Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
H6u the Effect of Corona Virus Outbreak on the
Quality of Financial Reporting in Companies Listed
on the Egyptian Stock Exchange "An Applied Study"
Muhammed Azzam Abd ElMeged
Assistant professor of accounting
Faculty of Commerce – South Valley University
Amr Salah Mohammed Abdullah
Master's Candidate,
Faculty of Commerce –
South Valley University
Abstract:-
Purpose: This study aims to measure the effect of the
Corona virus outbreak on the quality of financial
reporting in Companies Listed on the Egyptian Stock
Exchange.
The study hypothesis states that: The first hypothesis:
there is no statistically significant relationship between
Corona virus outbreak and the quality of financial
reporting. The second hypothesis: there is statistically
significant relationship between Corona virus outbreak
and the quality of financial reporting.
Design/methodology/approach: An Analytical Study:
through the analysis of what was mentioned in books and
periodicals, which deals with measures are analytical
and that helps for obtaining information and evidence
sufficient to enable him to carry out an analytical
study for covid 19 and the quality of financial reporting?
An applied study: The study population consists of the
companies listed on the Egyptian Stock Exchange. The
study population includes 91companies on EGX 100 for
the period under study represented in 18 sectors of
various activities and to provide a good representation of
the various sectors and industries operating within the
Egyptian economy. Data was analyzed using percentage,
tables , correlation, regression techniques and with
statistical package for social science (SPSS) was used to
test the regression analysis was employed to measure the
influence of Corona virus outbreak on the quality of
financial reporting in Companies Listed on the Egyptian
Stock Exchange at 95% confidence level.
Findings: The study results and statistical show that the
quality of corporate financial reporting has been lower
during the pandemic. Specifically, companies have
engaged in greater earnings management through real
business during the pandemic. Accordingly, to the
previously mentioned results we cannot reject the null
hypothesis " there is no statistically significant
relationship between Corona virus outbreak and the
quality of financial reporting.” and the alternative
hypothesis “there is statistically significant relationship
between Corona virus outbreak and the quality of
financial reporting” is rejected.
IJISRT23JUL1681 www.ijisrt.com
Monzer Mohammad Ali Mohammed
Doctoral researcher,
Faculty of Commerce, Ain Shams University
Hamdy Mohamed Abdelrady
Master's Candidate,
Higher School of Business and Economics.
Al-Farabi Kazakh National University
Keywords:- Financial reporting, Earnings management,
COVID-19.
I. INTRODUCTION
The world is currently experiencing increased changes
related to the arising Corona virus epidemic (Covid 19), and
nations are jointly looking for to take precautionary and
preventive steps to reduce the propagation of the virus and
mitigate its effects. possibly the most important of the
measures being taken to restrict its spread is to prevent direct
contact and integration between humans as much as possible,
as well as quarantine applications, including a travel ban.
These and other measurements on their significance have had
an effect on the business climate in all of the countries of the
area, which has compelled a large number of professional
organizations and international firms to measure and research
the global economic effect that this virus has had for the
financial systems of these countries.
Recent years have seen the emergence of rare
occurrences of their kind across the nations of the world,
starting in the developed world, moving on to the developing
countries, and then continuing to expand throughout the
majority of the world as a whole. The COVID-19 coronavirus
epidemic has caused significant disruption to the economy of
China and is rapidly expanding throughout the world. Due to
the high level of unpredictability surrounding both the
progression of the sickness and its effects on the economy, it
is currently challenging for policymakers to evaluate the
disease's influence on the viability of businesses.
The emergence of the virus in the Republic of China has
had a significant impact on global commerce and investment.
This virus has rapidly spread across various countries, leading
to adverse effects on their economies. Notably, it has caused
disruptions in global financial markets, affecting the trading
of shares, documents, and investments in international stock
exchanges. Furthermore, even small-scale projects with
limited revenue have been impacted by this global crisis.
The ongoing coronavirus epidemic continues to present
significant threats. An increasing number of nations have
implemented travel restrictions affecting a significant portion
of the population, while a growing number of individuals in
various regions are being subjected to quarantine protocols.
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Business enterprises often encounter financial losses and face
challenges in maintaining their supply chains. The exposure
of numerous organizations. vulnerabilities have been evident
as a result of the disruption of global supply chains caused by
factory closures. The outbreak has also resulted in
considerable instability in global financial and commodity
markets.
Preliminary indications demonstrate that this virus has
exerted a substantial influence on the worldwide economy.
Several governments have implemented measures aimed at
offering both financial and non-monetary resources to
support industrial sectors and companies that have been
adversely impacted.
The upkeep of financial market efficiency is contingent
upon the reliability of financial reporting, as various market
participants, including investors, lenders, and regulators,
heavily depend on data from financial reports to inform their
decision-making processes. (Hsu, YL, 2022) A number of
studies have reviewed the impact of the financial crisis by
2008 on the quality of financial reporting (Hsu, YL, 2022;
Eng et al., 2019). Similar to the 2008 financial crisis, the
outbreak of COVID-19 has resulted in substantial upheaval
within financial markets and the worldwide economy.
However, the precise ramifications of COVID-19 on the
integrity of financial reporting remain uncertain at present. So
far, Limited research has been conducted thus far to
investigate the effects of the COVID-19 pandemic on the
integrity and accuracy of financial reporting. The influence of
financial crises on the integrity of financial reporting has
yielded varied outcomes. Certain scholars posit that
corporations would enhance the calibre of their financial
reporting in order to mitigate information asymmetry and
bolster investor confidence, a crucial factor particularly in
times of financial turmoil. (Hsu, Y.L., 2022)
In response to the global spread of the pandemic,
governments have implemented stringent measures aimed at
mitigating the transmission of the disease and minimizing its
societal consequences. Moreover, empirical evidence has
demonstrated the existence of notable social and economic
disparities among nations, prompting governments to adopt
divergent policy approaches. While some of them have
implemented strict social distancing and quarantine measures
such as B. Restriction travel from abroad and freedom of
movement within countries, have adopted some flexible
measures, e.g., B. going outside as long as people maintain a
reasonable distance (Oğuz, M., 2021). Numerous cultural,
supportive, and athletic competitions have been either
cancelled or rescheduled. Furthermore, governmental entities
have implemented economic stimulus measures in order to
mitigate the adverse financial and economic consequences.
These policies have resulted in a variety of repercussions on
day-to-day life as well as economic activity, and these affects
vary depending on the socioeconomic levels of the countries
involved. Accordingly, there are concerns about whether the
coronavirus pandemic can trigger a social economic crisis in
the future (Gormsen, N. J., 2020; Rinaldi, L., 2020).
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International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
However, other researchers claim that the quality of
financial reporting is lower in times of financial crisis (Hsu,
Y. L., 2022). For example, Persakis and Iatridis (2015) show
that the quality of financial reporting declined during the
2008 financial crisis as companies managed their profits more
to mitigate the negative impact of the financial crisis.
Trombetta and Imperatore (2014), who use accrual-based
measures and real earnings management (REM), also report
that there is more earnings management when a financial
crisis becomes more extreme.
In the era of COVID-19, companies that should provide
useful information to their investors and other parties will
certainly face challenges. It is very important for investors
and other parties to obtain qualitative information more than
ever. To reduce risk and uncertainty, it has become essential
for companies in these uncertain times to produce timely,
adequate, and transparent risk reports.
Multiple channels, including press announcements,
management forecasts, conference calls, the company
website, and annual reports, are utilized by businesses in
order to maintain open lines of communication with their
shareholders and other stakeholders (Oğuz, M., 2021). Users
of financial data can better analyze how uncertainties and
risks may influence them in the future with the assistance of
annual reports. Although annual report financial statements
include historical results, these reports become forward-
looking by disclosing additional information about
unforeseen events that affect the company's current and future
position (Engbers, 2016). Disclosure by businesses is an
extremely important factor in the efficient operation of
financial markets within a market-based economy.
Regulations governing corporate disclosure, such as the
International Standards for Financial Reporting, offer
companies a standardized set of guidelines that determine
what information should be reported and how it should be
given. (Oğuz, M., 2021).
II. LITERATURE REVIEW
Study of (Dwivedi et al ,2020) determine how much
of an impact the COVID-19 pandemic is having on the
management of information research and practice in order to
transform education, work, and life The COVID-19 epidemic
has prompted many organizations to undertake major
changes, including reconsidering critical components of their
company's workflow and the usage of technology, in order to
maintain their business operations while complying to an
ever-evolving environment of rules and new procedures. The
research presented here provides an overall insight into many
of the important issues and underlying difficulties
confronting organizations and society from COVID-19 by
looking at them from the standpoint of information
technology and technological advancements. The opinions of
twelve invited subject-matter specialists will be gathered and
analyzed, and each will offer their own unique perspective on
a variety of topics, including distance learning, digital
planning, artificial intelligence (AI), managing information,
social networking, cyber safety, big data, block chain,
privacy, mobile technology, and strategy, viewed through the
lens of the current crisis and its impact on these particular
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areas. The viewpoints of the experts provide timely insights
into a wide range of themes, identify critical issues, and make
recommendations for both theory and practice.
Study of (Lopatta et al., 2020) The objective of this
inquiry pertains to the decision-making process regarding the
dissemination of information pertaining to the Coronavirus.
The study discovered that companies that promptly include
information about the COVID-19 pandemic in the annual
reports they file exhibit lower beta values, thereby elucidating
the significance of regular disclosure in elucidating capital
market responses during this period. The researchers
categorized companies into two distinct groups based on their
publication of annual reports either prior to or subsequent to
March 11, 2020, which is consistent with the official notice
made by the World Health Organization regarding the
COVID-19 outbreak. The initial set of companies was
referred to as early risk indicators and purportedly
demonstrated the capacity to effectively mitigate the risks
associated with the outbreak of the coronavirus pandemic.
The researchers utilized the newly released 2019 annual
reports of corporations that were listed in the primary stock
market indexes of ten different countries. Additionally, the
researchers postulated that the capacity of corporations to
identify risks in a timely manner and integrate them into their
annual reports was correlated with a decrease in risk (beta).
Study of (Sultana& Sen, 2021) intended to evaluate
the effects that the COVID-19 pandemic might have on the
reporting and disclosure practices of financial institutions.
Methodology of the study is COVID-19 pandemic is
negatively impacting business. Therefore, every component
of a company's operations may be broken down into one of
these five primary categories: financial motorists, company
activities, business contracts, business value, and
stakeholders. One independent variable was chosen to
represent each of these five primary activities. A structured
survey was produced in accordance with the associated
International Accounting Standards and International
Financial Reporting Standards (IAS and IFRS) through an
analysis of the numerous suggestions and recommendations
of both international and local accounting authorities.
Subsequently, the report was disseminated among accounting
practitioners in Bangladesh who are presently involved in the
tasks of financial statement compilation and auditing. The
data were ultimately subjected to analysis through the
application of structural equation modelling (SEM) in order
to examine the theoretical association between the variable
that is dependent and the independent variable.
This study elucidates the significant correlation
between financial factors, business contracts, stakeholders,
and financial reporting practices amidst the COVID-19
pandemic. Nevertheless, it is important to note that operations
and operational significance do not exhibit a tangible
correlation with accounting practices and reporting practices.
The study of (Sultana, R., et al, 2021) to examine the
impact of COVID-19 on DFR practices in the context of
Bangladesh. Additionally, the study was designed based on
the theory of legitimacy that such disclosures in this
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International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
pandemic impact organizational legitimacy. The COVID-19
pandemic has a negative impact on businesses. Therefore,
each aspect of a company's operations has been broken down
into one of five primary groups: financial drivers, company
operations, contracts for business, and business value.
Stakeholders complete out the list. These five main activities
were considered as an independent variable. Subsequently, a
structured questionnaire was developed based on EEE and
related IFRS to reflect the real scenario of financial reporting
practices in this pandemic period. Professional accountants
who prepare and audit financial statements were surveyed for
their opinions. A factor analysis with confirmation was
performed on all of the following: financial factors, company
activities, contracts of business, operating value, and
stakeholders. to ascertain their individual factors and factor
loads. The hypothesized association between both
independent and dependent variables was then put to the test
using SEM. During the current epidemic, results indicate that
financial reasons, company contracts, and stakeholders all
have a key role in influencing financial reporting practices.
This study Oğuz, M. (2021) examines whether
providing information about the coronavirus pandemic is
evaluated in annual reports to see whether or not businesses
are reacting to this pandemic and, if so, how they are doing
so. this plays a significant role in explaining yearly reports.
For this, the study that was conducted by Lopatta et al. (2020)
is used as the foundation for an analysis of the written
materials of the 2019 yearly reports of firms.
Companies ought to have done more to educate their
users of financial information about the pandemic caused by
the coronavirus. As for the 2019 annual reports, the
companies are not disclosing enough information on one of
the great events of this century. According to IFRS, it's of the
utmost importance for a business to present information
regarding its finances that is of a high quality. Increasing a
company's worth requires both the early identification of
potential dangers and prompt action in the event of an
emergency. In addition, adopting this mentality will result in
their being more open and specific.
The results of this study do not confirm the predicted
impacts. After reviewing annual reports, it was discovered
that just 14 of the 100 corporations made reference to the
coronavirus pandemic forty times in their respective annual
reports. This indicates that 14% of the businesses in the
sample discuss corona hazards in their 2019 annual
statements, having an average mention frequency of 0.4 times
across the reports. One of the businesses in the sample makes
reference to the coronavirus crisis 17 times in its 2019 yearly
report, whilst the other businesses in the sample include no
mention of COVID-19. The companies in the sample are
found to face increased equity risk.
Study of (Oğuz, M.C. ,2021). Explore the significance
of comprehensive financial reporting during the COVID-19
pandemic using the empirical evidence from the Borsa
Istanbul. The outbreak of COVID-19 was classified as a
pandemic by the World Health Organization on March 11,
2020. The actions that were made in response to this outbreak
had a significant impact on both our day-to-day lives and the
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economic activity of people all over the world. In addition to
this, the outbreak has had an effect on the practices of
corporate financial reporting. In this time of uncertainty,
comprehensive financial reporting plays a vital role in
providing quality financial intelligence. In times of
uncertainty, it is of the utmost importance for a business to
raise their level of transparency as well as a report should be
made on the impact of any potential dangers. In addition,
financial markets may respond to COVID-19 in the exact way
as they have in the past in response to big events such as
catastrophes, adverse news, and ecological and political
problems. The purpose of this study is to evaluate whether or
not businesses who include information on the COVID-19
epidemic in their financial reports serve a part in explaining
the reactions of the stock market and, if so, how. In order to
accomplish this, the financial statements of the Turkish firms
that are reflected in the BIST-100 index are analyzed in order
to ascertain whether or not there is a connection between the
earliest disclosure of COVID-19 and the risk posed by stock
market.
Study of (McKibbin& Fernando, 2021) aimed to
measure the global macroeconomic impacts of COVID-19:
There are seven distinct scenarios. The emergence of the
COVID-19 virus has caused significant disruptions in the
Chinese economy and has subsequently spread to various
regions worldwide. The trajectory of the illness and its
economic ramifications are characterized by a significant
degree of uncertainty, thereby posing challenges for
policymakers in devising a suitable macroeconomic policy
intervention. In order to enhance comprehension of the
potential economic ramifications, this study examines seven
distinct scenarios regarding the future progression of
COVID-19 within the upcoming year. These scenarios are
analyzed through the utilization of a modelling technique
initially devised by Lee and McKibbin (2003). Using a
worldwide mixed dynamically sequential general
equilibrium along with calculable general equilibrium
(CGE) model, this study explores the consequences of
numerous scenarios on the economy and financial markets.
Scenarios presented in this document show that even a
contained epidemic shall have a significant effect on the
world economy in the short term. These scenarios exemplify
the extent of the expenses that could be mitigated through
heightened allocation of resources towards public health
systems across all economies, with a particular emphasis on
less developed economies characterized by inadequate health
systems and high population density.
Study of (Hsu& Yang, 2022) This paper examined the
potential effect of the COVID-19 pandemic on the standard
of corporate financial reporting, as well as the potential
mitigating impact of corporate governance. Based on an
analysis of data obtained from UK-listed companies, our
study demonstrates a discernible decline in the standard of
financial reporting by these entities amidst the ongoing
pandemic. During the pandemic, companies have actively
employed earnings management strategies through genuine
business activities. Additionally, our findings indicate that the
presence of a larger board can effectively alleviate the
adverse consequences of the COVID-19 pandemic on the
IJISRT23JUL1681 www.ijisrt.com
International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
integrity of financial reporting. However, it is important to
note that we did not observe any beneficial impacts on board
independence along with dualism. CEOs. This document
presents supplementary information regarding the influence
of the COVID-19 pandemic on the standard of financial
reporting, within the context of a robust governance
framework implemented at a national level. In light of the
COVID-19 epidemic, this study is the first of its kind to
investigate the influence that corporate governance has on the
dependability of financial reporting. The findings of this
study introduce valuable recommendations for practical
application.
The study of Hsu, Y. L. and Yang, Y. C. (2022)
Investigate the moderating effect that good company
governance has on the outstanding level of financial reporting
that occurred during the COVID-19 epidemic. When we look
at how corporations actually manage their earnings, we
discover that the accuracy of financial reporting during the
epidemic is weaker than it was before. This could be due to
the fact that businesses are employing actual earnings
management as a strategy for surviving the crisis or
preventing further negative investor reactions.
Researcher came to the conclusion after examining
all earlier studies that:-
 The limited number of studies that have been undertaken
into the impact that the Corona virus outbreak has had on
the caliber of financial reporting of companies that are
traded on the Egyptian Stock Exchange.
 The majority of research have concentrated on the
economic effects of the spread of Coronavirus in general,
rather than concentrating on the effects of the virus on
financial reports in particular.
 This study makes significant additions, both to the existing
body of knowledge and to current clinical practice. To
begin, this document offers supplementary information
regarding the effect that COVID-19 has had on the
accuracy of financial reporting. At the moment, just a few
investigations have been conducted on this subject, and no
of them have examined this subject in sufficient depth to
assist us in gaining a deeper comprehension of the standard
of financial reporting provided by companies throughout
the COVID epidemic -19. In addition to that, this research
provides practitioners with some helpful recommendations.
For instance, our findings show that lenders and investors
need to exercise extra vigilance when assessing the results
of financial reports during this time period. These findings
demonstrate that actual management of earnings has grown
throughout the pandemic.
III. STUDY PROBLEM
The global community has witnessed numerous crises
and collapses in regions like East Asia, Latin America, and
Russia. Notably, several prominent corporations, including
Enron, an energy company, and World Com, a
telecommunications company, have experienced significant
defaults. These incidents have been attributed to the alleged
involvement of external auditors, which has been linked to
the occurrence of scandals, collapses, and epidemics. The
global landscape has witnessed numerous crises and collapses
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in regions like East Asia, Latin America, and Russia. Notably,
several prominent corporations, including Enron, an energy
company, and World Com, a telecommunications company,
have experienced significant defaults. These incidents have
been attributed to the alleged involvement of external
auditors, which has contributed to the emergence of scandals,
collapses, and epidemics in these contexts.
According to a report published by the International
Monetary Fund (IMF) in 2020, the COVID-19 pandemic has
triggered a widespread economic crisis that has the potential
to become considerably more severe than the global financial
crisis, or GFC, that occurred in 2008. One of the earliest
effects of the epidemic on the exchange rate system is the
severe depreciation of these EMEs' respective currencies in
comparison to the US dollar. (Grage, 2021).
The study of (Guanming, 2019& Sury, 2019 & Ibrahim,
2020) proofs that the presence of fraudulent activities in
numerous organizations and widespread epidemics has led to
a decline in public trust in financial reporting, consequently
impacting investor participation in the securities market. This
has resulted in identified shortcomings in the quality of
financial reporting.
As a result of the debate up to this point, the primary
difficulty can be stated as follows:
Inadequacies exist in the integrity of financial reporting
resulting from many factors one of them epidemics
appearance.
The research problem can be summarized on the
following questions: -
Does Corona virus outbreak effect on the quality of
financial reporting?
 Study Objectives
This study aims to measure the effect of the Corona
virus outbreak on the quality of financial reporting.
 Study Hypotheses
The hypotheses are based on the theoretical part of the
study as follows:
 The first hypothesis: there is no statistically significant
relationship between Corona virus outbreak and the
quality of financial reporting.
 The second hypothesis: there is statistically significant
relationship between Corona virus outbreak and the
quality of financial reporting.
IV. METHODOLOGY
 An Analytical Study: By an analysis of what was
discussed in published articles and periodicals, which deals
with analytical measures and that assists for acquiring
knowledge and proof sufficient to enable him to carry out
an analytical study for COVID 19 and the quality of
financial reporting?
 An applied study: The study population consists of the
companies listed on the Egyptian Stock Exchange. The
study population includes 91companies on EGX 100 for
the period under study represented in 18 sectors of various
activities and to provide a good representation of the
IJISRT23JUL1681 www.ijisrt.com
International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
various sectors and industries operating within the
Egyptian economy. The data was subjected to analysis
using percentage calculations, tabulation, and Spearman
rank order correlation techniques. Additionally, the
statistical software package for social science (SPSS) was
utilized to conduct regression analysis in order to assess the
impact of the Corona virus outbreak on the quality of
financial reporting. The analysis was conducted at a
confidence level of 95%.
V. RESEARCH STRUCTURE
 Introductory section: introduce introduction, the
literature review, the study problem, the study objectives,
the hypotheses, methodology and the research structure.
 The first section deals with the Theoretical background
 The second section deals with the applied study.
 The third section deals with conclusions, findings,
recommendations, and future studies
A. The first section: -Theoretical background
 COVID-19
COVID-19 is an infectious ailment that arises from the
novel coronavirus SARS-CoV-2 (2019-nCoV), which
garnered recognition subsequent to its emergence in Wuhan,
China, in December 2019. The COVID-19 outbreak was
officially declared a pandemic by the World Health
Organization (WHO) on March 11, 2020. Since that time, this
unprecedented global health crisis has impacted over 20
million individuals and resulted in a staggering death toll of
over 700,000 worldwide (John Hopkins University, 2020).
Concerns about the global health, financial, and
economic catastrophe were raised as a result of the pandemic.
This pandemic process has been given the name "the Great
Blockade" by (IMF), which has forecast that this will be the
most severe crisis since the Great Depression and will be
much more severe than the Global Financial Crisis. (Oğuz,
M, 2021). The consequences of the coronavirus, which is
being called a "once in one century pandemic," are expected
to continue for decades, as stated by the (WHO). (Gates,
2020; Reuters, 2020).
In late December 2019, medical professionals in
Wuhan, China initiated the process of gathering data
pertaining to multiple medical cases exhibiting comparable
symptoms. Towards the conclusion of 2019, Chinese
authorities made public the occurrence of an outbreak
resembling pneumonia and initiated the process of identifying
a previously unknown strain of coronavirus associated with
the reported cases. In mid-January 2020, as the Lunar New
Year's banquet tradition was observed in Wuhan, a city
located in Hubei province, a significant surge in infections
commenced. As of January 23, a total of over 600 cases had
been officially verified, prompting the implementation of
social distancing measures and, in certain instances,
quarantine protocols in Wuhan and other regions of China.
By April 2, 2020, the disease had spread to almost every
corner of the world. The number of confirmed cases
involving the novel coronavirus now called "SARS-CoV-2" -
which causes the respiratory illness now called "coronavirus
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disease 2019" (COVID-19) - has surpassed 1,000,000
worldwide, there is widespread consensus that the actual
number is likely significantly greater due to lags in testing
and complete reporting in a great number of nations. (WHO)
officially designated COVID-19 as a pandemic on March 11,
and not long after that, the United States government
designated the COVID-19 outbreak as a national emergency.
As of the second of April 2020, data from (WHO)
indicates that around 170 countries/regions have documented
at least one confirmed case of the ongoing global health crisis.
Furthermore, the number of deaths reported worldwide has
reached nearly 53,000. In order to mitigate the transmission
of the virus, numerous countries across the globe as well as
several states and cities within the United States have
implemented "shelter-in-place" or "stay-at-home" directives.
Certain markets that demonstrated early detection and
effective treatment of the virus are currently considering the
possibility of gradually relaxing their quarantine measures.
Several entities that initially relaxed their restrictions have
subsequently reversed their decisions upon observing a
resurgence in the number of confirmed COVID-19 cases. It
is imperative to acknowledge that the reported incidence of
any given disease frequently underestimates the true
prevalence of cases. As a consequence of this, the sum of
reported infections often keeps climbing even after the total
number of newly diagnosed cases begins to decrease. One of
the most significant factors that sets some countries apart
from others is the rate at which testing, and identification
procedures have become more widespread among their
citizens.
International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
The global community is increasingly concerned about
issues related to health, death, and economic concerns. The
impact that limitations on travel and shipping have had on a
contemporary and connected global economy has had an
amplifying effect on the logistical and financial markets as a
result of the outbreak. The financial markets have been
extremely volatile as a result of the release of new
information regarding the economy, the implementation of
new monetary policies, and the constant influx and ebb of
value and opportunity in favor of investors. Because many of
the world's largest manufacturers have grown closer across
continents, international operations' supply chains are also
significantly impacted. As a result of the global economy
adjusting to new, lower levels of activity, unemployment
rates have begun to increase.
In early April 2020, this resulted in a confluence of
risks. Additional operational and financial risks may emerge
as further events aggravate the current situation. The global
economy is deteriorating terribly due to the COVID-19
pandemic. Precautionary measures such as indefinite
shutdowns, social distancing, travel restrictions and repetitive
lockdown announcements had an instant negative impact on
the business. Because the recession will affect everyone
involved, including creditors, shareholders, consumers,
financial service providers, the government, and staff
members, these stakeholders are currently looking for
disclosures to gauge the financial consequences of this global
pandemic. This type of economic chaos will certainly have
adverse effects on society. Timely and relevant disclosure
will help them make key decisions in this time of crisis
(Sultana, R., et al., 2021).

