Effects of leadership and accounting capacity on accountability through the quality of financial reporting

Document Type : Research Paper

Authors

1 Assistant Professor, Department of Accounting, Payame Noor University, Tehran, Iran.

2 MSc., Department of Accounting, Payame Noor University, Tehran, Iran

10.22051/jaasci.2023.40407.1702

Abstract

Purpose: One of the main ways to prove the improvement of the performance of the public sector is through financial statements and increasing the quality of financial reporting, which should lead to the improvement of accountability. Using institutional and contingency theory, this article examines the effect of leadership and accounting capacity on the quality of financial reporting and accountability, as well as the impact of financial reporting quality on accountability in the welfare organization.
Method: In terms of purpose, this research is applied and is placed in the category of descriptive-survey researches. The statistical population of the study includes 175 managers and employees of welfare organization finance in Bushehr, Ilam, Fars, Hormozgan, Kohgiluyeh and Boyer-Ahmad provinces. To test the five research hypotheses, 122 questionnaires with a five-level Likert scale were completed and the structural equation modeling method of confirmatory factor analysis with partial least squares approach and correlation coefficient and Smart PLS software was used.
Findings: Findings show that accounting capacity has no effect on financial reporting quality and accountability, leadership has a positive effect on financial reporting quality and accountability and the quality of financial reporting will lead to increased accountability.
Conclusion: The results of this study prove the importance of leadership in organizational accounting reforms. It also shows that financial reporting quality provides an accurate assessment of the accountability of public sector organizations.
Enhancing knowledge: Studies show that the present study does not have a similar sample in Iran in terms of the subject, goal, and method of measuring the leadership and accounting capacity variables. The results of this research reveal a new insight regarding the importance of leadership and the impact of the quality of financial reporting on accountability in public sector organizations.

