The Understanding Of The Financial Reporting Environment In Saudi Arabia Accounting Essay

This survey was designed chiefly to heighten the apprehension of the fiscal coverage environment in Saudi Arabia by finding whether the International Standards on Auditing are capable of get the better ofing the bing outlook spread.

Because of their accounts and illustrations of hearer duty, scrutinizing criterions are important to those who use accounting studies, including stockholders, creditors, and authoritiess. The international auditing criterions commission ( 1979 ) created scrutinizing criterions with the primary aim of supplying guidelines to the profession. Another chief intent of organizing international criterions was to harmonise scrutinizing in different states, particularly those that lack local criterions ( Abdel-Qader, 2006 ) .

The Saudi Organization for Certified Public Accountants ( SOCPA ) has issued national auditing criterions in the state. Harmonizing to the Financial Standards Foundation Report on Saudi Arabia published in March 2010, SOCPA has declared alining national criterions to the international criterions of scrutinizing ( ISAs ) as one of its cardinal aims. SOCPA compares national dictums with international demands, such as the ISAs and US scrutinizing criterions in order to cut down differences where possible.

In Saudi Arabia, users and the bulk of the public frequently misunderstand the map of audits, taking to what is known as an outlook spread ( Haniffa & A ; Hudaib, 2007 ) . This spread exists when hearers and the public hold different beliefs about hearers ‘ responsibilities and duties every bit good as the messages conveyed by audit studies ( Koh & A ; Woo, 1998 ) . There are two different types of spreads: rationality and public presentation ( CICA, 1988 ; Porter, 1991 ) . The former appears when society expects hearers to make more responsibilities than what can be moderately expected. The 2nd exists when the hearers ‘ achievement falls short of society ‘s sensible outlooks ( Porter et al. , 2003 ) .

Harmonizing to Porter ‘s ( 1993 ) , an outlook spread appears due either to deficient criterions or lacking public presentation. In Saudi Arabia the outlook spread emerged as a consequence of failure by hearers, the professional organic structure ( SOCPA ) , and the province were unable to run into society ‘s outlooks ( Haniffa & A ; Hudaib, 2007 ) .

Therefore, this survey ‘s chief aim is to heighten apprehension of the fiscal coverage environment in Saudi Arabia. The survey aims to find whether the ISAs can get the better of the outlook spread obstruction. Furthermore, this survey seeks to rectify these jobs by detecting the strengths and failings of the ISAs.

Literature Review

Interpretations of international criterions on scrutinizing are needed in local contexts. Many have criticized the scrutinizing profession ‘s deficiency of such readings ( Zaid, 1997 ; Al-Wabil, 1990 ; Abdel-Karim, 1990 ) . Although hearers ‘ duties have been explained in audit studies, there is still a mismatch between what society expects and existent auditing demands as set Forth by the ISAs ( Porter et al. , 2008 ) .

The common response to this debatable issue is to make more accounting and auditing criterions and guidelines ( Humphrey et al. , 1993 ) . However, Porter et al. , point out that scrutinizing criterions need to include some responsibilities that are non required of hearers in order to contract the spread ( 2008 ) . For illustration, users of audit studies ‘ frequently ask hearers to forestall fraud and illegal Acts of the Apostless ; in contrast, hearers disagree that this service should be one of their duties ( Monroe & A ; Woodliff, 1993 ; Humphrey et Al, 1993 ) .

Previous surveies in the US ( AICPA, 1978 ; Schelluch, 1996 ) , Singapore ( Best et al. , 2001 ) , and Egypt ( Dixon et al, 2006 ) have confirmed the being of an audit outlooks spread, taking to broad argument about this spread. Humphrey et Al. ( 1993 ) divided the argument as follows: hearers ‘ function and duties ; the quality of the audit map ; the profession ‘s construction and ordinance ; and the nature of audit study messages. Monroe and Woodliff ( 1993 ) further explored the argument and added subjects including hearers ‘ duties, dependability of the fiscal statements, and chances of the audit entity. In add-on, Schelluch ( 1996 ) and Best et al. ( 2001 ) add another issue to the argument: which the utility of audited fiscal statements to decision-making.

No research presently exists analyzing the focal point of this survey: the effects of utilizing ISAs in Saudi Arabia to contract the outlook spread.

Research Questions

Despite the fact that there have been existent stairss undertaken to meet Saudi scrutinizing criterions with ISAs, deficient information is available to the populace. In add-on, most old literature discusses the outlook spread individually from the effects of utilizing ISAs in Saudi Arabia. In other words, there is merely a preliminary apprehension of possible effects of utilizing ISAs to cut down this outlook spread. Therefore, this survey attempts to name the attending of scrutinizing bookmans in Saudi Arabia to how applying ISAs affects the outlook spread. To accomplish this aim, the undermentioned research inquiries are proposed:

– What are the strengths and failings of the International Standards on Auditing?

– Make the International Standards on Auditing provide any utile counsel for get the better ofing jobs related to the outlook spread?

– If there is a spread between the perceptual experiences of stakeholders and those of external hearers, how can we bridge it?