Fig. 1: COVID-19 in Egypt

Source: https://ar.wikipedia.org/wiki/%D8%AC%D8%A7%D8%A6%D8%AD%D8%A9_%D

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ISSN No:-2456-2165

Fig. 2: Total Cases

Source: https://www.worldometers.info/coronavirus/country/egypt/#graph-cases-daily

 The quality of the financial reporting and its

measurement methods
Recent research in the areas of accounting and finances
has been devoting more and more attention to investigating
the issue of financial reporting quality. One of the primary
goals of the numerous research that have been conducted on
this topic is to locate an adequate measurement for the level
of quality of financial reporting. For this reason, it is essential
to have an understanding of the quality of financial reporting
as well as the means by which it can be explained and
quantified (Achim & Chiş, 2014, P.94).
The term of financial reporting quality encompasses
various definitions that are widely acknowledged. These
definitions exhibit significant variation across individuals,
projects, companies, and organizations, and are contingent
upon the intended uses for which the financial data will be
employed.
The concept of financial reporting quality encompasses
a wider scope, encompassing not only financial information
but also other than financial data that is included in the report
and is valuable for decision-making purposes. Financial
reporting quality is defined in terms of decision usefulness as
“information about the reporting entity that is useful to
present and potential equity investors, creditors and other
lenders in making decisions in their capacity as capital
providers”. (Beest et.al, 2009, P.4)
Chartered Financial Analyst Institutes defined high
standard financial reporting quality encompasses the
comprehensive financial reporting, including disclosures,
that leads to a balanced depiction of a company's operations,
encompassing both earnings and cash flows, as well as its
financial position. (Hasan &Omar, 2016, P.7)

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165

Fig. 3: Framework for the quality of corporate financial reporting

Source: Hasan, M. S., & Omar, N. (2016, P.8)

From the above figure the researcher concluded that
there are different measurements methods have been used to
assess the quality of the financial reporting such as corporate
accruals (non-discretional accruals), disclosure analysis and
user’s perception analysis. An elevated level of business
accruals, coupled with comprehensive disclosure analysis
and users' perception, contributes to an enhanced quality of
financial reporting. However, this is matched by a decrease
in the total amount of accruals made by the company. It was
discovered that the examination of disclosure procedures and
the impression of users had an adverse effect on the accuracy
of financial reporting.
This figure ignored discretional accruals (Earning
management) as a measure for the quality of the financial
reporting. The researcher suggests that discretional accruals
are the best measure for the quality of the financial reporting,
because through it the earnings management can be avoided
through determining the level of discretional accruals. When
there is a lower level of discretionary accruals, the quality of
financial information is higher, and the opposite is true when
there is a higher level.
“Studying the literature, we can see that on the one
hand, accounting quality can be seen as the precision with
which the financial reports convey information to equity
investors about the firms expected cash-flows. On the other
hand, reporting quality refers to the extent to which financial
reports of a company communicate its underlying economic
state and its performance during the period of
measurement”.(Achim & Chiş, 2014, P.94)
Verdi, (2006,P.2) defined financial reporting quality
refers to the degree of accuracy and reliability in which
financial reporting communicates pertinent information
regarding a company's operations, specifically its anticipated
cash flows, with the intention of providing valuable insights
to equity investors.
McDaniel et al., (2002) tried to define the financial
reporting quality in terms of decision usefulness as
“information about the reporting entity that is useful to
present and potential equity investors, lenders and other
creditors in making decisions in their capacity as capital
providers”.
Gamayuni (2018, P.48) define high satisfactory
financial reporting can be defined as financial reporting that
not only creates helpful information for users but also
satisfies the characteristics of quality financial information. It
is clear that the objective of reporting on government finances
is to offer meaningful information to users in order for them
to evaluate accountability and make economic, social, and
political decisions that are in their best interests.