Keywords

Main Subjects


امینی‌مهر، اکبر؛ حجازی، رضوان؛ شهیم‌پرمهر، ضیاالدین. (1394). بررسی سودمندی مبنای حسابداری تعهدی بر شفافیت گزارشگری و مسئولیت پاسخگویی در دانشگاههای وابسته به وزارت علوم، تحقیقات و فناوری (مطالعه موردی دانشگاه خوارزمی تهران)، دو فصلنامه حسابداری دولتی، 1(2): 55-66.
حسینی، سید علی؛ خوئینی، مهین. (1396). شبکه‌های اجتماعی ؛بازار سرمایه و گزارشگری مالی، حسابداری و منافع اجتماعی، 7(4): 23-38.doi:10.22051/IJAR.2017.15300.1294
کیانی، آیدین؛ آقایی، محمدعلی. (1395). ارزیابی سودمندی معیارهای اندازه‌گیری کیفیت گزارشگری مالی بر رشد آتی در فرآیند چرخه حیات شرکتها، پژوهشهای کاربردی در گزارشگری مالی، 5(2): 143-172.
موسوی شیری، محمود؛ صادقی، محمدحسین؛ فاتح، حسین. (1393). بررسی ویژگیهای مالی تهیه‌شده بر اساس مبنای حسابداری تعهدی در مقابل مبنای حسابداری نقدی در دانشگاههای علوم پزشکی کشور، دو فصلنامه حسابداری دولتی، 1(1): 31-40.
مهرانی، کاوه؛ بیک بشرویه، سلمان؛ شهیدی، زهره. (1393). رابطه ساز وکارهای راهبری شرکتی و کیفیت گزارشگری مالی در بورس اوراق بهادار تهران، حسابداری و منافع اجتماعی، 4(1): 1-19.     doi: 10.22051/IJAR.2014.487
Afiah, N. N., & Azwari, P. C. (2015). The effect of the implementation of government internal control system (GICS) on the quality of financial reporting of the local government and its impact on the principles of good governance: a research in district, city, and provincial government in South Sumatera, Procedia – Social and Behavioral Sciences, 211, 811-818.
Ahyaruddin, M., & Akbar, R. (2016). The relationship between the use of a performance measurement system, organizational factors, accountability, and the performance of public sector organizations, Journal of Indonesian Economy and Business, 31(1), 1-22.
Alam, M . M., Said, J., & Abd Aziz, M. A. (2018). Role of integrity system, internal control system and leadership practices on the accountability practices in the public sectors of Malaysia, Social Responsibility Journal, 15(7), 955-976.
Aminimehr, A., Hejazi, R., & Shahim pormehr, Z. (2015). Investigation Basis of Accrual Accounting Usefulness in Reporting Transparency and Improving Responsibility in the Universities Affiliatet to Ministry of Science, Research and Technology (A Case Study: Kharazmi University), Journal of Governmental Accounting, 1(2), 55-66. (In Persian).
Anessi-Pessina, E., Nasi, G., & Steccolini, I. (2008). Accounting reforms: determinants of local government’s choices, Financial Accountability & Management, 24(3), 321-342.
Antwi. K., Analoui. F., & Nana-Agyekum. D. (2008). Public sector reform in sub-Saharan Africa: what can be learnt from the civil service performance improvement programme in Ghana?, Public Administration and Development, 28) 4(. 253-264.
Azmi, A. H., & Mohamed, N. (2014). Readiness of Malaysian public sector employees in moving towards accrual accounting for improve accountability: the case of Ministry of Education (MOE), Procedia – Social and Behavioral Sciences, 164, 106-111.
Barton. A. (2007). Accrual Accounting and Budgeting Systems Issues in Australian Governments, Australian Accounting Review, 17(41), 38-50.
Berger, T. M.-M. (2018). IPSAS Explained: A Summary of International Public Sector Accounting Standards, John Wiley & Sons.
Bovens, M. (2010). Two Concepts of Accountability: Accountability a virtue and as a Mechanism, West European politics, 33(5). 946-967.
Clark, J. (1992). Policy influence, lobbying and advocacy. In Edwards, M. & Holme, D. (eds). Making a Difference NGOs and Divelopment in a Changing World, Earthscan Poblications Limited, London, 191-202.
Cohen, S., & Karatzimas, S. (2017). Accounting information quality and decision-usefulness of governmental financial reporting: moving from cash to modified cash, Meditari Accountancy Research, 25(1), 95-113.
Crosby, B.C., & Bryson, J.M. (2018). Why leadership of public leadership research matters: and what to do about it, Public Management Review, 20(9), 1265-1286.
DiMaggio, P.J., & Powell, W.W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields, American Sociological Review, 48(2), 147-160.
Eivani, F., Nazari, K., & Emami, M. (2012). Public accountability and government financial reporting, African Journal of Business Management, 6(29), 8475-8482.
Fernandez, S. (2008). Examining the effects of leadership behavior on employee perceptions of performance and job satisfaction, Public Performance & Management Review, 32(2), 175-205.
Florou, A., Morricone. S., & F.pope. P. (2020). Proactive Financial Reporting Enforcement: Audit Fees and Financial Reporting Quality Effects, The Accounting Review, 95(2), 167-197. https://doi.org/10.2308/accr-52497
Hood, C. (1991). A publicmanagement for all seasons?, Public Administration, 69(1), 3-19.
Hoque, Z. (2001). Public sector reform – implications for accounting, accountability and performance of state-owned entities – an Australian perspective, International Journal of Public Sector Management, 14(4), 304-326.
Hosseini, S., & Khoeini, M. (2017). Social Media; Capital Market & Financial Reporting, Journal of Accounting and Social Interests, 7(4), 23-38. doi:10.22051/IJAR.2017.15300.1294. (In Persian).
Hyndman, N., Liguori, M., Meyer, R.E., Polzer, T., Rota, S., Seiwald, J., & Steccolini, I. (2018). Legitimating change in the public sector: the introduction of (rational?) accounting practices in the United Kingdom, Italy and Austria, Public Management Review, 20(9), 1374-1399.
IPSASB (2013). The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities, International Federation of Accountants.
IPSASB (2018a). Handbook of International Public Sector Accounting Pronouncements, International Federation of Accountants, New York, NY.
Jensen, M.C., & Meckling, W.H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure, Journal of Financial Economics, 3(4), 305-360.
