in sensitive environments with discussion on the ability and/or willingness of courts to fully challenge, assess or value audit evidence presented. Managerial and technical frameworks for firstly what is considered as an environment where a computer system may be considered to be operating “properly” and, secondly, what aspects of education, training, qualifications, expertise and the like may be considered as appropriate for persons responsible within that environment, are both proposed. Analysis was undertaken to determine if audit and control of information in a high security environment, such as law enforcement, could be judged as having improved, or not, in the transition from manual to electronic processes. Information collection, control of processing and audit in manual processes used by the Queensland Police Service, Australia, in the period 1940 to 1980 was assessed against current electronic systems essentially introduced to policing in the decades of the 1980s and 1990s. Results show that electronic systems do provide for faster communications with centrally controlled and updated information readily available for use by large numbers of users who are connected across significant geographical locations. However, it is clearly evident that the price paid for this is a lack of ability and/or reluctance to provide improved audit and control processes. To compare the information systems audit and control arrangements of the Queensland Police Service with other government departments or agencies, an Australia wide survey was conducted. Results of the survey were contrasted with the particular results of a survey, conducted by the Australian Commonwealth Privacy Commission four years previous, to this survey which showed that security in relation to the recording of activity against access to information held on Australian government computer systems has been poor and a cause for concern. However, within this four year period there is evidence to suggest that government organisations are increasingly more inclined to generate audit trails. An attack on the overall security of audit trails in computer operating systems was initiated to further investigate findings reported in relation to the government systems survey. The survey showed that information systems audit trails in Microsoft Corporation's “Windows” operating system environments are relied on quite heavily. An audit of the security for audit trails generated, stored and managed in the Microsoft “Windows 2000” operating system environment was undertaken and compared and contrasted with similar such audit trail schemes in the “UNIX” and “Linux” operating systems. Strength of passwords and exploitation of any security problems in access control were targeted using software tools that are freely available in the public domain. Results showed that such security for the “Windows 2000” system is seriously flawed and the integrity of audit trails stored within these environments cannot be relied upon. An attempt to produce a framework and set of guidelines for use by expert witnesses in the information technology (IT) profession is proposed. This is achieved by examining the current rules and guidelines related to the provision of expert evidence in a court environment, by analysing the rationale for the separation of distinct disciplines and corresponding bodies of knowledge used by the Medical Profession and Forensic Science and then by analysing the bodies of knowledge within the discipline of IT itself. It is demonstrated that the accepted processes and procedures relevant to expert witnessing in a court environment are transferable to the IT sector. However, unlike some discipline areas, this analysis has clearly identified two distinct aspects of the matter which appear particularly relevant to IT. These two areas are; expertise gained through the application of IT to information needs in a particular public or private enterprise; and expertise gained through accepted and verifiable education, training and experience in fundamental IT products and system.