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
 Previous Studies on the quality of financial reporting
This study Assad, N. F., et al 2020 analyze the influence
of financial reporting quality and auditing on the
effectiveness of investments in the economies of the Gulf
Cooperation Council (GCC). This study also investigated the
potential mediating role of auditor quality in the relationship
between the quality of financial reporting and efficiency in
investment. The external auditor is one of the mechanisms of
corporate governance, particularly essential with regard to the
principle of disclosure. Records from this study comprise of
businesses listed in GCC, with a total of 150 company-years
of observations. The findings of the research indicate a
statistically significant and positive correlation among the
caliber of financial reports and the effectiveness of
investment activities. Audit quality has been found to have a
positive direct impact on investment, as well as a moderating
effect.
This study of Habiba Al-Shaer 2020 Explains that
companies whose sustainability reporting appears to be of
high quality tend to be less inclined to carry out earnings
management activities, which results in more transparent and
reliable financial reporting than companies that do not
perform high results regarding quality sustainability reports.
We also examine whether the relationship between
sustainability report quality and post-audit financial report
quality is contingent on audit efforts. The results of an
analysis using data gathered from the FTSE 350 index from
2007 all the way through 2018 reveal that companies that
generate sustainability reports of a high quality are highly
related with profit management measures, but in a negative
way. More crucially, this link is controlled by audit efforts,
which are evaluated by audit fees, demonstrating that the
quality of reporting on sustainability reflects aspects
examined by auditors in the course of their audit risk
evaluation practices. The robustness of these findings is
upheld following multiple sensitivity analyses. Based on my
analysis, it can be inferred that organizations that allocate
greater resources towards the creation of comprehensive
sustainability reports are more inclined to exhibit a general
dedication to excellence, thereby mitigating auditors'
apprehensions regarding the potential manipulative
utilization of such reports. The implementation of sustainable
practices not only promotes environmental responsibility but
also mitigates potential risks faced by businesses. Minimizing
the workload of auditors in the process of examining financial
reports.
The study Almaqtari, F. A., et al 2021 This study
investigates how various corporate governance methods
affect the quality of financial reporting in accordance with
Indian GAAP and Indian Accounting Standards (Ind. AS).
We take a representative sample of all 97 enterprises that are
traded on the Mumbai money market. Mechanisms of
corporate governance were taken into account as independent
variables, while the quality of financial reporting was taken
into account as the dependent variable. The measurement of
corporate governance encompasses various factors, including
the effectiveness of the board (in terms of size, independence,
diligence, and expertise), the attributes of the audit
committee, the presence of foreign ownership, and the quality
of audits. Descriptive statistics, correlation analysis, and
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ISSN No:-2456-2165
ordinary least squares (OLS) regression are employed to
estimate the outcomes. The study's results show that the board
of directors' qualities and the audit committee's qualities,
except for the audit committee inspection, have a big effect
on the integrity of financial reports. The impact of board
diligence and audit committee quality, but audit quality has
an important influence. The conclusions of the study have
important repercussions for governmental regulators and
policymakers, as well as for managers, investors, analysts,
and scholars. conformity with the (Ind. AS) should get a
greater amount of attention, and an inspectorate that verifies
conformity therewith the Ind. AS should be developed.
The study Abed, I. A., et al 2022 The banking sector
plays a crucial role in the economic framework, facilitating
the expansion of financial capabilities for individuals,
organizations, businesses, and nations globally. The financial
reports of banks encompass the presentation of accounting
activities, wherein it has been disclosed through pertinent
documentation that the utilization of creative accounting
exerts a substantial influence on the overall quality of said
financial reports. However, Prior research has suggested that
the influence of factors related to creative accounting on the
integrity of financial reporting is minimal. However, there is
currently a growing interest among researchers in exploring
the concept of financial reporting quality. The present study
investigates the possible benefits of social responsibility in
business, also known as CSR, on enhancing the significance
of factors that influence innovative accounting procedures
and the general standard of financial reporting in the business
of commercial banking is the subject of this study. The
research method employed for accomplishing the objectives
was a deductive approach utilizing a survey questionnaire.
Hence, the researchers employed purposive sampling as a
method to gather data from a sample of 364 employees
working in commercial banks in Iraq. The response rate
achieved was 72.8%. The data underwent statistical analysis
using SPSS v.25 software. The findings indicate that the
presence of corporate social responsibility has a notable
impact on the relationship between the factors influencing
accountancy and the comprehensive quality of reporting on
finances in the banking industry, ultimately leading to
competitive advantages.
This study Lu, J., Liu, Y., et al 2022 examines the
relationship between the turnover of financial controllers and
the quality of financial reports of public companies. Within
the unique institutional framework present in China, it is
mandated that financial controllers, CEOs, and CFOs affirm
the precision and comprehensiveness of company annual
reports. Through our analysis, we have observed a negative
correlation between the turnover of financial controllers and
the quality of financial reporting, (b) The correlation between
turnover of financial controllers and reporting quality is
notably stronger in non-public companies and businesses in
weaker corporate governance structures, c) the turnover of
financial controllers is not linked to the management of real
earnings. Other analyzes show that the impact of successive
retractions of the financial statements and enforcement
actions conducted by the Chinese Securities and Exchange
Commission is connected with the turnover of financial
controllers. It is possible to view the turnover of monetary
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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
controllers as a forerunner to a decline in the caliber of
financial reporting because it occurs before the turnover of
executives and also comes before the turnover of the financial
controllers. In addition to the information content regarding
senior management vacancies, this contains information
regarding turnover. According to the findings of our analyses,
businesses in which financial controllers are responsible for
making sales also have greater early returns, but their long-
term performance is worse than that of their competitors.
 Analysis of previous studies reveals the following:
 Previous studies did not deal with the income measures
as tools to refine the quality of financial reports.
 Past studies did not deal with the relationship between
Corona virus outbreak and the quality of financial
reporting.
This is a need to develop accounting standards because
it is one of the conditions that must be met to achieve the
quality of financial reports because the accounting standards
provide freedom to choose the alternatives for accounting
policies and sometimes management misuse that opportunity
to manipulate profits or make earning management.
In fact, the quality of the financial reporting has a great
importance to the users because it enables them to make their
rational decisions for investment. Therefore, the proposed
comprehensive income model must meet the qualitative
characteristics of the information as part of the characteristics
of the quality of financial reporting, which is explained in the
next section.
There are different measurements methods that have
been used to assess the caliber of the accounting data that was
suggested by the particular investigations that were
conducted to measure the integrity of the financial reports.
There are two trends to measure the quality of financial
reports the first trend is to measure the quality of financial
reporting in terms of the qualitative characteristics (direct
method) and the second trend is to measure the quality of
financial reports based on income quality indicators (indirect
method). (Abdelhamid, 2012, P.96)
 The direct method of measuring the quality of financial
reporting
A large number of scholars are attempting to quantify the
quality of financial reporting in an indirect manner by
concentrating on factors that are thought to have an effect on
the quality of financial reporting. These factors include
returns administration, financial adjustments, and relevancy
(Beest et.al, 2009, P.3).
Both the FASB and the IASB (2008) make it clear that
one of their primary goals is to develop an all-encompassing
assessment instrument that can be used to evaluate the level
of financial reporting while also taking into consideration all
aspects of usability. Because of this, the financial reporting
information (IASB, 2008) of these properties determines the
utility of decision because this measurement tool takes into
account all qualitative characteristics.
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The fundamental qualitative attributes, namely
relevance and faithful representation, hold significant
importance as they dictate the substance of financial reporting
data. Improving the qualitative characteristics, namely
comprehension, comparison, verifiability, and timeliness, can
enhance the usefulness of decision-making, provided that the
fundamental qualitative characteristics have been established.
Nevertheless, their ability to assess the reliability and
accuracy of financial information is limited. IASB (2008).
Gamayuni (2018, P.48) stated the dimensions of the
following qualities contribute to the quality of financial
reporting: (1) relevance; (2) reliability; (3) comparability; and
(4) understandability. The individual articulated the various
factors that exert an influence on the quality of financial
reporting. These factors include: (1) compliance to
accounting principles in the preparation of financial
statements, in addition to the commitment to supervise the
execution of an internal control system and the careful
assessment of findings from the Auditing Agency; and (2) the
presence of robust internal control mechanisms that enhance
the accuracy and reliability of financial statements, (3)
Taking action in response to the findings of the financial audit
or recommendations made to promote the system of internal
control (Gamayuni, 2018, P.47).
 The indirect method to measure the quality of financial
reporting
Earnings quality is defined as “the degree to which
reported earnings capture economic reality, in order to
appropriately assess a company’s financial performance”
(Krishnan & Parsons, 2008).
For assessing the quality of financial reporting, the most
commonly used method types in the previous literature,
namely accrual models, value relevance models, Accrual
models are employed for the purpose of quantifying the
degree of earnings management within the framework of
prevailing rules and regulations. These models are predicated
on the assumption that managers employ discretionary
accruals. The manager has the responsibility to exercise
control over the accumulated interest in order to manage
earnings (Beest et.al, 2009, P.6).
The correlation between the quality of earnings and the
quality of discretionary accruals, which are accruals
determined by managers, is evident. The presence of elevated
discretionary accruals indicates a potential decrease in the
quality of gains, whereas reduced discretionary accruals may
illustrate an enhancement in the quality of gains. The extent
to which discretionary accruals are utilized significantly
impacts the quality of financial reporting (Hasan &Omar,
2016, P.6).
Accruals can be divided into two categories: those that
are discretionary and those that are not. The vast majority of
academics employ a variety of approaches to quantify the
quality of accounting reporting. Tang (2008) created quality
indicators that relate to five areas of financial reporting: the
loss avoidance ratio, the profit decline avoidance ratio, the
accruals ratio, the qualified audit opinion ratio, and the non-
Big 4 auditor ratio. (Hasan &Omar, 2016, P.6).
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 ACCRUALS MODELS
 Jones model (1991)
NDAt= α1 (1/At-1) +α2 (∆REVt/At-1) + α3 (PPEt/ At-
1)
Where:
NDAt is nondiscretionary accruals in year t scaled by
lagged total assets.
∆REVt is revenues in yeart less revenue in yeart-1.
PPEt is gross property plant and equipment at the end
of year t-1.
At-1 is total assets at the end of year t-1; and
α1, α2, α3 are firm- specific parameters.
 The modified Jones Model, Deshow et al (1995)
NDAt= α1 (1/At-1) +α2[(∆REVt - ∆RECt) /At-1] + α3
(PPEt/ At-1)
Where:
∆RECt is net receivables in year t less net recoverable in
year t-1 and the other variables are as in the previous
equation.
 Bartov and Tsui (2000) Industry Model
NDAt =β1+β2medianj (TAt / At-1)
Where:
NDAt is non-discretionary accruals in year t scaled by
lagged total assets; medianj (TAt / At-1) is the median value
of total accruals in year t scaled by lagged total assets for all
non-sample firms in the same two- digit standard industrial
 Dechow and Dichev (2002) Model
∆WC =α+β0+β1OCFt-1+β2OCFt+β3OCFt+1+∈t
Where:
∆WC is a measure of accruals indicates a change in
working capital.
OCFt-1is operating cash flow for the previous year.
OCF tis operating cash flow for the current year.
OCFt+1is operating cash flow for the next year.
∈t Estimated error that represents discretionary
accruals.
Β0,β1,β2 parameters; α: constant.
 Santanu Mitra (2002) Model
CACCit /TAit-1=β0i+β1i[)∆REVit - ∆RECit)/ TAit-1]
+β2i[(∆COGSit+∆INVit)/ TAit-1] +β3i(∆OCFit/ TAit-1) +
∈it
Where:
CACCit :total current accounting accruals for firm i in
year t.
TAit-1 :total assets of firm i at the beginning of year t.
∆REVit:change in revenues of firm i in year t from
year t-1.
∆RECit: change in accounts receivables of firm i in
year t from year t-1.
∆COGSit: change in cost of goods sold of firm i in
year t from year t-1.
∆INVit: change in inventory in year t – change in
inventory in year t-1.
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International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
∆OCFit: change in operating cash flows of firm i in
year t from year t-1.
∈it = Error term for firm i in year t (proxy for
discretionary accruals).
) ∈it) is expressed about the amount of error in the
quality of the financial reports (discretionary accruals). To
calculate this amount, it is necessary to find CACCit that
expressed about the amount(discretionary accruals) that can
be calculated by the following equation.
CACCit = [) ∆CAit- ∆Cashit)]– [(∆CLit -∆CLDit)].
Where:
∆CAit :change in current assets for firm i in year t.
∆Cashit: change in cash for firm i in year t.
∆CLit :change in current liabilities for firm i in year t.
∆CLDit :change in the current portion of long-term
debt for firm i in year t.
The researcher relies on Santanu Mitra (2002) model
which contains working capital (current accruals) CACCit in
the calculation of discretionary accruals as an indicator of the
quality of financial reports where it is a measure of earning
management and manipulation through management. This
model includes all the changes that represent management
manipulation tools such as a change in revenues, changes in
the cost of goods sold, changes in inventory and other
changes that are considered an area of management
manipulation. ACCAC reflect the current accrual that result
from the choice or discretional accrual, and it represent
percentage from total current accruals that cannot explained
through variables in regression equation .(∈it) represent
residuals or errors expressed by the quality of financial
reports.
According to Ahmed (2016) the researcher can rely on
the discretionary accruals instead of the total accruals because
the most complicated things are classifying the total accruals
to discretionary and non-discretionary. The contents of the
non-discretionary reflect the working conditions such as
growth rate and the flow of operational operations that lead
to appear accruals while discretionary accruals reflect only
the management choices, so we consider the discretionary
accruals are the best proxy for earnings management.
 The impact of the Corona virus spread on the
financial reports’ quality
COVID-19 will undoubtedly impact the fair value
measurement of specific items in financial statements
necessitates consideration of potential adjustments, which are
contingent upon the timing of the effects on the fair value of
said items. In the process of evaluating fair value, it is
imperative for management to take into account the relevant
information and conditions that were present on the valuation
date and were either known or reasonably known to the
involved parties. Consequently, it is imperative for
management to evaluate the data accessible as of the
reporting date in relation to COVID-19 in order to ascertain
if said information could have influenced the amount that
either party might have been inclined to consent to for this
transaction.
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During the process of preparing financial statements, it
is imperative for management to evaluate the entity's capacity
to sustain its operations as a going concern. Financial
statements are typically prepared assuming that the entity will
continue its operations in the foreseeable future, unless there
is an intention by management to wind up the entity. This
would occur when the entity ceases its operations, undergoes
liquidation or dissolution, and subsequently redistributes its
net assets. Alternatively, ceasing trading or adopting an
alternative course of action may not be a viable option. In
instances where management deems the utilization of
ongoing business accounting to be unsuitable given the
prevailing circumstances, it may be obligatory or
discretionary for them to formulate the financial statements
using an alternative basis, such as the liquidation basis.
Disclosures are required when:
 The utilization of the going concern method, as well as the
accounting methodology employed for the preparation of
financial statements, is absent.
 The management acknowledges the presence of substantial
uncertainties related to events or circumstances that could
raise significant concerns about the entity's ability to
sustain its operations as a going concern.
Management must carefully evaluate the present and
projected impact of the COVID-19 pandemic on the
Financial Factors
Business Operation
Business Value
Business Contracts
Stakeholders
Fig. 4: Framework
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ISSN No:-2456-2165
organization's activities and its capacity to sustain its
operations as a going concern, for a minimum period of 12
months, and potentially longer. Entities affected by the
COVID-19 pandemic will be required to take into account
various considerations, including their projected future
earnings and cash flows, capacity to fulfil debt obligations
and other financial commitments, as well as their ability to
secure additional funding or cash injections, if necessary.
First, regulators and standard setters are emphasizing
disclosure of uncertainties arising from the pandemic. The
COVID-19 crisis does not give rise to a variety of risks and
neither at the time of the semi-annual reports nor at the end
of 2020 can the impact of the crisis and other developments
be reliably predicted. This gives rise to the necessity of
providing a description of the uncertainties that are prevalent
in financial reporting and of informing stakeholders regarding
the essential management judgments and assumptions.
The aforementioned theoretical significance, as well
as the significance of financial reporting and
transparency in the context of the COVID-19 epidemic,
were taken into consideration in the construction of the
study framework that was proposed. (See Figure 1).
Financial
Reporting &
Disclosure
(Sultana, R., et al, 2021)
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 Financial factors
As the COVID-19 pandemic continues to impede the
commercial operations of enterprises, it is only natural that
all financial aspects of the firm, such as its assets, liabilities,
income, and expenses, will be impacted. This is essential in
order for the business to function properly. As a result of the
global pandemic, many enterprises are going out of business,
which may have an effect on revenue cycle accounting, the
applicability of revenue contracts, revenue estimation, and
the loss on accounts receivable(KPMG, 2020b). Debt
collection is decreasing due to prolonged containment
measures that could decrease future cash flows (Sultana, R.,
et al., 2021). Because of this, the business organization may
be forced to enter into a contract that will result in a loss due
to the lack of available liquidity (KPMG, 2020b).
Nevertheless, it has been extremely challenging to mobilize
inventories for production and sales because of the lockdown,
travel restrictions, and land border closures that have been
imposed as a result of the COVID-19 epidemic. Because of
this, there will be a significant shift in the market's appetite
for equities. Inventory management is made even more
difficult by the short-term nature of items, which, when
paired with the growing demand from sustainability
regulations and standards, makes the task even more
challenging (Logistik Express, 2020).
 Business operation
Continued business operations are becoming an issue
because of the fast diffusion of COVID-19 virus. Therefore,
Global accountancy organizations and local professional
accounting regulators are proposing that business
organizations that have been impacted by the COVID-19
epidemic conduct sensitivity analysis in order to evaluate
whether or not they will be able to continue operating as
enterprises in the future. The persistent issue at hand is the
need to ensure that appropriate disclosures are made in
situations where there is significant uncertainty regarding
material matters. Companies whose reporting periods end on
or before December 31, 2019, would not be required to make
any adjustments to their financial statements in order to
account for the impact of the COVID-19 pandemic (ICAB,
2020). Entities are required to disclose the primary
consequences that the COVID-19 pandemic has had on their
businesses as the breakout of the pandemic proceeds in the
years 2020 and 2021. PWC (2020) proposed that
management take into mind the effects of the COVID-19
pandemic while drafting both interim and yearly financial
reports. This was recommended so that the management
could better deal with the unstable scenario. Furthermore, it
is imperative for entities to disclose their discernment and
endeavors in formulating substantial accounting policies and
estimations to address the prevailing crisis.
 Business contracts
Companies are being forced to reevaluate the terms of
various sorts of business agreements and training programs
as a direct result of the economic disruptions caused by the
COVID-19 outbreak. Blake and Conticelli (2020) stated that
lenders no longer enforce a strict policy of recovering funds
from borrowers when borrowers become involuntarily in
default, and it is difficult for borrowers to enter into extended
loan agreements with limited income.
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International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
 Business value
As a result of its impact on earnings quality, business
value, and fair value, the COVID-19 pandemic has
introduced a new dimension of uncertainty into the business
world. Business value declines due to declining current
profits caused by lower customer demand and forced business
closures during the pandemic (Sadang, 2020). As a direct
result of this, stock prices continue to fall as a direct result of
a decline in business profitability throughout the COVID-19
epidemic and unstable market reactions due to the protracted
lockdown of businesses (El-Mousawi and Kanso, 2020). As
a result, these observable inputs of the state of the market are
no longer relevant, leading to an increase in the subjectivity
associated with measuring fair value. As a result of this
pandemic, preparers of financial statements will be forced to
alter their accounting standards and estimations, which will
undoubtedly have an effect on the value and assessment of
non-current assets (for example, the cost of depreciation and
amortization for a variety of assets will be influenced as a
result of lower utilization). (Sultana, R., et al, 2021).
 Stakeholders
The business organization encompasses both internal
stakeholders, such as employees and management, as well as
external stakeholders, including government entities,
suppliers, creditors, and banks. The COVID-19 pandemic has
disrupted the equilibrium among these entities. Certain
organizations provide unique incentives to employees who
are working during a lockdown, which could potentially
affect the recognition of benefits. (ICMAB, 2021). The
government should provide timely assistance so that
businesses can survive in this battle. All different kinds of
enterprises have been granted a wide variety of relief and
stimulation programs by the government. This includes tax
cuts, tax reduction, tax deferral, and low-interest loans,
among other things. (Sultana, R., et al, 2021).
 Accounting impact.
Companies that report financial results should make
certain that their financial reporting and accounting practices
take into consideration the volatility and uncertainty of the
market. It is necessary to reevaluate the most important
assumptions and sensitivity levels. In addition, reporting
businesses need to assess whether or not the information they
provide is relevant to the topic at hand:
 Potential inventory write-downs and impairment losses.
 Default on loans or breaches of clauses, or amendments or
waivers to loan agreements.
 The risk of credit of customers or other entities may
experience fluctuations due to adverse developments in the
present circumstances.
 Insurance recoveries.
 Alterations in economic or business conditions that impact
the equitable valuation of financial as well as non-financial
assets and liabilities.
 Variations in growth projections that have the potential to
influence impairment evaluations of various assets (such as
goodwill and other intangible assets, for instance).
 Methods and procedures to deal with constantly changing
circumstances.
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B. The second part of this article discusses the applied study
The preceding sections of this study have addressed the
theoretical underpinnings by drawing upon relevant literature
sources. This section encompasses an empirical investigation,
encompassing a comprehensive account of the research
methodology, the study's target population and sample, as
well as the utilization of appropriate preparatory techniques
and the assessment of validity and reliability measures. This
section provides a comprehensive account of the procedures
undertaken by the researcher during the codification,
implementation, and subsequent statistical treatments
employed in the analysis of the study. It also presents the
outcomes of the applied study.
 Objectives of the applied study
The purpose of this study is to determine how the
epidemic of the Corona virus impacted the companies that are
traded in the Egyptian Stock Exchange and their quality of
their financial reporting.
 Study Hypotheses
The hypotheses are based on the theoretical part of the
study as follows:
 The first hypothesis: there is no statistically significant
relationship between Corona virus outbreak and the
quality of financial reporting.
 The second hypothesis: there is statistically significant
relationship between Corona virus outbreak and the
quality of financial reporting.
 Study Population and Determination of Sample Size
 Study Population
Index of the EGX 100) Egyptian Stock Exchange( was
used it includes EGX 30 and EGX 70 contains the highest 100
companies in terms of liquidity and activity.
International Journal of Innovative Science and Research Technology
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The study population consists of the companies listed
on the Egyptian Stock Exchange. The study population
includes 91companies on EGX 100 for the period under study
represented in 18 sectors of various activities and to provide
a good representation of the various sectors and industries
operating within the Egyptian economy. This indicator is
considered accurate for the Egyptian market. The following
table show the study population divided into different sectors:
 Sample Size
The researcher excluded the sectors of banks and
insurance companies due to their different nature in the
preparation of the financial statements and also excludes the
media sector because it not included companies listed in
EGX100 and also excludes banks and insurance companies
because of their special nature in preparing its financial
statements. The researcher has set the following criteria
which should be available in the companies included in the
sample:
 They are listed on the Egyptian Stock Exchange during the
study period .
 They should not be liquidated or suspended during the
study period.
 The financial statements and all data for these companies
should be available throughout the period study.
 Availability of study variables in these sectors.
If one of these criteria is not met in any company, this
company should be excluded from the field of study, for any
company to be part of the applied study; all these criteria must
be met.
The researcher selects 36 companies that met the
previous conditions represent 40% of population size.
The following table shown number of companies
subject to study within each sector and percentage per sector:

Table 1: Percentage representation of companies subject to study

N0. Sectors Number of companies Percentage
1 Communications, media, and information technology sector 3 8%
2 real estate sector 9 25%
3 Services, industrial products, and cars sector 4 11%
4 building materials sector 3 8%
5 Basic Resources Sector 3 8%
6 Financial services excluding banks sector 3 8%
7 Food, Drinks and Tobacco sector 6 17%
8 Paper and packaging materials sector 1 3%
9 Contracting and engineering construction sector 1 3%
10 Tourism and Leisure sector 1 3%
11 Infrastructure Sector 1 3%
12 Health care and medicine sector 1 3%
Totals 36 100%

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Table 2: Companies subject to study
Companies Number of companies
Telecom Egypt 1
Emaar Misr Development Company 2
El Sewedy Electric LLC 3
Al Shams Housing and Development LLC 4
Upper Egypt General Contracting and Real Estate Investment 5
Arab Cement 6
Egyptian Financial and Industrial LLC 7
EFG Hermes Holdings 8
South Valley Cement LLC 9
Raya Call Center Services 10
Obour Land for Food Industries 11
Amer Group Holding LLC 12
Misr Fertilizer Production SAE MFPC 13
Misr Cement – Qena 14
Ghabbour Auto LLC 15
Universal for the manufacture of packaging materials and paper 16
Mina for tourism and real estate investment 17
Edita Food Industries LLC 18
Porto Holding Group 19
Ajwaa Group for Food Industries 20
Egyptian electrical cables 21
Egyptian Kuwaiti Holding LLC in dollars 22
Egyptian Financial and Industrial LLC 23
Egyptian Real Estate Group 24
Beltone Financial Holding 25
Arab real estate investment 26
Arab Valves LLC 27
Golden Tex Woolen 28
North Upper Egypt for Development and Agricultural Production 29
Egypt Gas (EGAS) 30
The Egyptian for the development of the construction industry 31
The Egyptian Media Production City LLC 32
Mina Pharm for Pharmaceuticals and Chemical Industries 33
New Ismailia for Development and Urban Development 34
Ismailia National for Food Industries 35
Ismailia Egypt Poultry 36

 Data Collection Methods https://www.worldometers.info/coronavirus/country/egypt/#

 Financial reports published by companies through their
websites.
 Companies’ financial statements through the Egyptian
Stock Exchange.
 Obtain some data from Miser Information Services,
Trading Company, and the Central Bank of Egypt.
 The Egyptian Ministry of Health
 Calculating the Study Variables
The Independent Variables are calculated as Follows:
According to the theoretical study, Covid-19(Total
Coronavirus Cases) in Egypt in 2021 is measured through the
statements and censuses of the Ministry of Health in Egypt
and available on the following websites:
https://www.care.gov.eg/EgyptCare/index.aspx
graph-cases-daily
 Calculating the Quality of Financial Reporting
(Dependent Variable)
This variable can be calculated through (Santanue Mitra
model, 2002) with the following equation:-
CACCit/TAit-1=β0i+β1i[) ∆REVit - ∆RECit)/ TAit-1]
+β2i[(∆COGSit+∆INVit)/ TAit-1] +β3i(∆OCFit/ TAit-1)
+Eit
CACCit that expressed about the amount(discretionary
accruals) can be calculated by the following equation
CACCit = [) ∆CAit - ∆Cashit)]– [(∆CLit -∆CLDit)].
The components of each equation are explained in detail
in the previous section

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165

Dependent Variable Independent Variables

Quality of financial
reports
Through the Companies
following equation under study
distributed
CACCit /TAit-1=β according to
0i+β 1i [) ∆REVit - the different
∆RECit)/ TAit-1] sectors and Covid-19(Total Coronavirus
+β2i [(∆COGSit+ include 12 Cases) in Egypt in 2021
∆INVit)/ TAit-1] + sectors and
β3i (∆OCFit/ TAit- their number is
1) + £it 36 companies

Total accruals to obtain Calculation of the amount of error in the

discretionary accruals (Eit) equation of the financial reports quality to
obtain the discretionary accruals which
CACCit = [(∆CA it - ∆Cash it)] – reflect the amount of error (Eit)
[(∆CLit - ∆CLDit)]

Fig. 5: Statistical analysis according to the test research hypotheses

Source by the researcher

 Data Analysis Methods  Descriptive Statistics

Before starting the statistical analysis and before entering
the data in Statistical Package for Social Sciences program
(SPSS), In order to prepare all of the information that will be
put into the models that are utilized for measuring both the
variables that are independent and the dependent variable, it
is required to work on a set for calculations and load the data
from the accounting records of the companies into the Excel
software. This is necessary in order to prepare the information
that will be entered. The researcher used the following
statistical methods:
These approaches offer details on the features of the data
that were utilized in the analysis so that the properties and
characteristics of the data can be determined. and trends of the
research sample towards the study hypotheses, including:
 Mean: To find out how high or low the study values of the
main axes of the study.
 Std. Deviation: To find out the dispersion study sample
values from the overall average values.

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Volume 8, Issue 7, July 2023
 Deductive Statistical Methods
 T-Test: Measure the average difference between the two
groups follows a normal distribution.
 ANOVA: measure the difference in averages using
analysis of variance for more than two samples or groups
within the same sample and follow a normal distribution.
 F - Test: test the correlation relationship between two
variables.
The value of the correlation coefficient is material if the
level is less than (.05 level of significance) and if it is greater
than (.05 level of significance) the value of the correlation
coefficient is immaterial between the two variables.
 Correlation coefficient(r): measure the relationship
between two variables (strong, weak, and average) and
the direction of this relationship (Positive relationship,
negative relationship).
 Coefficient of determination (𝐑𝟐 ): Express the
explanatory power of the model and represent the
percentage interpreted by the independent variable for
the total change of the dependent variable.
Simple linear regressions is used to explain the
relationship between a dependent variable and independent
variable.
 Data Analysis Methods
International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Before starting the statistical analysis and before entering
the data in Statistical Package for Social Sciences program
(SPSS), it is necessary to work on a set of calculations and
loading the data from the financial statements of the
companies on the Excel program in order to prepare all the
information to be entered into the models used to measure
both the independent variable and the dependent variable.3
 Study Hypotheses
The hypotheses are based on the theoretical part of the
study as follows:
 Ho: there is no statistically significant relationship
between Corona virus outbreak and the quality of financial
reporting.
 H1: there is statistically significant relationship between
Corona virus outbreak and the quality of financial
reporting.
VI. RESULTS OF THE STATISTICAL ANALYSIS
Firstly: results of statistical analysis of hypothesis tests:
Analysis and testing data related to the first hypothesis. “The
first hypothesis: there is no statistically significant
relationship between Corona virus outbreak and the quality
of financial reporting. "To test this hypothesis, we need to
obtain discretionary accruals .It is measure through the
following equation:

CACCit/TAit-1=β0i+β1i[) ∆REVit - ∆RECit)/ TAit-1] +β2i[(∆COGSit+∆INVit)/ TAit-1] +β3i(∆OCFit/ TAit-1) + Eit

)∆REVit - ∆RECit)/ TAit-1= X1 Revenues

(∆COGSit+∆INVit)/ TAit-1 =X2 costs

(∆OCFit/ TAit-1=X3 cash

The total current accounting accruals as (they are The following table shows the results of the
divided into discretionary and non-discretionary accruals are statistical analysis, to test this hypothesis using Pearson
calculated through the following equation CACCit = correlation
[) ∆CAit - ∆Cashit)]– [(∆CLit -∆CLDit)].

Table 3: Results of the correlation analysis between Corona virus outbreak (Total Coronavirus Cases in 2021) and
(the discretionary accruals) that represent the quality of the financial reports
discretionary Covid-19(Total
Correlations accruals Coronavirus Cases)
discretionary accruals Pearson Correlation 1 .204
Sig. (2-tailed) .232
N 36 36
Covid-19(Total Pearson Correlation .204 1
Coronavirus Cases) Sig. (2-tailed) .232
N 36 36

The table above shows the correlation coefficient =.204, represent the quality of the financial reports( )Eit).The higher
It indicates a weak positive relationship between the the Total Coronavirus Cases, the higher the value of
independent variable Covid-19(Total Coronavirus Cases in discretionary accruals and this led to the lower the quality of
2021) and the dependent variable (discretionary accruals that financial reports.

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
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 To test this hypothesis also using multiple linear regression

Table 4: Results of the linear regression analysis between Corona virus outbreak (Total Coronavirus Cases in 2021) and (the
discretionary accruals) that represent the quality of the financial reports
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .204a .042 .013 .3033986484

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression .136 1 .136 1.478 .232b
Residual 3.130 34 .092
Total 3.266 35
a. Dependent Variable: discretionary accruals
b. Predictors: (Constant), Covid-19(Total Coronavirus Cases)

Coefficientsa
Unstandardized Coefficients Standardized Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -.072 .212 -.338- .738
Covid-19(Total
9.420E-7 .000 .204 1.216 .232
Coronavirus Cases)
a. Dependent Variable: discretionary accruals

The regression equation is as follows :Y=-.072+ 9.420E-7 X1.From the previous table it is clear that:
 Independent variable significance
Explanatory power of the model or the value of
coefficient of determination (R2 ) = 0.042 means that the
independent variables included in the model Covid-19(Total
Coronavirus Cases) are explained almost (4%) from the
variance in the dependent variable (discretionary accruals that
represent the quality of the financial reports) (Eit)) of the
company.
The correlation coefficient =.204, It indicates a weak
positive relationship between the independent variable
Covid-19(Total Coronavirus Cases) and the dependent
variable (discretionary accruals that represent the quality of
the financial reports( )Eit).The higher the Covid-19(Total
Coronavirus Cases), the higher the value of discretionary
accruals and this led to the lower the quality of financial
reports.
T-Test and F-Test results indicates that the effect of the
independent variable on the dependent variable is non-
significant because the level of significance=.738 is greater
than (. 05 level of significance).
Accordingly, to the previously mentioned results we
cannot reject the null hypothesis " there is no statistically
significant relationship between Corona virus outbreak and
the quality of financial reporting.” and the alternative
hypothesis “there is statistically significant relationship
between Corona virus outbreak and the quality of financial
reporting” is rejected.
 The findings, recommendations, and suggestions for
further research are presented and discussed in the
second section.
Following the presentation of the theoretical aspect of the
study, in accordance with the data obtained through the
previously analyzed questionnaire and following the testing
of the hypotheses pertaining to the investigation, the
researcher will present this chapter by means of the following
points. findings, recommendations, and suggestions for
further research are included.
VII. FINDINGS
The findings of this study indicate that the majority of
commercial enterprises will, on the whole, disclose the
financial aspects of their operations. This is due to the fact
that the vast majority of businesses have incurred enormous
losses during times of heightened surveillance and
restrictions on the freedom of their employees and customers.
Due to poor sales volume, decreased cash collection, and
increased exposure to credit risk, many firms have been
forced to close as a direct result of the dissolution of business
organizations. In addition, it was discovered that businesses
ought to release information pertaining to business contracts
in a very timely manner. This is due to the fact that such
disclosure can reassure investors regarding changes in the
conditions of any business agreement that was established in
the past. In conclusion, businesses should consider the needs
of their many stakeholders and make public any information
that is essential to preserving their legitimacy in the eyes of
society. The DFR should be used to highlight the potential for
tax deferment, the high remuneration given to staff for how
they performed during the epidemic, as well as the
announcement and distribution of stimulus measures.
However, the relationship between financial reporting and