Jyoti, J., & Dev, M. (2015). The impact of transformational leadership on employee creativity: the role of learning orientation, Journal of Asia Business Studies, 9(1), 78-98.
Kiani, A., & Aghaei, M. (2017). Evaluating the Effect of Financial Reporting Quality Measurement Proxies on Future Growth through Firms’ Life Cycle Stages, Applied Research in Financial Reporting, 5(2), 143-172. (In Persian).
Kim, P.S. (2009). Enhancing public accountability for developing countries: major constraints and strategies, Australian Journal of Public Administration, 68(s1), S89-S100.
Kurtenbach, J.M., & Roberts, R.W. (1994). Public sector research in accounting: a review and synthesis, Journal of Public Budgeting, Accounting & Financial Management, 6(2), 216-253.
Lindquist, E. A., & Huse, I. (2017). Accountability and monitoring government in the digital era: promise, realismand research for digital-era governance, Canadian Public Administration, 60(4), 627-656.
Luder, K. (1992). A contingency model of governmental accounting innovations in the political administrative environment, Governmental and Nonprofit Accounting, JAI Press Inc, 99-127.
Mack, J., & Ryan, C. (2006). Reflections on the theoretical underpinnings of the general-purpose financial reports of Australian government departments, Accounting, Auditing & Accountability Journal, 19(4), 592-612.
Mbelwa, L., Adhikari, P., & Shahadat, K. (2019). Investigation of the institutional and decisionusefulness factors in the implementation of accrual accounting reforms in the public sector of Tanzania, Journal of Accounting in Emerging Economies, 9(3), 335-365.
McPhee, I. (2006). Financial Management in the Public Sector: How Accrual Accounting Enhances Governance and Accountability, CPA Australia Public Sector Finance and Management Conference, 17 August, Available at: http://www.anao.gov.au/~/media/Uploads/Documents/financial_management_in_the_public_sector2.pdf. [Online] [25 January 2014].
Mehrani, K., Beik Boshroyeh, S., & Shahidi, Z. (2014). The Relation Between Corporate Governance and Financial Reporting Quality in Tehran Stock Exchange, Journal of Accounting and Social Interests, 4(1), 1-19. doi:10.22051/IJAR.2014.487. (In Persian).  
Mohamed, E.K., & Lashine, S.H. (2003). Accounting knowledge and skills and the challenges of a global business environment, Managerial Finance, 29(7), 3-16.
Mosavi Shiri, M., Sadeghee, M., & Fateh, H. (2014). A Comparative Study of the Qualitative Features of Financial Reports on Accrual Accounting Basis and Cash Accounting Basis in Medical Science Universities,  Journal of Governmental Accounting, 1(1), 31-40. (In Persian).
Nakmahachalasint, O., & Narktabtee, K. (2019). Implementation of accrual accounting in Thailand’s Central government, Public Money & Management, 39(2), 139-147.
Nuhu Nuraddeen, A., & Appuhami, R. (2016). The association between the use of management accounting practices with organizational change and organizational performance, in Baird, K. (Ed.) Advances in Management Accounting, Emerald Group Publishing, 67-98.
Palmer, K.N., Ziegenfuss, D.E., & Pinsker, R.E. (2004). International knowledge, skills, and abilities of auditors/accountants: evidence from recent competency studies, Managerial Auditing Journal, 19(7), 889-896.
Patton, J. M. (1992). Accountability and governmental financial reporting, Financial Accountability & Management, 8(3), 165-180.
Rossi, F.M., Caperchione, E., Cohen, S., & Brusca, I. (2019). Financial management and public sector accounting in an age of reforms: developments and changes in public sector financial management, Public Administration in Europe, Springer, 235-246.
Scott, W.R., & Meyer, J. W. (1994). Institutional Environments and Organizations: Structural Complexity and Individualism, Sage.
Sellami, M.Y., & Gafsi, Y. (2019). Institutional and economic factors affecting the adoption of international public sector accounting standards, International Journal of Public Administration, 42(2), 119-131.
Steccolini, I. (2004). Is the annual report an accountability medium? An empirical investigation into Italian local governments, Financial Accountability & Management, 20(3), 327-350.
Sulu-Gambari, W., Stafford, A., & Stapleton, P. (2018). Public accountability reform in a Nigerian ministry, Qualitative Research in Accounting & Management, 15(4), 485-509.
Thomas, D. (2018), Leadership and accountability, American Anthropologist, 120(4), 641-646.
Tran, Y. T., Nguyen, N. P., & Hoang, T. C. (2021). Effects of leadership and accounting capacity on accountability through the quality of financial reporting by public organisations in Vietnam, Journal of Asia Business Studies, 15(3), 484-502. https://doi.org/10.1108/JABS-02-2020-0077
Tummers, L., & Knies, E. (2016). Measuring public leadership: developing scales for four key public leadership roles, Public Administration, 94(2), 433-451.
Van der Voet, J., Kuipers, B.S., & Groeneveld, S. (2016). Implementing change in public organizations: the relationship between leadership and affective commitment to change in a public sector context, Public Management Review, 18(6), 842-865.
Van Helden, J., & Ouda, H. (2016). Public sector accounting in emerging economies, Critical Perspectives on Accounting, 40, 1-7.
Wise, V. (2010). Theory and accountability: the case of government consolidated financial reporting, International Review of Business Research Papers, 6(5), 82-97.
Woods, M. (2009). A contingency theory perspective on the risk management control system within Birmingham City Council, Management Accounting Research, 20(1), 69-81.
Xu, H., Horn Nord, J., Daryl Nord, G., & Lin, B. (2003). Key issues of accounting information quality management: Australian case studies, Industrial Management & Data Systems, 103(7), 461-470.