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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
transparency is not even remotely significant with operations
and operational value. The observed business and operating
value outcome in relation to financial reporting and
disclosure practices during the COVID-19 pandemic can
potentially be attributed to prudent government initiatives and
robust performance of the capital market.
Because of the effects of COVID-19 on stock markets
and private companies, as well as on the price of commodities
and foreign currency rates, there have been significant swings
in the fair value of specific investments and other assets.
When an entity's investments and other assets are subject to
significant fluctuations in fair value, that fact should be
disclosed in the financial statements assuming it is material
and/or it is reasonable to expect that whether it has a material
impact on the decision of the users of the financial statements,
the entity's market price or market value, etc. In addition, the
virus could have an effect on the discount rates that are
utilized in discounted cash flow estimates. In spite of the fact
that the risk-free rate could have dropped as a result of the
COVID-19 crisis, the company's discount rates may still
require the addition of a greater risk premium in order to
account for the unpredictability of the market.
Significant unpredictability has been brought about as a
result of the COVID-19 epidemic for the estimates of entities
directly and indirectly affected by the outbreak. In addition to
these estimates, management should assess the impact the
outbreak may have on all of its estimates, including:
A. Valuation and obsolescence of stocks
 The net realizable value of inventory may decrease, and
obsolescence may increase due to the cessation or
limitation of operations of the entity due to COVID-19.
Management will need to assess whether inventory write-
down is necessary.
 Because of COVID-19, it's possible that some entities
won't be able to carry out their year-end count of
inventories. When this is the case, we recommend that
management take preparations to finish the inventory
count as quickly as they can after the completion of the
fiscal year, and then adjust the amounts based on
purchases to bring them back up to the level they were at
the end of the year. and inventory sales made during this
period.
Allowance for bad debts and bad debts/expected credit
losses.
 We expect these amounts to increase for some entities due
to COVID-19. Reduced economic growth forecasts
increase the likelihood of default for many borrowers.
When attempting to estimate these sums, management
needs to take into account a variety of factors. Some of
these factors include, but aren't restricted to, the
customer's capacity to make installments in a timely
manner (or at all), as well as the customer's financial
stability. As well as the particular exposure of individuals
and/or corporate borrowers to the economic repercussions
of their geographical location and their sector of activity.
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ISSN No:-2456-2165
 In addition, the value of collateral may decrease due to a
decline in asset prices.
B. Variable consideration arising from revenue contracts
Many entities could see their sales decrease due to
COVID-19. When an entity obtains variable consideration on
its revenue contracts, management will need to reassess the
amount of consideration to which it expects to be entitled
given the impact of COVID-19 on its customers' operations.
C. Remaining useful life of assets and depreciation rate
Depending on the effects that COVID-19 has on the
corporation, the utilization of particular assets may either rise
or decrease. In order for management to assess whether or not
any adjustments are required, the useful lives of the
company's assets and the rates at which they depreciate will
need to be analyzed.
D. Deferred/future tax assets
Deferred or upcoming tax assets can only be recognized
under certain circumstances, such as when it is very likely
that taxable income will be generated and when it is possible
to realize deductible temporary differences. Given the effect
that COVID-19 has had on the activities of the businesses, it
may be more challenging to support the probability of
realization for particular entities, including predicting the
amount that will be realized as a result of the realization. This
is especially relevant in the event that there are considerable
doubts regarding the entity's capacity to carry on its
operations as a going concern.
E. Provisions and contingencies
Based on the characteristics of the entity, new
arrangements or eventualities could need to be acknowledged
or declared, and existing arrangements might need some
tweaking. Adjustments to existing arrangements might also
be necessary.
F. Obligations related to the retirement of assets.
Depending on how the company conducts its business, the
anticipated date of an asset release obligation or the cost that
is connected with the obligation may be subject to vary.
G. Employee termination costs
Due to the increased number of contract terminations and
layoffs that COVID-19 has caused, it is possible that accruals
for termination of staff costs will need to be made. Instead of
being recorded on the date that the payment was made, these
modifications need to be accounted for on the date that the
decision was made.
VIII. RECOMMENDATIONS
A. Business interruption risk
There are several aspects of the current Corona outbreak
that have not been precisely defined; some of its main effects
include but are not limited to the following:
Production interruptions, supply chain disruptions,
unavailability of staff, decrease in sales and profits, closing
of companies and stores, delays in conducting planned
business expansions, inability to raise financing, increased
volatility in the value of financial instruments, decrease in
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Volume 8, Issue 7, July 2023 International Journal of Innovative Science and Research Technology
tourism and travel disruption, cancellation of sports activities [4.]
cultural and recreational
Because the accounting industry is the real translator of
economic, financial, and health disasters as well as other
types of catastrophes, afflicted organizations and chartered [5.]
accountants will continue to be able to communicate with one
another for as long as the disease continues to spread.
Through the production of figures indicating the course of
events, but we assume that accounting will face the problem
of classical and modern measurement again, and a new
opportunity to raise the debate about the historical cost and [6.]
fair value.
B. Big 4
The reactions of the Big 4 accounting and auditing firms
[7.]
were very quick, as "pwc, kPMG, Deloittoe, EY" published
a set of specialized publications and reports and held a series
of meetings with their partners to understand the potential
accounting implications of the Corona epidemic, especially [8.]
with regard to the recognition of revenue and assets.
Intangibles, hedging debts, expected credit losses, contracts,
studying possible restructuring issues, stock market losses,
insurance hikes, and inventory disposal.
From the above it is clear that: [9.]
 Provide management insight into potential consequences of
revenue disruption
[10.]
 Submitting reports on the potential effects on the
company’s reputation as an intangible asset, the possibility
of re-estimating the fixed assets, determining the remaining
useful life, and the residual value of the assets and the
company
 Attention to the issue of issuing material judgments about [11.]
uncertainties in financial reports, in uncertain times, as the
accountant is obliged to provide appropriate insight to users
of information about the risks facing the company.
 Assessing the impact of future cash flows, and making
adjustments to budgets [12.]
 Paying attention to the areas of hedging and debts and
estimating the provisions for termination benefits.
 Assisting in managing liquidity risk, and amending
contractual arrangements [13.]
 Reassess inventory, review production and storage costs
 Verify the recovery of any recognized deferred tax assets
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International Journal of Research in Engineering and Science (IJRES)
ISSN (Online): 2320-9364, ISSN (Print): 2320-9356
www.ijres.org Volume 11 Issue 7 ǁ July 2023 ǁ PP. 271-277

The Effect of Coronavirus Spread on Exchange Rate (An

applied study)

Monzer Mohamed Ali Ahmed Sayed Tokhy

PhD Researcher, Faculty of Commerce, Ain PhD Researcher, Faculty of Commerce, Ain
Shams University, Cairo, Egypt Shams University, Cairo, Egypt
Email:monzerali639@yahoo.com Email:ahmed.sayed9095@yahoo.com Mobile:
Mobile:00201129724191 00201069548961

Prof. Dr. Jamal Saad Khattab Hamdy Mohamed Abdelrady

Professor of accounting and auditing Al-Farabi Kazakh National University, Almaty,
Faculty of Commerce, Ain Shams University Kazakhstan
South Valley University, Qena, Egypt

Aya Ashour Abdelfattah Masry

Master Researcher, Faculty of Commerce, Ain
Shams University, Cairo, Egypt

Abstract
This study aims to measure the impact of Coronavirus Spread on currency exchange rate. The first hypothesis
states that daily Coronavirus cases don't effect on currency exchange rate. The second hypothesis states that
cumulative Coronavirus cases don't effect on currency exchange rate.
The study results show that there are positive and strong relationship between the daily Coronavirus cases and
the currency exchange rate. This means that the higher daily Coronavirus cases, the higher currency exchange
rate. Explanatory power of the model or the value of coefficient of determination (R2) =0.694 means that the
independent variables included in the model (Daily Coronavirus cases) are explained almost (69%) from the
variance in the dependent variable (currency exchange rate). So we can accept the alternative hypothesis of
the first hypothesis daily Coronavirus cases effect on currency exchange rate.
The study results also show there are positive and strong relationship between the cumulative Coronavirus
cases and the currency exchange rate. There significant. This means that the higher cumulative Coronavirus
cases, the higher currency exchange rate. Explanatory power of the model or the value of coefficient of
determination (R2) = 0.784 means that the independent variables included in the model (cumulative
Coronavirus cases) are explained almost (69%) from the variance in the dependent variable (currency
exchange rate). So we can accept the alternative hypothesis of the first hypothesis cumulative Coronavirus
cases effect on currency exchange rate.
Results indicate that currency Exchange rate seems to be sensitive to Coronavirus cumulative indicators more
than daily ones.
Key Words: Coronavirus, COVID- 19, currency exchange rate.
----------------------------------------------------------------------------------------------------------------------------- ----------
Date of Submission: 11-07-2023 Date of acceptance: 24-07-2023
----------------------------------------------------------------------------------------------------------------------------- ----------

I. Introduction
The world is currently facing accelerated developments related to the emerging Corona virus epidemic
(Covid 19), and countries around the world are collectively seeking to take precautionary and preventative
measures to limit the spread of the virus and mitigate its effects, and perhaps the most important of these
measures to limit its spread is to avoid direct contact and convergence between humans to the greatest extent
possible and quarantine applications, including an almost complete cessation of trade, banking and travel. These
and other measures on their importance have impacted the business environment in all countries of the region,
Which necessitated many professional organizations and international companies to measure and study the
global financial impact of this virus on the economies of these countries.
Recently, unique events of its kind appeared among the countries of the world, beginning with the
developed world passing through the developing countries and continuing to spread and spread among the rest

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

of the world as a whole. The coronavirus epidemic called COVID-19 has disrupted the Chinese economy and is
spreading worldwide. The evolution of the disease and its economic impact are very uncertain, making it
difficult now for policy makers to measure its effect on the continuity of firms.
Commercial and consequently investment worldwide, and it is the Republic of China, where a virus has
emerged that has spread among the countries of the world and affected the economies of countries, beginning
with global financial markets in all countries and the circulation of shares and documents and investment in the
global stock exchange, and even to small projects with limited income.
Threats posed by the coronavirus epidemic do not stop. More countries have imposed travel bans on
millions of people and more people in more locations are placed with quarantine measures. Businesses do
business with revenue losses and disrupted supply chains. Disruption of global supply chains due to factory
closures has already revealed the vulnerabilities of many organizations. The epidemic has also led to significant
volatility financial and commodity markets around the world.
There are already signs that the virus has had a significant impact on the global economy. Various
governments announced measures to provide financial and non-financial resources assistance to disrupted
industrial sectors and affected companies.
Thus, Egyptian economic also show the increasing of currency exchange between Egyptian
bound with US Dollar. As report by Egyptian Stock Exchange during outbreak of COVID-19 in Egypt on
March 2020. Therefore, government should take a serious action in order to avoid the economic recession. Thus,
it is important to investigate the impact of COVID-19 into currency exchange rate between US dollar (USD) and
Egyptian bound.
We need to invest much more in public health and development in the richest countries, but also and
especially in the poorest countries. Unfortunately, politicians continue to ignore the scientific evidence of the
role of public health in improving quality of life and as a driver of economic growth. (Alber, 2020, P.2)Figures
(1) and (2) illustrate the developments of Coronavirus spread during the research period, as follows:
Figures (1)

Source: https://www.worldometers.info/coronavirus/country/egypt/

Figures (2)

Source: https://www.worldometers.info/coronavirus/country/egypt/

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

Figures (3) currency exchange rate from March 6, 2020 till June 8, 2020

Source: by researchers depending on data from the Central Bank of Egypt

II. The Literature Review

The Prior studies related to Coronavirus are the following:-
Alber, (2020): investigate the effects of Coronavirus spread on stock markets. Coronavirus spread has been
measured by cumulative cases, new cases, cumulative deaths and new deaths. This has been applied on the
worst 6 countries (according to number of cumulative cases), on daily basis over the period from March 1, 2020
till April 10, 2020. Coronavirus spread has been measured by numbers per million of population, while stock
market return is measured by Δ in stock market index. Results indicate that stock market return seems to be
sensitive to Coronavirus cases more than deaths, and to Coronavirus cumulative indicators more than new ones.
Besides, robustness check confirms the negative effect of Coronavirus spread on stock market return for China,
France, Germany and Spain. However, these effects haven’t been confirmed for Italy and United States.
Abd Elrhim & Elsayed, (2020): explore the effects of the spread of COVID-19 on global e-commerce
companies, where the five largest e-commerce companies in the world were chosen in terms of revenues and
market value, and they were as follows: American Amazon, Chinese Alibaba, Japanese Rakuten, German
Zalando, United kingdom ASOS, has been Measuring the prevalence of corona virus by "cumulative infections"
and "cumulative deaths" on a daily basis. Besides, it is measured through the values of both the "new corona
virus cases" and the "new corona virus deaths" daily, the dependent variable reflects the response of the global
e-commerce market to the impact of the spread of the corona virus and is measured by the daily returns of the
shares of e-commerce companies to the global financial markets. This was applied on a daily basis from 15
March 2020 to 25 May 2020. The results of the descriptive analysis of the returns of the e-commerce companies
showed that the companies achieve positive daily returns by calculating the average daily returns. The results of
the aggregate model, according to the Beta Standardized Coefficients test, indicate the most important
independent variables and an impact on the returns of shares of global electronic trading companies, a variable
(total deaths) was the degree of its impact in the first rank, in the second rank a variable (total cases) and in the
third variable (new cases).
Elsayed and & Elrhim, (2020): examine the effects of COVID-19 spread on Indices Sectoral of The Egyptian
Exchange .Coronavirus spread has been measured by “Coronavirus cases” and “Coronavirus deaths” on daily
basis. Besides, it’s measured by each of “new Coronavirus cases” and “new Coronavirus deaths”, in terms of
Egypt's population. The dependent variable reflects the response of the Egyptian sectorial indicators to the
spread of the Corona virus and is measured by the returns of the daily sectorial indicators for the Egyptian stock
market. This has been applied on daily basis over the period from March 1, 2020 till May 10, 2020. Results
indicate that the return of the stock market sectors seems to be more sensitive to cumulative indicators of
mortality than daily deaths from corona virus, and new cases more than cumulative cases of corona virus. The
coefficient of determination between the independent variables and the variable belonging to 4 sectors is (IT,
Media & Communication Services 0.393, Industrial Goods, Services and Automobiles 0.470, Health Care &
Pharmaceuticals 0.327, Basic Resources 0.266).
Abu Bakar, N & Rosbi, S, (2020): study the effect of Coronavirus diseases (COVID-19) on the equity market
index and currency exchange rate. This pandemic creates unstable economic environment and unbalance
financial situation in worldwide because many economic activities are ceased down. The important of this
finding will help government body to understand the current condition during coronavirus disease 2019
(COVID-19) outbreak. In addition, the findings will assist policy makers to develop solution in stabilizing
economic situation in COVID-19 outbreak. In the same time, this study helps investors to monitor the equity
market to develop investment portfolio to gain better return and reducing loss.

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

McKibbin, W& Fernando,R,(2020): The outbreak of coronavirus named COVID-19 has disrupted the
Chinese economy and is spreading globally. The evolution of the disease and its economic impact is highly
uncertain, which makes it difficult for policymakers to formulate an appropriate macroeconomic policy
response. In order to better understand possible economic outcomes, this paper explores seven different
scenarios of how COVID-19 might evolve in the coming year using a modeling technique developed by
Lee and McKibbin (2003)and extended by McKibbin and Sidorenko (2006). It examines the impacts of
different scenarios on macroeconomic outcomes and financial markets in a global hybrid DSGE/CGE general
equilibrium model. The scenarios in this paper demonstrate that even a contained outbreak could
significantly impact the global economy in the short run. These scenarios demonstrate the scale of costs that
might be avoided by greater investment in public health systems in all economies but particularly in
less developed economies where health care systems are less developed and population density is high.

After reviewing all previous studies researcher concluded that:-

- The scarcity of researches conducted in the effect of Coronavirus spread on currency exchange rate (An
applied study in Egypt).
- Most studies have focused on economic and financial effects of Coronavirus spread in general without
focusing on its effects on currency exchange rate in particular

III. Research problem and questions

The research problem can be summarized on the following questions: -
1- Does daily Coronavirus cases effect on currency exchange rate?
2- Does cumulative Coronavirus cases effect on currency exchange rate?

Research objective
The main objective of this study is to measure the effect of Coronavirus cases effect on currency exchange rate.
Research hypotheses
From previous researches on Coronavirus effects, the study hypotheses are:-
First hypothesis: daily Coronavirus cases don't effect on currency exchange rate.
Second hypothesis: cumulative Coronavirus cases don't effect on currency exchange rate.

IV. Research Methodology

The researcher will be relying on a combination of inductive and deductive approaches to carry out two types
of study are as follows:
A- An Analytical study: - through the analysis of books, periodicals, theses related to Coronavirus spread.
B- An Empirical study: - The study period has been applied on case of Egypt (according to number of daily
and cumulative cases), on daily basis over the period from March 6, 2020 till June 8, 2020.

V. Measuring Variables and Developing Hypotheses

Coronavirus spread has been measured by “Coronavirus cases on daily basis. Besides, it’s measured by each of
“daily” and “cumulative Coronavirus cases in terms of country population. The dependent variable reflects the
currency exchange rate response to Coronavirus .the following table represent research variables.

Table (1): Research variables

Variables Calculation Sig
Exchange Rate** Daily Exchange Rate ER
Daily Cases** Daily Cases DC
Cumulative Cases** Cumulative Cases CC
Source: by researchers

Firstly to test the study hypotheses we will show the descriptive Statistics that provide information on the
characteristics of data used in the analysis in order to determine the attributes and trends of the research
sample towards the study hypotheses, thus the below table will offer mean, Std. Dev. and Std. Error Mean .

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

Descriptive Statistics

Daily Cases Cumulative Cases Exchange Rate

N Valid 95 95 95
Missing 0 0 0
Mean 373.09 7791.31 15.729755
Median 189.00 3659.00 15.689900
Std. Deviation 425.234 9393.313 .1148231
Variance 180824.257 88234334.129 .013
Skewness 1.404 1.399 2.595
Std. Error of Skewness .247 .247 .247
Kurtosis .902 1.022 6.772
Std. Error of Kurtosis .490 .490 .490
Minimum 0 12 15.5647
Maximum 1536 35444 16.1542
Source: Data processing output using SPSS v.26

Testing the first hypothesis using Pearson correlation

Results of the correlation analysis between daily Coronavirus cases and currency exchange rate
Correlations
Daily Cases Exchange Rate
Daily Cases Pearson Correlation 1 .833**
Sig. (2-tailed) .000
N 95 95
Exchange Rate Pearson Correlation .833** 1
Sig. (2-tailed) .000
N 95 95
Source: Data processing output using SPSS v.26

The above table showed that the correlation coefficient between independent variable (daily
Coronavirus cases) and the dependent variable (currency exchange rate (r =.833, It indicates that there are
positive and strong relationship between the independent variable and the dependent variable. There significant
levels (Sig.) = 0.000 less than (. 05 level of significance).This means that the higher daily Coronavirus cases, the
higher currency exchange rate. So we can accept the alternative hypothesis of the first hypothesis daily
Coronavirus cases effect on currency exchange rate

Model Summaryb
Model R R Square Adjusted R Square Std. Error of the
Estimate
1 .833a .694 .691 .0638661
Source: Data processing output using SPSS v.26
The above table showed that
Independent variable significance:

Explanatory power of the model or the value of coefficient of determination ( means that
the independent variables included in the model (Daily Coronavirus cases) are explained almost (69%) from the
variance in the dependent variable (currency exchange rate( .
Coefficients

Unstandardized Standardized
Coefficients Coefficients Collinearity Statistics
Toleranc
Model B Std. Error Beta T Sig. e VIF
1 (Constant) 15.646 .009 1790.70 .000
8
Daily Cases 0.000225 .000 .833 14.520 .000 1.000 1.000
Source: Data processing output using SPSS v.26

The regression equation is as follows:

Y= a+ BX+ E
ER= 15.646 + 0.000225 DC + E

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

ANOVA
Model Sum of Squares Df Mean Square F Sig.
1 Regression .860 1 .860 210.840 .000b
Residual .379 93 .004
Total 1.239 94
Source: Data processing output using SPSS v.26

F-Test results indicates that the effect of the independent variable on the dependent variable is significant,
because the level of significance=.0.000 is less than (. 05 level of significance). Accordingly to the previously
mentioned results we reject the null hypothesis (H0): daily Coronavirus cases don’t effect on currency
exchange rate and accept the alternative hypothesis (H1): daily Coronavirus cases effect on currency
exchange rate.

Testing the second hypothesis using Pearson correlation

Results of the correlation analysis between cumulative Coronavirus cases and currency exchange rate
Correlations
Cumulative Cases Exchange Rate
Cumulative Cases Pearson Correlation 1 .886**
Sig. (2-tailed) .000
N 95 95
Exchange Rate Pearson Correlation .886** 1
Sig. (2-tailed) .000
N 95 95
Source: Data processing output using SPSS v.26

The above table showed that the correlation coefficient between independent variable (cumulative
Coronavirus cases) and the dependent variable (currency exchange rate (r =.886, It indicates that there are
positive and strong relationship between the independent variable and the dependent variable. There significant
levels (Sig.) = 0.000 less than (. 05 level of significance).This means that the higher cumulative Coronavirus
cases, the higher currency exchange rate. So we can accept the alternative hypothesis of the first hypothesis
cumulative Coronavirus cases effect on currency exchange rate.

Model Summaryb
Model R R Square Adjusted R Square Std. Error of the
Estimate

1 .886a .784 .782 .0536339

Source: Data processing output using SPSS v.26

The above table showed that

Independent variable significance:

Explanatory power of the model or the value of coefficient of determination ( means that the
independent variables included in the model (cumulative Coronavirus cases) are explained almost (69%) from
the variance in the dependent variable (currency exchange rate( .

Coefficient

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta T Sig. Tolerance VIF
1 (Constant) 15.645 .007 2183.660 .000

Cumulative Cases 0.000011 .000 .886 18.380 .000 1.000 1.000

Source: Data processing output using SPSS v.26

The regression equation is as follows:

Y= a+ BX+ E
ER= 15.645 + 0.000011 CC + E

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 The Effect of Coronavirus Spread on Exchange Rate (An applied study)

ANOVA
Model Sum of Squares Df Mean Square F Sig.
1 Regression .972 1 .972 337.832 .000b
Residual .268 93 .003
Total 1.239 94
Source: Data processing output using SPSS v.26

F-Test results indicates that the effect of the independent variable on the dependent variable is
significant, because the level of significance=.0.000 is less than (. 05 level of significance). Accordingly to the
previously mentioned results we reject the null hypothesis (H0): cumulative Coronavirus cases don’t
effect on currency exchange rate and accept the alternative hypothesis (H1): cumulative Coronavirus
cases effect on currency exchange rate.

VI. Summary and Concluded Remarks

This paper attempts to investigate the effects of Coronavirus spread on currency Exchange rate. Coronavirus
spread has been measured by cumulative cases, daily cases. This has been applied on Egypt, on daily basis over
the period from 06/03/2020 till 08/06/2020 .
Most of the previous studies deal with the economic effects of the COVID-19 epidemic, while this study studies
its effects on Exchange rate. Moreover, it considers all the signs of infection, whether cumulative or daily.
Results indicate that currency Exchange rate seems to be sensitive to Coronavirus cumulative indicators more
than daily ones.
Accordingly to the previously mentioned results we reject the null hypothesis (H0): daily Coronavirus cases
don’t effect on currency exchange rate and accept the alternative hypothesis (H1): daily Coronavirus cases effect
on currency exchange rate.
Accordingly to the previously mentioned results we reject the null hypothesis (H0): cumulative Coronavirus
cases don’t effect on currency exchange rate and accept the alternative hypothesis (H1): cumulative Coronavirus
cases effect on currency exchange rate.

References
[1]. Abd Elrhim, M & Elsayed,A, 2020,” The Effect of COVID-19 Spread on the e-commerce market: The case of the 5 largest e-
commerce companies in the world”, Electronic copy available at: https://ssrn.com/abstract=3621166
[2]. Abd Elrhim, M & Elsayed,A, 2020,” The Effect Of COVID-19 Spread On Egyptian Stock Market Sectors”, Electronic copy
available at: https://ssrn.com/abstract=3608734
[3]. Abu Bakar,N & Rosbi,S, 2020,” Impact of Coronavirus Disease 2019 (COVID-19) to Equity Market and Currency Exchange Rate”,
IOSR Journal of Economics and Finance (IOSR-JEF) Volume 11, Issue 2 Ser. VI (Mar – Apr 2020), PP 22-31.
[4]. Alber, Nader, 2020,” The Effect of Coronavirus Spread on Stock Markets:
[5]. The Case of the Worst 6”, SSRN, Electronic copy available at: https://papers.ssrn.com/sol3/results.cfm.
[6]. McKibbin, W& Fernando, R, 2020,” The Global Macroeconomic Impacts of COVID-19: Seven Scenarios”, CAMA Working
Paper 19/2020 February 2020.
[7]. March 2020 IFRS accounting considerations of the coronavirus outbreak
[8]. https://www.maannews.net/articles/2002209.html
[9]. www.cbe.org.eg

www.ijres.org 277 | Page

ISSN 2957-4013 еISSN 2957-4021 Farabi Journal оf Social Sciences 9, № 1 (2023) https://jhumansoc-sc.kaznu.kz

IRSTI 06.01.05 https://doi.org/10.26577/FJSS.2023.v9.i1.05

HOW TO HANDLE INTERNAL AUDITOR’S INDEPENDENCE GAP?

A. Nurmagambetova1*, H.M. Abdelrady1, S. Mohamed2

1
Al-Farabi Kazakh National University, Almaty, Kazakhstan
2
South Valley University, Qena, Egypt
*e-mail: azhar.nurmagambetova@kaznu.edu.kz

Abstract. This scientific article explores the concepts of objectivity and independence within the internal audit
profession. We discuss the significance of the internal auditor’s autonomy and impartiality for different stakeholders,
both internal and external. Furthermore, we examine the factors that influence the independence of internal auditors
and the challenges they face. Independence is a state of trust and fairness that allows internal auditors to provide
their insights on internal control, risk management, and other internal audit operations, free from any influence
from company management. Our research relies on the analysis of various scientific articles and papers related
to the topic of internal auditor independence, covering its various aspects within organizations. Throughout this
article, we employ general scientific methods of cognition, including analysis and synthesis. Finally, we present
recommendations that can be implemented in firms to enhance the autonomy of internal auditors and mitigate threats
to their independence.
Key words: internal audit, external audit, corporate governance, financial reporting, financial performance, audit, and
analysis system.

Introduction now independence means more than that. Objectivity

Internal auditors’ independence is regarded
as one of the most critical aspects in determining
the success of internal audits within corporate
governance standards, especially after the worldwide
financial disasters that hit many different companies,
like Enron, WorldCom, and most recently Lehman
Brothers, the importance of it has grown significantly.
It has been believed that the lack of independence
maintained by internal auditors was considered as
one of the main elements that contributed to the start
of the financial crises. Therefore, it will be essential
to do in-depth research on this topic.
Internal audits performed by independent
internal auditors have the same effect as external
audits in lowering management’s opportunistic
behavior, this is because internal auditors understand
management’s motivations and know how work is
done in business organizations (Asare et al., 2008).
Regarding internal auditors’ independence, the
International Standards for the Professional Practice
of Internal Auditing (ISPPIA) indicated that internal
audit actions must be independent and that internal
auditors must do their work objectively. Whereas
«independence» was defined as being free from
things that would make it hard for the internal audit
committee (AC) to do its job or for the chief audit
executive (CAE) to do his or her job in a fair way, but
is defined as an impartial manner of thinking that
authorizes internal auditors to do their jobs in a way
that makes them feel confident in the safety of their
work results and not make any sacrifices that hurt
the quality of their work (IIA, 2017). As it relates
to the credibility of the reports that the internal
auditor releases, the internal auditor’s independence
is of the uttermost importance. Unless the essential
independence along with credibility provided by the
internal auditor, audit reports lose their credibility
and value with investors and lenders.
The shareholders view the internal auditor’s
independence from the directors of the corporation
as a crucial element in delivering high-quality
audits. However, effective collaboration with the
firm’s board of directors (BODs) can be necessary
for an audit. This powerful working relationship has
prompted shareholders to query the perceived and
real independence of auditors and to require more
controls, safeguards, and standards to protect them
(Otene, 2014).
It is argued that the level of independence granted
to internal auditors is quite low. Furthermore, it has
been shown that, in the majority of instances, internal
auditors are not objective in their judgments and
suggestions. This is caused by the simple fact that
they are workers of the organization, which prevents
them from enjoying complete independence.

48 © 2023 al-Farabi Kazakh National University

 A. Nurmagambetova et al.
There are many obstacles that internal auditors
have to overcome within business organizations.
Based on the fact that several businesses have a
tendency to lessen the degree of independence
that internal auditors possess. This, in turn, causes
internal audit reports to be biased in support of the
directors’ board and executive management, to
which the internal auditor is related functionally and
administratively. This ends up with a decrease in
the degree of confidence, transparency, value, and
relevance in internal audit reports, which subsequently
in turn effects the effectiveness of the disclosure
of internal audit reports to external stakeholders
(such as shareholders and investors). Therefore,
researchers realized that it is important to analyze the
gap concerning internal auditors’ independence and
try to solve this gap by implementing the elements
that support independence.
Literature review
Due to the increased importance of this topic, it
becomes a matter of interest for most researchers in
the audit field, here we will discuss previous studies
and researches that addressed internal auditors’ in-
dependence from different aspects.
Anggraini (2020) aimed to examine the
independence and abilities of internal auditors
along with their effect on audit quality. While the
company’s expansive scope prevents the BODs from
exercising direct supervision over either external
and internal operational duties and functions of
the organization. for enhancing internal control
efficiently and effectively, an organization’s BODs
must appoint a task force charged with monitoring
and examining the operations of the business. Due
to the internal auditor’s position as a member of the
company’s management, the research found that
there are still many difficulties with independence
among internal auditors. The study concluded that
independence and competency have an effect on the
integrity of internal audit operations.
Okodo et al. (2019) examined the internal audit
reliability issues. It offers conceptual as well as
practical insights into a number of consequential
issues when evaluating the dependability of internal
audit tasks. This study focused on four of these
issues in particular: internal auditors’ competency,
the level of management support, their objectivity
as well as independence, and regulatory issues.
Accordingly, this study revealed that the four
identified characteristics would most likely have
an effect on the dependability of internal audits.
Therefore, in addition to other policy consequences,
the study suggests a conceptual research paradigm
that will need to be empirically examined by other
researchers.
Helmy (2018) attempted to demonstrate the
influence which the internal auditor’s independences,
AC members, as well as institutional ownership
of corporations have on the publication of internal
control. The internal controls disclosure index was
utilized in the research project in order to quantify
this disclosure. The industrial enterprises that were
listed on the Indonesian stock market between the
years 2014 and 2016 availed as the basis for such
analysis. According to the outcomes of the study,
internal auditors’ independence as well as the
institutional ownership of corporations has a direct
and positive association with the disclosure of
information regarding internal controls. The AC was
powerless to sway the decision to make the reports
on the internal control and supervision public.
Dordevic & Dukic (2017) meant to bring attention
to the issue of the objectivity and independence,
which is particularly important considering the
position and function of internal auditing within
the framework of corporate governance as well
as the efficiency and effectiveness of internal
audit. The paper also highlights the obstacles that
internal auditors encounter in achieving objectivity
and independence in their job and highlights the
difficulties that internal auditors face. According to
the returns of the study, regulatory choices governing
the status of internal audit in organizations provide
important support for internal auditors, particularly
orders to invest efforts and eradicate all threating
variables that could compromise their objectivity
and independence.
Abbott et. al. (2016) sought to establish a
competent and independent internal audit function
quality model as part of an interactive internal
auditing function IAF. Taking into consideration the
increasing significance of functions performed by
internal audit unit as well as the confined archival
information regarding the quality of the internal
audit, the clear purpose of this study was to gain a
deeper understanding of the factors that determine
how effective the Internal Audit Function is as a
financial reporting controller.
The study detected that the joint presence
of competence and independence is a necessary
criterion for effective IAF financial reporting
monitoring. Also, findings concluded that the
financial reporting quality depends on the internal
auditor’s independence (competence).
49
 How to handle internal auditor’s independence gap?
Nasvita (2016). The basic objective of this
study was to examine the elements that influence
internal auditor’s independence. These factors
include internal auditors’ competency, intervention
from management, participation from employees,
and regulation from the organization. According
to the feedback of this study, every aspect either
fully or partially has effect on internal auditor’s
independences. These influences might occur
concurrently or separately. Internal auditors’
independence is negatively impacted by management
intervention, despite the fact that auditor competency,
employee participation, and business regulation
all have a favorable impact on internal auditor’s
independences.
Dawuda et al. (2015) used descriptive research
to examine Ghanaian local government internal
auditors’ organizational independence, the
investigation found poor budget allocation, low
status of internal audit departments, management
control over internal audit activity due to lack of
charter. Intimidation and familiarity are the biggest
dangers to internal auditor independence. The
study found local government internal auditors’
organizational independence at risk.
Kassab (2015). This study aimed to identify the
most influential factors that impact internal auditor
independence, followed by the independence of
the department of internal audit in corporations
located in Saudi Arabia. The study confirmed that
the managerial and functional subordination of the
department of internal audit to the top authority in
the business, which is the AC that comes from the
BODs, makes internal auditors more independent.
Some people have said that it would be better for
independence to move that subordination to the
general shareholder meeting. Also, an internal
auditors’ independence is strongly linked to their
experience and qualifications, the lack of executive
tasks, how effective is the AC, having an explicit
internal audit charter that has been approved, and the
internal auditor’s hiring and firing.
Kimotho (2014). The target of this study was to
characterize the factors that affect the independence
of internal audits at the Mombasa Technical
University as well as the many variables that impair
it. A review of the relevant literature was performed
on many independent factors that have an effect on
the dependent factor. According to the study results,
it is radical for the organization to maintain the
independence of its internal auditing processes in
order to facilitate increased employee accountability
and performance within the organization.
50
Otene (2014). The aim of the study was to cast
doubt on the idea that there is a connection among
the independence of the internal audit procedure
and the success of companies’ stock performances
on the Nairobi stock market. At the close of
2013, this study was approved for adoption. The
study disclosed that there is a significant positive
relation between the independence of the internal
audit and corporate equity performance, as well
as a significant connection between evaluation
rates (such as profit distribution) and ownership
performance. The research indicated that during
the period of the last five years, there had been
considerable increases in exchange rates for
currencies, inflation rates, profit distribution, and
income.
Stewart & Subramaniam (2010) aimed to give
a clear review of the literature concerning the
objectivity, internal auditors’ independence, and
address opportunities for future study. Five factors
related to the objectivity and independence were
examined at: the internal auditor’s organizational
position, the internal auditor’s dual duty as a
provider of assurance as well as consulting
activities, the internal auditor’s involvement in
risk management, outsourcing of internal audit
operations and the utilization of internal audit
as a training activity for managers. The study
summed up a set of concepts about the objectivity
alongside independence of the internal auditor
and found that a variety of these organizational
and individual factors have the potential to affect
and be affected by the independence as well as
objectivity of internal audits.
Ahmad & Taylor (2009) aimed to come up
with standards for how committed internal auditors
are to being independent. It did this by taking a
cognitive view of internal auditors’ independence,
role conflicts, and ambiguity in roles in the context
of their work environment. This was done to show
how role conflicts and ambiguity affect the internal
auditor’s commitment to being independent. The
study indicated that internal auditors’ ambiguity
and conflict roles negatively affect independence.
Ambiguity in the internal auditor’s authority, time
pressure, and discrepancy between their personal
values and management’s and their profession’s
requirements are the main factors that affect
independence.
Christopher et al. (2009). The intention of
this study sought to carry out a comprehensive
investigation on the autonomy of the internal audit
department in Australia by investigating how it
 A. Nurmagambetova et al.
interacts with the company’s board of executives
and the AC. The study confirmed there is an array
of factors that pose a risk to the connection that
is present between the role of internal audit and
management. Among these are the following:
using the duty of internal auditor as an entry-level
position to other jobs; CEO or CFO of the company
is the official who gives input on the internal audit
strategy and authorizes the budget for the internal
audit function. In terms of the connection with the
auditing committee, the following threats were
found: It is not required that the (CAE) submit
to the Auditing Committee ( AC), and AC is not
solely responsible for staffing up, discharging,
or evaluating the (CAE) . The members of the
(AC) lack experience in accounting, and there is
not even one person on the committee who has
experience in accounting, either.
Goodwin & Yeo (2001) tested two aspects that
have the potential to influence the independence
alongside objectivity of internal audits. The AC
relationship affects internal audit’s organizational
independence. Second is managerial training.
There is a possibility that internal auditors will
be afraid to confront the pressures brought on
by an auditee that might pose a potential threat
which may undermine objectivity. According to
the outcomes of the study, there is a significant
relationship that exists among the level of
engagement between the AC and the internal
audit team, was demonstrated to be greater when
the AC was composed completely of independent
members. significant number of companies in
Singapore employ the management training
ground based on internal audit section.
Materials and methods
The methodology used in this article depends
on the theoretical review and analysis of scientific
articles and works related to the internal auditors’
independence gap, what threats that impact
independence, what factors that manipulate the
independence in order to obtain logical conclusions
and summarize the whole topic in this article that
help in the suggestion of a set of requirements to
increase independence and objectivity. In addition,
this article employs general scientific methods of
cognition, including analysis and synthesis.
Discussion and results
Firstly, internal audit was described by the IIA in
1999 as an impartial, objective assurance along with
consulting activity meant to provide value while
boosting an organization’s operations. It serves an
organization in accomplishing its mission through
organized, disciplined strategy for assessment and
enhancement of the efficacy of supervision, in
addition governance activities. Independence means
the absence of conditions that could compromise
objectivity as well as an appearance of objectivity
these kinds of challenges to objectivity need to be
controlled at every level – the individual auditor, the
engagement, the functional, and the organizational.
Objectivity means an objective frame of mind that
enables internal auditors to execute engagements
using a way that they have a sincere belief in the
output of their labor and that non-significant
goodness sacrifices are made.
Consequently, it seems that the difference
between the two phrases is that objectivity refers to
a state of mind, whereas independence refers to the
state of events that makes it possible for an internal
auditor to do their duties with an objective attitude.
Secondly, the significance of having
independence was highlighted by Mutchler et
al. (2001) who stated that the desire for more
independence, objectivity, and accountability
among internal auditors grows in tandem with the
responsibilities of internal auditors, it is dignified
for the company to maintain the independence of its
internal auditors in order to assist in the improvement
of employee performance and responsibility.
So internal auditors shall operate honestly and
independently, the role of internal auditing must
have adequate organizational status, this is required
since internal auditors are unique employees that
evaluate and monitor management decisions and
advise management on internal controls.
The Institute of Internal Auditors (IIA) published
a number of attribute standards and practice
advisories regarding independence and objectivity
(IIA, 2009) emphasizing the significance of internal
audit function’s organizational independence as well
as internal auditors’ individual objectivity which are
as follows (Table 1).
51
 How to handle internal auditor’s independence gap?

Table 1 – Standards as well as advisories for objectivity and independence (Prepared by researchers)

Standard Explanation
Standard 1100 – Pointed out that internal auditing operations demanded to be independent and that internal
Independence and Objectivity auditors ought to be impartial in their work.
The (CAE) must have to have unfettered involvement with senior management and the board in
order to ensure the required level of independence; this can be done by having a dual reporting
arrangement.
Standard 1110 – The (CAE) is required to furnish reports to an upper management level that enables the internal
Organizational Independence audit function to effectively discharge its duties. Annually, the CAE must attest to the board that
the organization's independence that governs internal audit activity.
The related Advisory Practice No Ideally, the CAE ought to provide reports to both the company's board of executives and the
1110-1 CEO, encompassing administrative aspects, respectively.
Administrative reporting ought to go to an executive with enough authority to foster independence,
comprehensive audit coverage, adequate assessment of engagement communications, and
suitable action on engagement recommendations.
Standard 1120- Pertains to the individual's capacity for objectivity and demands on internal auditors to maintain
Individual Objectivity a neutral stance, free from bias, and to steer clear of any possible and potential upcoming
conflicts of interest
The related Advisory Practice No Emphasizes the necessity to prevent prospective and real conflicts of interest as well as bias at
1120-1 the personal level, and recommends that staff assignments be periodically rotated.
Standard 1130 – Impairment to Highlights the necessity of providing appropriate disclosure to the appropriate parties of any
independence or objectivity impairment to the independent or objective status of the firm
An example of an impairment would be internal auditors evaluating activities for which they
had been responsible in the past. Individual conflicts of interest, limitations on scope, resources,
and constraints to access data.
The related Advisory Practice No Emphasizes the significance of avoiding taking payments, gifts, or amusement from audit clients
1130-1 and requires auditors inside firm to disclose any instances that involving actual or possible
impairment to the CAE, also encourages internal auditors to report any events involving actual
or prospective impairment.

Thirdly, there are some factors that impact on
auditors’ independence in company and applying
those factors can improve auditors’ independence,
proposed by Kimotho (2014) which are the
following: 1) The auditor must acquire a sufficient
comprehension of the role of internal control and
audit to identify pertinent internal audit operations
for the company. 2) Managing internal audit
operations and objectives with different assurance
providers in order to minimize repetition of effort
and departmental management burdens. 3) Requiring
management to react to important findings from
the audit in a formal and timely way by taking
necessary corrective action in accordance with the
recommendations of the audit. 4) Including in an
audit charter a set of responsibilities and authorities
for internal auditing that are crystal obvious and
clearly stated. 5) Tracking to ensure that management
executes agreed-upon control enhancements in
a timely manner and that they are sufficient and
efficient. 6) Evaluation the efficiency of policies that
are currently in place and evolution of new ones. In
addition, a wide range of concerns that impact on
the internal auditor’s impartiality and independence,
such as Organizational Independence: which
means functionally subordinating the CAE to the
BODs ensures organizational independence. While
the internal auditing process has to be allowed to
determine its scope, perform its task, and report its
findings. The CAE must notify the members of BOD
about any interference. The CAE needs to directly
communicate with the BOD. Also, the role of the
chief audit executive CAE outside the internal
audit framework: which means the CAE of internal
audit must take efforts to protect independence and
objectivity when he has or is expected to have roles
beyond the internal audit framework. This has been
determined as the CAE might have to fulfill additional
roles beyond the internal audit structure, such as
risk management, which may negatively impact
compliance activities, organizational independence,
governance practices and individual objectivity.
Additionally, Individual Objectivity: which means
internal auditors should be unbiased and equitable,
and they must avert any possible conflicts of interest.
The term «conflict of interest» has been defined
as a scenario whereby the internal auditor, who is
expected to be trustworthy, has competing either

52
 A. Nurmagambetova et al.
professional or private interests. These competing
interests could render it challenging to the internal
auditor to successfully carry out his responsibilities
in a fair and impartial manner. Additionally, a
conflict of interest could undermine trust in the
internal audit’s findings. A conflict of interest can
also compromise an auditor’s capacity to carry out
his tasks and duties objectively.
Fourthly, threats to internal auditors’
independence (independence gap) must be
discussed to help determine the internal auditor’s
independence gap, which is of greater significance
in this article. Incentives can also impact internal
auditors, as incentive remuneration based on
company performance as a whole may pose a threat
to the objectivity accompanied by internal auditor’s
independences. In the same way. Internal auditors
are less likely to report GAAP violations if incentive
payments are related to share prices.
The IIA (2001) has released a framework for
directing internal auditors in matters of independence
and impartiality. In this scope, internal auditors’
independence is characterized as a circumstance
in which threats to objectivity (independence gap)
are effectively addressed. Internal auditors have a
duty to identify, evaluate, and manage any threats
to the organization’s objectivity, which includes the
requirement to think about measures that can reduce
threats drawbacks.
This framework examines seven internal auditor
objectivity and independence threats: (Mutchler, 2003)
1) Self-evaluation, wherein the internal auditor
evaluates his own work.
2) The internal auditor is subjected to social
pressure by the auditee.
3) Economic interest that results from payment of
incentives or appraising the duties of the individual
who has sufficient authority to affect internal
auditor’s employment or compensation.
4) Personal connection, where an internal auditor
is regarded as one of the members of the same family
or is a personal acquaintance of the organization
being audited.
5) Friendship and familiarity with the entity
being assessed as a result of having maintained a
longstanding relationship with the entity, including
having performed work in the unit that is being
reviewed.
6) In international firms, cultural, racial, and
sexual prejudices can emerge when the person
reviewing is biased or lacking an awareness of local
customs and practices. This can lead to unequal
treatment of employees from different groups.
7) cognitive biases coming from either the
adoption of a given psychological perspective
when carrying out the review or the existence of
preconceived notions.
The degree to which interactions between
management, the AC, and the internal audit present
potential risks to the organization’s independence
was analyzed by (Christopher et al., 2009) and
they identified three basic threats to independence
as follows: 1) practice to put future managers
through their paces in the internal audit function,
which serves as both a training ground and a
stepping stone. It is possible to claim, despite the
fact that there are reasons to support this approach,
that internal auditors are unlikely to be able to
function independently because they would be
dependent on the auditees they work for due to
possible professional changes. 2) Approval of
internal audit budget. The approval of the budget
for the internal audit is often the duty of the Chief
Executive Officer or Chief Financial Officer. Because
the imposition of financial constraints is a powerful
tool that management can use to minimize the scope
and effect of the internal audit function, this can be
considered as a substantial threat to internal audit
process independence. 3) A significant amount of
top management involvement is expected in the
creation of the plan for the internal audit. Even
if the opinion of senior management is essential
for determining the priorities of internal audits,
the influence of this feedback should be kept under
control by the CAE as well as the AC. Internal
auditors are perceived as management advisors,
which usually poses a challenge internal auditing
department independence, if their requests are
considered to be unconditional priorities. Internal
auditors are frequently viewed as «partners» by
staff members. This «partner role» exerts pressure
on internal auditors to assume a subordinate
management position, thereby endangering internal
audit function independence.
Fifthly, in this part we will go over some ways
in which the challenges to our objectivity and
independence can be overcome, IIA (2017)
confirmed that organizations ought to make
attempts to overcome the challenges of securing
its independence and objectivity which include the
following:
– It is necessary for internal auditors to stop
conducting audits of the procedures that they
formerly oversaw. If an internal auditor delivers
assurance services linked to an activity for which he
was accountable in the preceding year, it is likely
53
 How to handle internal auditor’s independence gap?
that his objectivity will be compromised as a result
of this conflict of interest.
– Assurance engagements that pertain to duties
that are supervised by the CAE are required to be put
under the supervision of a third party that does not
take part in the process of conducting internal audits.
– Also, there are a few different approaches that
can be taken in order to cut down on the amount
of uncertainty regarding the internal auditor’s
objectivity and independence, which are as follow:
– Numerous studies have demonstrated that one
of the most prominent factors that shape a rise in the
level of external users’ trust in the independence of
the entity’s internal audit is the degree to which the
processes of internal audit are outsourced.
- An obligation placed on management to refrain
from interfering with the audit’s scope determination
or imposing restrictions on internal auditor’s
abilities to gain access to records or make contact
with personnel of the organization being audited.
– Reviewing the authority that presently has
the authority to fire the internal auditor, which is
represented by the AC and the BODs. Providing this
power to the shareholders’ general meeting reduces
the burden on internal auditors, enhancing their
independence.
Sixthly, we will discuss factors that can decrease
the threats to independence which are as follow: 1)
Positioning of the Organization and Its Policies:
The internal auditor’s organizational position and
customer relations policy statements at multiple lev-
els may improve the auditor’s position and prevent
audit clients from influencing or threatening audi-
tors. Such procedures can shield staff from reper-
cussions for alerting management. 2) Powerful Or-
ganizational Governance System/Environment:
A supportive internal audit function and company
environment that supports learning and continual
improvement may lessen the feeling of failure as-
sociated with suggestions and system implemen-
tation issues. auditors and audit consumers would
be less fearful of bad results and reporting inaccu-
racies. An AC fosters support. Strong AC ensure
auditor objectivity. 3) Rewards: Threats against
objectivity can be mitigated by instituting a struc-
ture of rewards along with disciplinary procedures
inside the internal audit unit as well as within the
organization itself. Encouragement toward objectiv-
ity can be found in environments that punish biased
and prejudiced thought while rewarding critical and
objective thinking. 4) Utilization of Teams: Having
other people back up your assessments, choices, and
judgments is an important part of being objective.
54
Teams, not just people, can help reduce cognitive
biases, being familiar, interpersonal connections, as
well as self-review threats when providing assurance
services. A team member will be afraid to say some-
thing that goes against what most of the team or a so-
cially strong team member thinks because of social
pressures risk. 5) Peer Review/ Supervision: Audit
studies show that performance rewards, justification
requirements, as well as feedback can reduce biases
in audit judgments. Expecting peer and superviso-
ry evaluation may improve an auditor’s self-aware-
ness, helping them avoid biases and other challenges
to neutrality. 6) Circumstances Alter/Passage of
time: The possibility of an auditor posing a threat
to his or her own self-review decreases over the
passage of time when the auditor examines the sug-
gestions he or she has made during earlier audits. A
longer period of time can also result in changes in
the situations and employees in the audit client area,
so lowering or removing potential dangers such as
social pressure, as well as self-review. 7) Internal
Consultations: Two mitigating factors include the
utilization of teams as well as supervision and peer
review. When conducting an internal consultation,
as opposed to an external one, the auditor handles
potential threats to his or her impartiality by freely
and of their own accord taking the initiative to do so
requesting information or feedback from a profes-
sional colleague. Despite the process of consulting
with an outside party. An informal procedure that
defines criteria for when an internal auditor should
seek assistance could be created by the internal audit
unit as part of a formal process.
Conclusion
The independence of the internal auditor is ab-
solutely necessary for the company in order to facil-
itate improvements in both employee performance
and responsibility. Additionally, the independence
of the internal auditor is essential to investors as well
as other outside stakeholders in the event that the in-
ternal audit is disclosed.
This is done in order to assist investors in mak-
ing decisions based on factual information. With-
out independence, an internal audit report can no
longer be considered effective or of high quality.
Because many companies have a tendency to less-
en the degree of independence enjoyed by their
internal auditors, those working in auditing roles
within businesses confront a number of obstacles
on the job such as self-evaluation, social pressure
by the auditee, economic benefits that results
 A. Nurmagambetova et al.

from payment of incentives and salaries, personal
relationships as the internal auditor is one of the
employee of the organization, serving the firm for
a long period makes him more familiar with the top
level management and AC as well as Prejudices
based on culture, ethnicity, and sexual orientation
can threat the internal auditor independence , and to
overcome all of those threats internal auditors must
fully understand standards and associated practice
recommendations pertaining to independence and
objectivity that have been issued by the institute of
internal auditors in 2009, internal auditors should not
evaluate their former processes, the authority to fire
the internal auditor has to be delegated to the general
meeting of shareholders, thereby reducing the strain
on internal auditors as well as outsourcing internal
audit processes boosts external users’ confidence in
audit’s independence.

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55
 Under Publishing
Accounting information systems and its impact on the quality of
accounting data and information
Applied study on Al-Farabi Kazakh National University
Prepared by
Hamdy Mohamed Abdelrady
Teaching assistant at the faculty of commerce
South valley University- Egypt
Master’s degree candidate
Al-Farabi Kazakh National university- Kazakhstan
Abstract: The study aimed to identify the reality of using the accounting information
system at Al-Farabi Kazakh National University and its impact on the quality of accounting
data and information. To achieve the objectives of the study, the descriptive approach was
adopted to study the problem, where a questionnaire form was designed to collect data,
which was distributed to the employees of the Office of Financial Affairs, the Office of
Internal Audit and the Office of the Financial Controller at the university. The statistical
program SPSS has been applied to analyse 36 questionnaires valid for analysis and test the
hypotheses of the study by a set of statistical methods including arithmetic mean, standard
deviation, simple linear regression and T test.
The study reached a set of results, the most important of which is the existence of a positive
impact of statistical significance for the use of the accounting information system on the
quality of data and accounting information disclosed at Al-Farabi University. The study also
recommended the need to evaluate the accounting system and work to develop and update
it continuously to suit the nature and volume of work.
Keywords: Accounting information system, accounting data quality, Al-Farabi university
Introduction:
Information and its quality are the main feature in the last decades of the twentieth century,
as its importance became clear in light of economic changes characterized by conditions of
uncertainty and risk that the world is experiencing (Naseer, 2018). The information
revolution was greatly reflected, especially accounting information, on institutions, and this
information has come to play an important role in reducing conditions of uncertainty and
rationalizing economic decisions, which in turn affect the income, wealth and resources of
societies, and thus the welfare of individuals. The huge amount of data necessitated the
design and development of integrated and sound systems to deal with and control them,
hence the emergence of information systems, which are defined as ‘’a set of interrelated
material and intangible sub-components aimed at collecting, processing and storing data and
then converting it into useful information and delivering it to users to help make a decision’’
(Susanto, 2017).
The accounting information system as one of the most important information systems in the
institution has become an important factor in the management of the institution by delivering
information related to financial transactions to all parties related to the institution. The
accounting information system in its application contains an important part of financial and
international accounting standards stipulated in the framework of preparing financial
statements and reports as a means of delivering financial information to different and wide
segments of society (Elbaz, 2013). The accounting system is not a goal in itself, but it is a
means to achieve the goals that the management of the institution seeks to achieve, and from
this principle, the accounting system has no intrinsic value, but its value is measured by the
amount of its usefulness in achieving the goals for which it was developed.
Literature Review:
The research of Al-Fitouri (2012) aimed to study how information technology had facilitated
accounting procedures and systems that were previously manually made are conducted
electronically, efficiently and effectively by saving time and cost through a study conducted
in the General Electricity Company in Libya. Based to the results of the study, the
deployment of computers has an effect on the fundamental aspects of accounting
information systems. This has a beneficial effect, both in terms of accuracy and speed, on
the process of preparing financial statements and reports.
The study of Elbaz (2013) examined the role of the accounting and financial system in
improving the quality of accounting information through a case study applied in BATISUD
factory in Algeria. The study found that the accounting information system contributes to
enhancing the credibility of accounting information and delivering it to decision makers,
the accounting system is a must, especially if it is used properly and clearly.
The study of Ahmed (2013) tried to measure the impact of the quality of the outputs of the
accounting system on customer satisfaction in Jordanian commercial banks, where 400
questionnaires were distributed to the study sample represented in the financial departments
of Jordanian companies as they are bank customers. Statistical tests showed a direct and
significant impact on the quality of the outputs of the accounting information system on
customer satisfaction, and pointed out that both information relevance and customer
confidence in the bank's financial data and its ability to meet their requirements had the
largest role in customers’ satisfaction.
Abo Hadaf (2015) stated that information systems are not new, as they have been developed
since the end of World War II, and have reached where we are now, this development has
led to the fact that the sub-information systems have become formalized, and thus the
economic unit has several subsystems, each of which serves a specific purpose for which it
was designed. Due to the importance of the accounting information system in terms of its
production of accounting information that contributes to identifying the economic and
financial reality and organizing economic and legal information that affects the financial
disclosure of the institution, this topic has become the focus of attention for many
researchers and scholars, which was reflected in the increase in research and studies in this
field.
Al-Dmour (2019) investigated the degree to which Jordanian corporate organizations have
adopted Sys Trust's framework (principles and requirements) as an internal control strategy
for the purpose of guaranteeing the dependability of accounting information systems (AIS).
According to the findings, the level of Sys Trust implementation that has been accomplished
up to this point can be categorized as being relatively moderate. This suggests that there are
some differences between businesses and other types of organizations with regard to the
degree to which they execute the Sys Trust principles and standards. The findings also
demonstrated that the degree to which corporate organizations applied the Sys Trust
principles differed widely depending on the industry in which they operated. On the other
hand, we did not find any differences between the companies based on the size of their
businesses or the amount of experience they had.
The study of Jans et al. (2022) conducted an empirical investigation into the gap that exists
between AIS research that has been published in accounting literature and AIS research that
has been published in outlets specifically devoted to AIS research. It found that "information
disclosure," "network technologies," and "audit and control" dominate the discussion of AIS
in accounting journals. Other AIS subjects continue to be underrepresented. A plausible
explanation could involve concentrating on historical research in accounting outlets, but
additional factors might play a role. The results indicate that there's only a partial agreement
between the parent accountancy study area and the AIS subfield in terms of the diversity of
topics and research methodologies. These results indicate a significant gap between the two
fields, which could have long-term negative effects if no corrective measures are
implemented.
Quang & Kien (2022) provided a clear and consistent picture of the role that digitalization
of accounting information serves among small and medium-sized businesses (SMEs) by
employing a methodology that is both statistically reliable and as simplistic as possible in
order to ascertain the impact that DOAI has on sustainable innovation ecosystems and the
production of public value. Because of this, the geographical reach of this draft text was
limited to small and medium-sized enterprises (SMEs) in developing nations.
The examination of the findings demonstrated that there were statistically significant
positive relationships among the hypothesized constructs about the significance and the
effect magnitude. The quality of the information contained in financial reports and SIE also
had a role in mediating some of the connections between these entities.
In the light of the previous studies that have been reviewed, it is clear that many studies dealt
with the subject of accounting information systems and their impact on various factors from
several aspects. These studies varied in their objectives, variables, categories and
environments in which they were conducted, and a review of the literature of the subject of
the study showed that there is no study that directly looks at the impact of the accounting
information system on the quality of accounting data and information at Al-Farabi
university.
Research problem and Hypotheses:
The primary issue that has to be investigated might be stated as follows:
What is the impact of using the accounting information system on the quality of accounting
data and information?
Based on the question of the study, there is a main hypothesis and sub- hypotheses which
formulate the main hypothesis as follows:
- The main hypothesis ‘’ There is a statistically significant effect of using the AIS on the
quality of accounting information’’.
1st Hypothesis: There is a statistically significant effect of using AIS on the relevance of
accounting information.
2nd Hypothesis: There is a statistically significant effect of using AIS on the reliability of
accounting information.
3rd Hypothesis: There is a statistically significant effect of using AIS on the
understandability of accounting information.
4th Hypothesis: There is a statistically significant effect of using AIS on the comparability
of accounting information.
Research methodology
The field study was conducted at Al-Farabi university in the offices and departments related
to the accounting information system, where the study population included the office of
financial affairs, the office of internal audit and the office of the financial controller at the
university, and the study sample was limited to the employees of these offices related to the
subject, where (40) questionnaires were distributed to the study sample, from which 39
forms were retrieved and the number of valid forms for analysis was (36) forms on the basis
of which the analysis was carried out. To analyse the data of the study questions and test
their hypotheses, the statistical program (SPSS) was used.
Theoretical framework
Accounting information system: It is one of the oldest information systems known to
organizations, also it is one of the most important components of the management
information system that produces accounting information (Ahmed, 2019). Due to
organization’s expansion and spread processes and its need for financial and human
resources and all other activities finds itself in urgent need to develop a system
commensurate with the size of these activities and ensures the warmth of all the enormous
information from the various units.
The accounting system is the official communication network within the organization,
which provides management and stakeholders with information that enables them to make
rational decisions. Thus, it can be said that the accounting information system is a group of
people, procedures and information technologies that seek to achieve the following goals
(Firas, 2018):
1-Measuring all economic events that occur within the organization through data collection,
storage and recording in accounting records.
2- Achieving internal control over all essential elements in the organization.
3- The accounting information system should achieve a high degree of accuracy and speed
in the processing of financial statements when converted into accounting information.
4- The system should be characterized by speed in retrieving quantitative and functional
information stored in its databases when needed.
5- To be flexible when it is required to update it to suit the changes in the organization.
6- Converting the collected data into information by processing and communicating it
through a set of documents and reports to everyone who can benefit from it, including the
management of the facility that uses this information in evaluating performance.
7- To provide management with the necessary information to assist it in the short, medium
and long-term planning function of the future business of the enterprise
Quality of accounting data and information: it is one of the topics that have received a
great deal of attention, especially after the collapses of a number of major companies. Users
of accounting information are increasingly demanding to improve the quality of information
and provide them with information that helps them. to make decisions that achieve their
goals (Abdelhakem, 2020). The goal of accounting information is to increase the knowledge
of its users, it is required according to its quality and suitability for decision-making where
the quality of accounting data means "the credibility of accounting data and information that
included in financial reports and the benefit it achieves for users", It also lies in its ability to
add value for decision makers. In 1980, the Financial Accounting Standards Board (FASB)
issued a Statement No. 2 on the qualitative characteristics of accounting information which
are as follows:
Relevance: means the ability of information to make a difference in the decision whether
by making future predictions or confirming previous expectations, also the right timing is
related to the relevance of information, so that information is useful and must reach its users
in a timely manner, as the late arrival of information loses much of its importance and
appropriateness in influencing the decision.
Comparability: this feature is of great importance, which means that the information must
be prepared in a way that is easy for users to use it for comparison, and the comparison
process requires consistency in the use of accounting policies from year to year. The
comparison feature enables users to identify the basic aspects of agreement and difference
in the economic phenomena of the same organization during different periods or compare
its results with the results of other organizations. The comparative feature is one of the most
important indicators on which financial analysis and control procedures depend in order to
evaluate the performance of economic units (Elbaz, 2013).
Comprehensibility: It is the ability of accounting information to be understood directly by
users, for this purpose it is assumed that users have a reasonable level of knowledge of the
financial, economic and accounting activities of the institution. The ability to understand
property represents the link between the characteristics of information and the
characteristics of users, the property of comprehensibility depends on the characteristics of
users of this information such as the level of education, perception and information
accumulated by them. This does not mean excluding information on complex issues if it is
appropriate to the needs of decision makers on the pretext that it is difficult to understand
by users (Aizy, 2018).
Reliability: Reliability relates to the honesty and reliability of information, reliability
according to (FASB) is the feature of information in asserting that information is reasonably
free from errors and bias and that it truthfully represents what it claims to represent. That is,
information has this feature if it expresses economic events as they are, and that it is free
from important errors and free from bias, and users can rely on it as information that honestly
represents the reality it expresses.
The Applied Study
In order to test the main hypothesis "There is a statistically significant effect of using
the AIS on the quality of accounting information", simple linear regression was used
on the sub-hypotheses, in which the independent variable was accounting information
system and the characteristics of the quality of accounting information were considered
dependent variables. And used significance level was (.05).
Sub-Hypotheses Test Results
- Frist hypotheses “there is an impact of using AIS on the relevance of accounting
information’’
Correlation Determination Regression
coefficient coefficient coefficient
F value F level
R R 2
β
.453 .206 .480 8.799 .0005
Since R2 equal .206 which means 20.6% of change in the relevance of
accounting information comes from AIS and 79.6% comes from other factors
 and since F level (.0005) is less than significance level which is (.05)
significance level and since regression coefficient β (.480) which means the
magnitude of change in the degree of relevance of accounting information by
the accounting information system. Thus, this hypnosis is true.

- Second hypotheses “there is an impact of using AIS on the reliability of

accounting information’’
Correlation Determination Regression F value
coefficient coefficient coefficient
F level
R R 2
β
.492 .242 .763 10.843 .002
Since R2 equal .242 which means 24.2% of change in reliability of accounting
information comes from AIS and 75.8% comes from other factors and since F
level (.002) is less than significance level which is (.05) and since regression
coefficient β (.763) which means the magnitude of change in the degree of
reliability of accounting information by the accounting information system.
Thus, this hypnosis is true.

- Third hypotheses “there is an impact of using AIS on the understandability of

accounting information’’

Correlation Determination Regression F value

coefficient coefficient coefficient
F level
R R2 β
.547 .299 .966 14.52 .001
Since R2 equal .299 which means 29.9% of change in understandability of
accounting information comes from AIS and 70.1% comes from other factors
and since F level (.001) is less than significance level which is (.05) and since
regression coefficient β (.966) which means the magnitude of change in the
degree of understandability of accounting information by the accounting
information system. Thus, this hypnosis is true

- Forth hypotheses “there is an impact of using AIS on the comparability of

accounting information’’
Correlation Determination Regression F value
coefficient coefficient coefficient
F level
R R2 β
.369 .136 .47 5.346 .027
 Since R2 equal .136 which means 13.6% of change in comparability of
accounting information comes from AIS and 86.4% comes from other factors
and since F level (.027) is less than significance level which is (.05) and since
regression coefficient β (.47) which means the magnitude of change in the degree
of comparability of accounting information by the accounting information
system. Thus, this hypnosis is true
Main Hypothesis Result
Correlation Determination Regression F value
coefficient coefficient coefficient
F level
R R 2
β
.586 .343 .670 17.78 .0000
Since R2 equal .343 which means 34.3% of change in quality of accounting information
comes from AIS and since F level (.000) is less than significance level which is (.05)
and moreover β equals .67 which means improvement in AIS by one degree will lead
to improvement in quality of accounting information by .670 Thus, the main hypothesis
is true which is ‘’there is an impact of using the accounting information systems on
the quality of accounting information’’
Findings and Recommendations:
Findings
The findings of the study can be summarized as follows:
1- The accounting information system is actually used with a high degree of practice
at Al- Farabi university.
2- There is a statistically significant impact of using the accounting information system
on the quality of accounting data and information disclosed at Al- Farabi university.
Recommendations
Based on the findings, the study revealed the following recommendations:
1- Conducting a continuous evaluation process for the accounting information system
from time to time and paying attention to the problems facing the application and
finding appropriate solutions to them.
2- Work to provide the necessary material elements to operate, develop and improve
the accounting information system continuously to suit the workload
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